Credit scores are a tricky subject. So many different things go into calculating them, including how many credit accounts you have open, how long your credit history is, and how many loans you apply for within a certain period of time. Many people worry about their credit score when they go to apply for a car loan, but you might also be wondering about what comes after - how does paying off an auto loan affect your credit score?

There are many different ways to apply for an auto loan. You can get pre-approved for a loan by your bank or credit union, or finance your vehicle through the dealership. Either way, an auto loan is one of the most common types of credit, alongside monthly payments like a house mortgage. Having an auto loan can diversify your credit history, which actually looks good to lenders in the long run - and if you make all your monthly payments on time, that shows you're responsible and capable of keeping up with other payments.

When determining whether or not an auto loan will negatively impact your credit score, you have to look at your outstanding debts as a whole. Can you afford to keep paying interest on all your credit accounts? Do you need to keep your auto loan around longer to pad your credit history and give you more diversity? If you pay your auto loan down to zero too quickly, then it could actually negatively impact your score - but if you have the ability to pay the debt off quickly and have many other outstanding accounts, you might want to just pay it off so you don't have that account on your mind.

If you have several credit accounts open, then keeping one installment account open just for the sake of giving your score a minor boost isn't worth it. Auto loans can positively impact your credit score, but if you have the ability to pay it off and want to, you should go for it.

If you have any questions about credit scores or financing, contact Apple Honda in Riverhead, NY today!

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