Does trading in car affect credit?

There are many factors that affect your credit score. Today we take a look at what trading in your car will do for your score.

Lawrence Minnie

6 Dec 2021 · 20:47Automotive News

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Paying off your car loan in full by trading in your car will most likely not help your credit score, but won't hurt it either. Because car loans are installment loans and differ from consumer credit, lenders really only like seeing that you responsibly pay off your loans on time. They don't really care if you pay it off early, lenders like seeing open lines of credit and that you manage them well.

Trading in your car to buy another will have a minor impact on your score as you are essentially opening a new line of credit and you will also see a hard credit inquiry on your profile.

The hard inquiry will simply lower your credit score by a few points for up to 6 months. So, from a credit score perspective, you're really not going to help yourself by trading in but it's not like you're going to be majorly affecting your score either.

Written by Lawrence Minnie

Lawrence has been involved with motorsports for almost 30 years. Whether it's two wheels or four, if it has an engine, he will try to race it. This love of motor vehicles has led him to ride, drive, film, photograph, and write about his passion. Freelance for a while but now a permanent fixture on the AutoTrader team for over 7 years, Lawrence contributes written, photographic, and video content for AutoTrader and AutoTrader Bikes.Read more