Does this make you credit score drop?

Question

I got an auto loan. My score dropped by 12 points. I am current on all of my payments and carry a low balance on my credit card. Did my score drop because of the loan?

Answer 1

The auto loan is likely the reason why your credit score dropped, and that makes sense if you consider what a credit score is used for. Credit scores attach a number to your name that give potential creditors a quick way to determine whether or not it is safe for them to issue you a line of credit; since you took on more debt liability in the form of an auto loan, your credit score drops because you will logically have to make payments on that loan, thus making you a slightly higher credit risk to a new creditor if you were to apply for more credit in the near future. A slightly lower credit score is a normal part of the borrowing process and probably isn’t something you should be concerned about.

If you’d like to inflate your credit score a little while still maintaining your auto loan, I would recommend asking for credit increases from your current credit card issuers or picking up another credit card after you’ve had the auto loan for more than six months (to make sure you qualify for a decent APR.) Part of your credit score is determined by how much of your available credit limits are NOT being used, so increasing your limit while you keep your balances low is a handy way to buy back a few of those credit points at no additional cost – just make sure you don’t start spending more as a result!

I’m sure it goes without saying that you need to keep up on all your payments, but I figured I would throw this in here just in case. 35% of your credit score is determined by your payment history, so this is by far the biggest chunk of keeping your credit score on the up and up!

Answer 2

Your credit score was lowered for two reasons:

1. Any time you apply for credit, an "inquiry" goes into your credit report. This alone will lower your score by about 5 points or so.

2. Getting a new line of credit lowers the average time that all of your accounts have been open. The longer your accounts have been open, the better it is for your credit score.

Unless you plan on financing a big ticket item like a mortgage in the next year, I wouldn't worry about it. Even if you do plan on buying a house, 12 points is not that much. As long as you continue to make timely payments on everything, you'll likely get those points back in a matter of months.

Answer 3

Having "diversified" debt is a good thing (as long as you don't fall behind) This loan should actually improve your score. I use a credit monitoring service through my bank and sometimes my scores change by 3 or 4 points in a month even when I do nothing at all. These things get tabulated very often so small changes are the norm. It's worth looking into though - better safe than sorry :)

Answer 4

Yes, any time you do an inquiry for credit, approved or denied, your score will drop. After a period of time it will go back up.

Answer 5

MOST LIKELY IT DID, THEY INQUIRE YOUR CREDIT AND THAT CAUSES FOR YOUR SCORE TO GO DOWN, NOW HOW MUCH IS SOMETHING ELSE, I THINK 12 POINTS IS ALOT FOR CREDIT CHECK ON A AUTO LOAN! YOU SHOULD LOOK INTO IT!!!

Answer 6

nope if all bills are paid on time it would not make your score drop. get a credit report from all three agencies, someone might have used your info.

Answer 7

Yes, it certainly did. You now have debt, or more debt, that you have to repay, that makes your score drop. Your debt versus your income level has gone up as well.

Answer 8

your score could have dropped when they ran your credit to see if you qualified

Answer 9

yes because you took on more debt...pay regular payments on time and your score should go up.

Answer 10

nope!