The long and short of it is yes, applying for car finance will affect your credit score. But unless you submit a full application, the impact will only be minor and temporary - this is what’s known as a soft search.
Let’s go through the longer answer below to see how car finance could improve your credit score, how much a full car finance application might impact your score, and how long the impact might last.
The Knowledge Round-Up
Applying for car finance can affect your credit score
Soft credit checks usually have little to no impact on your score
A full application may cause a small temporary dip
Making regular repayments could help improve your credit score over time
Missed payments could damage your credit score and remain on your report for years
Can Car Finance Improve Your Credit Score?
Making consistent, regular payments could potentially help to improve your credit score over time. This happens because lenders can clearly see how you reliably manage credit.
When you keep up with repayments, your credit report may show positive signals such as:
Consistent on-time payments
Responsible use of credit
A longer credit history
Keep in mind that this likely won’t have an immediate impact on your credit score. If it does improve your score, the change will usually be gradual. Don’t be discouraged by slow growth; staying consistent with repayments can make a difference over time.
How Much Will My Credit Score Go Down if I Finance a Car?
During the initial application process, you might just see a small dip in your score. This could be just a few points, although the exact impact can vary depending on your credit profile. Any dip will usually only last for a few months before returning to your original score.
If you go through with an application and are declined, the impact could be slightly more noticeable. In that situation, it’s usually best to avoid applying for more credit products straight away while your credit report settles.
On the other hand, if you are approved for car finance, the longer-term effect may depend on how you manage the agreement. Making payments on time consistently could gradually have a positive effect on your credit history.
How Long Does Car Finance Affect Your Credit Score?
Any impact on your credit score during the application stage will usually be temporary, often lasting only a few months.
However, once the car finance agreement appears on your credit report, it will remain there for the duration of the agreement and sometimes after it has been settled. The long-term effect will depend largely on your repayment behaviour.
For example:
Regular payments could help strengthen your credit profile
Late or missed payments could harm your credit score
Defaults or serious arrears could stay on your credit file for up to six years
If you want to take the guesswork out, use our free CreditKompass tool simulate how taking out a car finance agreement might impact your credit score. Results are for illustrative purposes only, and actual results may vary.
Ways to Protect Your Credit Score When Applying for Car Finance
If you’re planning to apply for car finance, there are a few simple steps that may help to minimise any negative impact on your credit score. Before applying, it can help to prepare your financial profile and understand how lenders may assess your application.
Some useful steps include:
Check your credit report first, so you know what lenders may see
Avoid multiple credit applications in a short period of time
Make sure you’re on the electoral roll, which helps verify your identity
Keep existing credit balances manageable before applying
Use eligibility checkers where possible to see your chance before submitting a full application
If you want to better understand how your credit report works, you might also find our guide to common credit report myths useful. It breaks down some misunderstandings around credit scores and what really affects them.
How Car Finance Can Affect Your Credit Score
Car finance can play a role in shaping your credit profile over time. While the application itself may cause a small, temporary change, the bigger influence comes from how the agreement fits into your wider financial picture.
Handled responsibly, a car finance agreement can demonstrate consistent repayment behaviour and show lenders that you can manage long-term credit commitments. On the other hand, falling behind with payments can have the opposite effect and make future borrowing more difficult.
Before taking on any new finance agreement, it can be helpful to understand your current position. Checking your credit report first can give you a clear idea of how lenders might assess your application and help you approach car finance with confidence.
Check Your Credit Report for Free
If you’re ready for the next step, you can get a personalised car finance quote with no impact on your credit score, or use our Car Finance Calculator to see how much you could potentially borrow.
Related Guides
Explore related topics to further build your CreditKnowledge:
What Credit Score is Needed for Car Finance?
Can You Get Car Finance With a Guarantor
How Can I Improve My Credit Score
CreditKnowledge is a credit broker, not a lender.
Editorial Disclaimer: This content is provided for general informational purposes only and should not be considered financial advice. It is not intended to provide personalised recommendations or guarantees of any outcome, including changes to your credit score or approval decisions from lenders. Credit scoring models and lending decisions vary between providers and are based on a range of factors.
This content reflects general information at the time of publication and is not endorsed by any bank, lender, or financial institution. You should always consider your own circumstances and, where appropriate, seek independent financial advice before making financial decisions. Nothing in this content should be interpreted as a recommendation to take, or refrain from taking, any specific financial action.
Page Last Reviewed: 25.05.2026