Our Volkswagen credit and financing system is designed to assist buyers of all socio-economic backgrounds. One question we often get is whether applying for financing hurts an applicant’s credit score. Strong Volkswagen explains what happens when you open an application for a car loan or lease.
How Financing Affects Credit Scores
The short answer is yes; financing slightly negatively impacts your credit score. Here’s what happens: when you apply for any loan, the lending institution performs a hard credit check on your credit history. This can negatively impact your score because it signals to the credit bureaus that you’re taking on additional debt.
The degree this affects your score varies depending on factors such as existing debt and a history of missed or defaulted payments. However, as we’re about to see, this is little cause for concern.
How to Minimize the Impact
You should not let a temporary credit score decline keep you from applying for finance assistance at a dealership. A hard credit pull stays on your record for two years, but the impact on your score lasts only about 12 months.
How to Rebound from a Hard Credit Check
There are ways to quickly regain your score after taking out an auto loan.
- Avoid multiple hard credit checks; consider pre-qualifying instead of applying until you’ve made a firm decision on your dealership and vehicle
- Make all payments on time
- Keep your credit utilization ratio below 30%
How to Rebound from a Hard Credit Check
As long as you set a budgeting plan, you should have minimal problems making timely payments. This will quickly get your score back on track from a hard credit inquiry and may even improve your credit rating, especially if a loan hasn’t been part of your credit mix until now. We assist buyers with new and pre-owned car financing, so visit Strong Volkswagen to find and finance your dream car today.
