Noticing a drop in your credit score after purchasing a car may come as a surprise to most first time buyers. Vehicle purchases can impact a credit score positively, or negatively depending on the consumers ability to meet their loan obligations.
Any drop in a credit score requires consumers to review their credit reports to identify the reasons for the impact occurring. However, a minor drop is normally expected due to the process used to approve vehicle purchases. Read on to discover what these are.
When an individual applies for a new line of credit, like a car loan, lenders will make a hard inquiry into their credit reports when reviewing the application. If a consumer has too many hard inquiries reported in a short time frame, their credit report will be negatively impacted. Generally, 6 or more hard inquiries is considered excessive.
Consumers credit scores may also temporarily be impacted by the new line of credit being opened, increasing their debt obligations and debt to income ratio.
Ultimately purchasing a car will either positively or negatively impact consumer credit scores subject to how well they meet their loan obligations.
Credit scores negatively impacted after purchasing a vehicle are often a result of too many hard inquiries within a short time frame, or due to a new line of credit being added to a consumer's overall obligations.
The first step is to review credit reports to identify the exact cause of the drop before any solutions can be considered. The second step is to consult credit repair specialists Credit Sage to ensure you attain the best credit picture possible.
Speak with a live credit specialist for your free consultation, now