Does financing a car actually drop your credit score?

Personal Finance Canada Forum
1

last year i took on a mortgage, and earlier this spring, i financed a car with a good interest rate. back in spring, my score was in the low 800s, but now it’s down to the 740s. i’ve never missed a payment on anything – mortgage, car, phone, internet, or credit cards, which i pay off every month.

only thing i can think of is that i use over 50% of the limit on some cards (but again, i pay them off every month on time).

just checked my credit report and nothing suspicious showed up either.

any idea why my score dropped? does opening a car loan really affect it this much?

2

800 to 740 isn’t a big deal on credit reports. if you already have the mortgage and car loan, it doesn’t really matter anyway.

3

Harlyn said:
800 to 740 isn’t a big deal on credit reports. if you already have the mortgage and car loan, it doesn’t really matter anyway.

agree with this. you’ve got the credit you need, and 740 isn’t gonna hurt you. it’ll start climbing back up.

4

Harlyn said:
800 to 740 isn’t a big deal on credit reports. if you already have the mortgage and car loan, it doesn’t really matter anyway.

thank you

5

the dealership probably did a “hard” credit check, which can drop your score a bit.

6

BobbyThompson4 said:
the dealership probably did a “hard” credit check, which can drop your score a bit.

thank you that makes sense

7

StephieStephie said:

BobbyThompson4 said:
the dealership probably did a “hard” credit check, which can drop your score a bit.

thank you that makes sense

your mortgage a few months back probably did the same. so you’ve got two recent hard checks, plus high usage. it’ll go back up as you make payments.

8

@EVERLY
thank you that makes sense

9

BobbyThompson4 said:
the dealership probably did a “hard” credit check, which can drop your score a bit.

yeah, hard checks do drop your score.

10

i financed a car last month and mine dropped by like 20 points but went back up this month.

11

Aza said:
i financed a car last month and mine dropped by like 20 points but went back up this month.

thank you!

12

i was in a similar situation… it was actually the mortgage that dropped my score. it’s coming back up, but apparently that’s normal.

13

Ray said:
i was in a similar situation… it was actually the mortgage that dropped my score. it’s coming back up, but apparently that’s normal.

wow, that’s helpful to know, thanks!

14

car loan increases credit utilization

15

Carly said:
car loan increases credit utilization

nah, it’s not revolving credit.

16

Mila said:

Carly said:
car loan increases credit utilization

nah, it’s not revolving credit.

nope, not a car loan. a regular or line of credit loan, yes, but a car loan is secured against the car and doesn’t work like a revolving account.

17

why does it matter?

18

Whit said:
why does it matter?

it doesn’t really, just wanted to make sure nothing fishy was going on since i’ve been a bit worried about identity fraud.

19

StephieStephie said:

Whit said:
why does it matter?

it doesn’t really, just wanted to make sure nothing fishy was going on since i’ve been a bit worried about identity fraud.

it’s a mystery algorithm. since you have a recent mortgage and car loan, your usage is high, and you’ve had a couple hard checks. it’ll bounce back as you pay.

also, scores vary with different agencies. the main thing is you’re doing everything right – just keep it up, and your score will go back up on its own.

20

@Valentina
thanks so much! i’m new to credit so trying to learn as i go. this was super helpful.