How Buying a Car Can Impact Your Credit Score

Whether you’re seeking options for bad credit car finance in Mansfield or have a stellar credit rating, you’re probably wondering how buying a car can impact your credit score. Taking out an auto loan can impact your credit in a variety of ways, some positive and some negative. Read this guide to learn how Lexington car-buyers like you can boost the positive effects and reduce the negative effects, and explore Kia credit options with our dealership! 

What Goes Into a Credit Score?

To understand how a car loan can impact your credit, let’s take a moment to learn what goes into a credit score. 

• Payment History – 35%: Lenders in Shelby want to see that you’re a responsible client who will make payments on time, so payment history makes up the biggest chunk of your credit.

• Amounts Owed – 30%: It’s not inherently bad to owe money on credit accounts. What matters is how much of your available credit you’re using; if you’re maxing out, lenders may view you at risk of defaulting on a loan.

• Credit History Length – 15%: The length of credit history doesn’t hold as much weight as the above factors. A longer history is favorable and helps build trust with lenders, but if you have a shorter history with a good payment history and low amounts owed, you should be in good shape.

• Credit Mix – 10%: Credit mix refers to the variety of credit lines you have, i.e. credit cards, mortgage loans, installment loans, etc. You don’t need one of each to have good credit, but having more than one can help build a credit history. 

• New Credit – 10%: Opening multiple new credit lines in a short period is a risk factor due to the hard credit inquiry required with each application, also called a “hard credit pull.” It’s particularly risky for those with a short credit history.

What Is a Hard Credit Pull?

When you apply for a line of credit, the creditor will request to look at your credit report. This is known as a “hard credit pull,” as it allows them to review in detail all of the five credit score factors we discussed above.

How Can a Hard Credit Pull Impact Your Credit?

Each time a hard credit pull is done, it temporarily lowers your credit score by a few points, and the credit pull can remain on your report for up to two years. This is why opening multiple new credit lines at once is risky — lenders will see it reflected in your history and may see you as a bigger risk.

Get Pre-Approved for Kia Credit with No Hard Credit Pull!

Some establishments, like Spitzer Kia Mansfield, allow customers to apply for pre-approved credit without the hard credit pull. A “soft credit pull” may be done instead, which doesn’t affect your credit score nor go on your credit report. 

Whether you need bad credit car finance in Mansfield or you have good credit, you can get pre-approved with our secure online Kia credit application! 

How Buying a Car Can Improve Your Credit

You can avoid the hard credit pull and protect your credit score by submitting a Kia credit application for pre-approval at Spitzer Kia Mansfield. But even if you were applying for bad credit car finance in Mansfield through an establishment that required a hard credit pull, your car loan could actually help minimize the impact and even improve your credit over time! Here’s how buying a car can improve your credit:

• Making car payments on time helps boost your credit! If your credit score falls a few points after a hard inquiry, it will go back up over time once you start making payments.
• Timely payments contribute to a positive payment history, the biggest contributor to your credit score.
• A car loan also helps diversify your credit portfolio and improve your credit mix.

Contact Us with Kia Credit Questions!

Do you have questions about our Kia credit application? Need help finding the right Kia for your drives in Ashland? We’re here for you! Contact us or stop by our dealership to get help from our knowledgeable financiers, and check out our Kia research guides to explore our lineup in the meantime!