How a Car Loan Affects Your Credit Score?
Anamika is going to buy a new car. Anamika is worried that this will hurt her credit score and she doesn’t want that because she has plans to buy a house in five years. But we can tell you that this won’t hurt your credit score too much.
How Are Credit Scores Decided?
Credit agencies like CIBIL base their credit score on how you pay and the amount of money you owe. They also look at your history and whether or not you have a mix of loans or only one kind of loan. If someone has a lot of new credit, this can hurt their score.
- Amount Owed – This is the ratio between the debt an individual has and their yearly income. If it is lower, that is good.
- Credit Mix – This means that people look at your debt. They will give you a score of 10% for what kind of debt they think you have.
- New Credit – If someone is applying for a new loan, this parameter will take 10% of the weight.
- Payment history carries the heaviest weight, typically around 35% of the total score. As a result, on-time payment of bills will result in a high credit score.
- It is important to note that the length of a person’s credit history has a 15% weighting.
How Does A Car Loan Affect Credit Score?
Anamika knew that she will have to pay a fee because she applied for a car loan. The fee would affect her credit score, but that is okay. If Anamika pays the bills on time, then over time it will improve her credit score.
If someone has a good repayment history, they will get a higher score on the “Payment History” parameter. If someone has had car loans in the past and has had good repayment history, they will also get a higher score on “Length of Credit History.”
Anamika may have to pay a lot more at the beginning of her car loan, but it will go down as she pays the money back quickly. Anamika should also keep her other credit cards in check so that they don’t go up too high. If she does this, it will help with her credit score.
Axis Bank offers many different kinds of loans for both new and used cars. For a new car, you can get a loan up to 100% of what it costs.
You can get a loan with Axis Bank for as long as 7 years. Axis Bank also has ties with several manufacturers, which means that you will have some special privileges from them if you borrow from this bank.
For people who buy used cars, Axis Bank can provide up to 85% of the value of the car in a loan. Axis Bank also makes it easy to transfer ownership through its connections with dealers across India.
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