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Will paying my car payment increase my credit score?

How long does it take for a credit score to update after paying off debt?

We are committed to being fully transparent with our readers. Opinions expressed here are the author’s alone. WalletHub editorial content on this page is not provided, commissioned, reviewed, approved or otherwise endorsed by any company. In addition, it is not any company’s responsibility to ensure all questions are answered.

Lauren Smith , WalletHub Staff Writer

@laurenellesmith • 04/17/23 This answer was first published on 04/17/23. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

It takes up to 30 days for a credit score to update after paying off debt, in most cases. The updated balance must first be reported to the credit bureaus, and most major lenders report on a monthly basis – usually when the account statement is generated.

Credit scores reflect the contents of credit reports, so the paid off debt will impact your credit score once it is added to your report. As a result, how long it takes for a credit score to update will depend on the creditor and the timing of your payment.

The magnitude of the change in your score is also contingent upon a number of factors, but paying off debt will likely help your credit. Generally, your score could increase by approximately 10 to 50 points if you pay off 25% of your credit card balances. If you pay off 100% of your credit card debt, your score could increase by 100+ points.

You can use WalletHub’s free credit score simulator to find out how paying down debt will affect your credit and get personalized credit-improvement tips from our analysis tools.

The Bigger the Creditor, the Faster Your Score Will Update

Most large creditors report user activity to credit bureaus once a month. In this case, you can expect to see the payment reflected on your credit history within 30 days of payment.

On the other hand, if your creditor is a smaller entity, they may only report activity to credit bureaus once a quarter. In this situation, it’s possible payments may take months to appear on your credit report.

What to Do When You Can’t Wait for Your Score to Update

Sometimes, it won’t be practical to wait a month or more for your credit score to update. Maybe you’re thinking about a big purchase like a house or a car, for example. In these situations, there are a few things you can do to speed up the process of updating your credit report. They all have limitations, however.

Rapid Rescoring May Help: With rapid rescoring, you work with a lender to report recent credit activity to the credit bureaus so that your credit report and score update sooner than normal. Instead of waiting for changes to your credit history, you pay off a debt and your lender requests an update from the credit bureaus to get your new score in 3-5 days. Lenders are not allowed to charge for rapid rescoring as a separate service, so they will most likely build it into their fee.

Add Bill Payments to Your Credit Report: Rent and utility bills usually aren’t reported to the credit bureaus. However, services like Experian Boost, eCredable Lift, and UltraFICO use banking information to add new account entries and details to your credit report. Basically, customers can allow access to their bank accounts for a potential score increase based on bill payments that usually wouldn’t be taken into account.

Contact the Credit Bureaus Directly: If your credit report does not reflect a recent payment on a debt, you may need to contact the credit bureau directly to have them correct the error.

How to file a dispute online:

  1. Sign into your account with the credit bureau.
  2. Select the reason for your dispute and submit any documentation that supports your claim.
  3. Submit your dispute.
  4. Wait for a response (typically within 30 to 45 days).

Bottom Line

Your credit report should update about 30 to 45 days after paying off a debt. Whether or not your score changes depends on the rest of your credit history.

You can track your progress with free daily credit score updates from WalletHub.

What Kind Of Car Financing Rate Can I Get With A 700 Credit Score?

The “prime range” runs from 661 through 780. If your credit score is anywhere between 700 to 709, you are in the middle of this segment, and you can get competitive rates to finance your vehicle. However, these depend on your shopping habits, income, and debt-to-income ratio.

what kind of car financing rate can i get with a 700 credit score

A credit score of 700 gets you an interest rate of 3% to 6% on car loans for new cars and about 5% to 9% for second-hand cars. Please note that these figures are just estimates, not interest rates. The actual interest rates may vary as they depend on multiple factors such as:

  • Duration of the loan
  • Down payment amount
  • Offers and promotions on interest rates

Is A Credit Score Of 700 A Good Score?

A credit score of 700 is good enough for you to negotiate the best interest rates. Dealerships prefer that customers buy new vehicles instead of old ones and the interest rates for financing a new car are much better than the interest rates for buying a used car. Dealers advertise special lease offers, low interest rates, and cash rebates for financing your new vehicle. A credit score ranging from 700 to 709 will make you eligible for some of these offers, while other offers will look more lucrative for buyers in the superprime range.

What’s A Credit Score?

A credit score comprises various components. One such component is payment history, comprising 30% of the total credit score. If you have missed payments, it will be a part of your payment history and credit score. It will also include the delinquent accounts, if any.

Yet another significant marker for a credit score is Amounts owed, which also comprises 30% of the total credit score. However, debts don’t necessarily mean you will have a low credit score. If you have used too much of your credit, your credit score can dip.

You will have a good credit score with a long-standing history of regular and timely payments. The length of your credit history accounts for 15% of your credit score. In comparison, new credit accounts can affect your credit score by bringing it down. The new credit parameter has a weightage of 10% on your credit score.

Yet another factor that affects credit scores is the credit mix. The credit mix accounts for 10% of your credit score. If you have various credit accounts like a home loan, a student loan, and credit cards, and you have been making timely payments, which will boost your credit score.

Some Other Factors That Affect Car Financing Rates

The interest rates are calculated based on various factors. One of the first critical factors is the lender’s trust in your financial data and habits for loan repayment. The riskier the loan seems for the lender, the higher the interest rate they will offer.

Some of the factors the lender considers are as follows:

  • Credit Score. The first thing lenders check is your credit score: the higher your credit score, the higher your chances of securing an auto loan at lower interest rates.
  • Credit History. Your credit history data helps the lender know how much of your credit you currently use and your repayment history, along with missed monthly payments.
  • Loan Duration. Auto loans generally have terms ranging from one year to seven years. Longer payment terms translate to lower monthly payments, but interest rates are higher. In contrast, the lower the time to return the sum, the lesser the rate.
  • Market Rates. The average interest rates in the market are a huge determining factor when it comes to your loan. If the average interest rate at which most lenders give out money is high, the interest rates will be high in the entire market.
  • Loan-To-Value Ratio. The loan-to-value ratio, or the LTV ratio, is part of the risk assessment procedure for the lender. It’s usually calculated through a special formula, where the amount borrowed is divided by the appraised car value. The lower your LTV ratio, the better your chances of getting a lower interest rate.
  • Down Payment. The zero-money down payment looks attractive, but to bring your LTV ratio down, you must pay a considerable part of the car’s cost as a down payment. This will surely get you better interest rates, and you’ll return the money quicker.
  • Debt-To-Income Ratio. The debt-to-income or DTI ratio denotes the amount of money you are liable to pay as debt obligations compared to your monthly salary. The lenders look at this to determine your eligibility to pay debts. The lower your DTI ratio, the lower the interest rates you can negotiate on your automobile loan.

You can get lower interest rates on your car loan by increasing your down payment and getting as many discounts as possible, especially on automatic payments. You can easily save up to 0.5%.

Get a co-signer if your credit score doesn’t attract the competitive rates you wish to get. Anyone in the family or friends with a good credit score might help you get a lower rate. Plus, you could try and choose a shorter loan term.


Your credit score is a significant factor in determining the interest rates on your car loan. If you have a good credit score, chances are you will find competitive rates for your auto loan. If you’ve a 700 credit score, you’ve got plenty of options ranging from banks to credit unions and from online lenders to loan marketplaces and car dealerships.

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How To Pay Off Your Car Loan Faster

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Your car payment is likely one of your biggest monthly expenses. Figuring out how to pay off your car loan faster can help you save a significant amount of money even if you have one of the best auto loan rates . We at the Guides Auto Team will give you strategies for paying your auto loan off early and explain when it may or may not be right for your financial situation.

Why Trust Our Team The Guides Auto Team is committed to providing reliable information to help you make the best possible decision about financing for your vehicle. Our researchers, writers and editors are dedicated to investigating providers and analyzing customer feedback and insights so you can choose with confidence.

24 Companies Reviewed
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295 Research Hours

Should You Pay Off Your Car Loan Early?

The first step to paying off your car loan early is figuring out whether it’s a good idea to do so. While getting rid of your car payment seems like a major advantage, it may not always be the best financial decision.

How To Use a Car Loan Calculator

Before you try to pay off your car loan early, see if doing it would actually benefit you. The additional savings may not be worth the adjustments you’d need to make to your budget. One of the easiest ways to find out how much you can save is to use a car loan calculator. These tools allow you to input different scenarios, such as making higher monthly payments, and see how they would affect your loan. You can even see what your payments would be if you refinanced your car loan at a different interest rate.

When You Should Consider Paying Off Your Car Loan Early

  • You got a raise or extra cash : If you recently got a pay raise or a tax refund or otherwise came into extra unexpected money, you may be able to afford making larger payments.
  • You want to be debt-free : When you pay off your car loan, you go from having debt to having an asset. This could increase your credit score in addition to removing a monthly obligation.

Graphic showing seven ways to improve your credit score

  • You have a high interest rate : You may have had to settle for a high-interest loan when you bought your car. Paying off your loan early can substantially reduce the amount of interest you pay over the life of the loan, especially when your rate is high.
  • You want to save money : Paying off your auto loan ahead of time reduces the amount you pay in interest. Depending on how quickly you pay off your loan, the savings could be substantial.
  • You have a variable-rate auto loan: With loan interest rates on their way up, it may be a good idea to pay off your car loan faster to avoid getting hit with a higher rate.

When You May Not Want To Pay Off Your Car Loan Early

Faster repayment of your auto loan isn’t always the best move. Here are a few situations in which it may not make sense to pay off your car loan faster:

  • Your car loan has prepayment penalties : Some loans come with penalties for early payoff. In this case, you may not save money by repaying ahead of schedule,
  • You can’t really afford it : Stretching to make extra payments on your car loan may seem wise, but if you end up needing to borrow money as a result, it can hurt your financial situation.
  • You have other debts with higher interest rates: In many cases, the interest rate on a car loan is lower than the rates for credit cards, personal loans, student loans and other types of financing. If you have loan debts with higher interest rates, it usually makes more sense to pay those off early.

5 Ways To Pay Off Your Car Loan Faster

If you’ve decided that going for an early loan payoff makes sense, you have several ways of doing so. Your best option depends on your personal finance situation and money habits.

#1 Refinance Your Car Loan

Refinance auto loans offer you the opportunity to get a new interest rate and new loan term. If you can afford higher payments, you may be able to secure a refinancing loan with a lower interest rate and shorter term.

However, a refinance loan is just a new car loan for a vehicle you already own. It may come with the same fees and additional costs as other loans, so include these costs in your calculations.

Source: Capital One

#2 Split Your Bill Into Two Biweekly Payments

At first glance, making half payments toward your car loan every two weeks might seem like a net neutral. However, this will result in 26 payments over the course of a year instead of 12. That means you’ll make an additional month’s payment each year.

#3 Make a Large Payment

If you come into extra money from a job bonus, tax return or other source of additional income, making a large lump-sum down payment toward your auto loan can help you pay it off faster. That’s especially true if your lender counts additional payments beyond the required debt payment toward the principal. This will also reduce the amount of interest you get charged going forward.

#4 Round Up Your Car Payments

Any additional amount you pay toward your car loan will help you finish paying it off early. Simply rounding your payment up to the next $50 or $100 increment can go a long way. For example, if your car loan payment is $365 per month and you pay $400 per month, you will have paid an additional $420 toward your loan after a year — more than a month’s payment.

#5 Review Additional Car Expenses

You may be paying for things you don’t need with your car loan. Dealerships typically roll things like gap insurance and car warranties into purchase loans. In some cases, you can get a partial refund by ending this coverage, which lowers your monthly payment. If you continue to make the same payment you were making before, you’ll pay your auto loan off faster.

How To Pay Off Your Car Loan Faster: The Bottom Line

For many people, ending car payments can be a game-changing financial move. When it comes to how to pay off your car loan faster, you have more than a few options. Whichever way you choose to go about it, first make sure you’re in the right position to benefit from paying your auto loan’s remaining balance off early.

Should You Pay Off Your Car Loan Faster: Checklist

To help you decide whether or not it makes sense to wrap up your auto loan early, we’ve created a checklist. If you check most or all of the items on this list, it’s worth looking into how you can pay off your car loan faster:

  • You can save a significant amount of money by paying off your loan early.
  • You can achieve other financial goals by eliminating your loan payments.
  • You can afford to make larger payments or one large payment.
  • Your loan doesn’t have a prepayment penalty.
  • You don’t have other debts with higher interest rates.
  • You can refinance your loan without too much additional cost.

Our Recommendations for Refinance Auto Loans

A refinance auto loan may be a great way for you to pay off your car loan faster — as long as you secure affordable rates with a reputable lender. Sourcing quotes from providers allows you to compare them and see who offers the best refinancing rates for you. We recommend starting your search with one of the following providers from our list of the best auto refinance companies.

Top Choice for Refinancing

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Excellent customer ratings Low rates for good credit customers Strong industry reputation
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Financing for customers with bad, limited, or no credit Offers special military rates A+ BBB Rating

Auto Approve: Top Choice for Refinancing

In our review of the best auto loan providers, Auto Approve was named Top Choice for Refinancing. As a refinance-only lender, Auto Approve has competitive rates for borrowers who want to get new loans to pay off their car loans faster. The company also has a very easy online application process and doesn’t charge prepayment penalties. Keep reading: Auto Approve review

MyAutoloan: Best Low-rate Option

For those looking for refinance loans, the marketplace model at myAutoloan is worth checking out. Rather than having borrowers search for lenders, the site allows borrowers to submit their information and lenders to come to them. This makes comparing offers simple and efficient. In addition, myAutoloan is open to borrowers with credit scores as low as 575. That means people with less-than-stellar credit history may also find refinance auto loans. Keep reading: myAutoloan review

Frequently Asked Questions

What is the best way to pay off a car loan early?

There are several ways to pay off a car loan early, and the best way to do it depends on your situation. Some of the most common ways include making larger payments each month, making a large bulk payment when you can and refinancing your loan to a shorter term or lower interest rate.

Will my car payment go down if I pay extra?

No, your car payment will not go down if you pay extra in most cases. Typically, your car payment will stay the same, but the additional payment will be credited toward your loan balance. Depending on how much extra you pay, this could mean that you pay off your car loan faster.

Should I pay my car payment twice a month?

Paying half of your monthly car payment twice a month instead of a full payment each month can help you pay off your car loan early. That’s because when you make payments on a biweekly basis, you make 26 payments that add up to 13 monthly payments instead of 12.

When you pay extra on a car loan, does it go to principal?

Whether or not any extra you pay on a car loan goes to the principal depends on your lender and your loan contract. Some lenders may automatically credit additional payments toward your principal, while others may only apply that payment toward interest. Your lending agreement should specify which. Also, it may be a good idea to state clearly in writing that an additional payment is to be paid toward the principal only.

Our Methodology

  • Reputation (25% of total score) : Our research team considered ratings from industry experts and each lender’s years in business when giving this score.
  • Rates (25% of total score) : Auto loan providers with low APRs and high loan amounts scored highest in this category.
  • Availability (25% of total score) : Companies that cover a variety of circumstances are more likely to meet consumer needs.
  • Customer Experience (25% of total score) : This score is based on customer satisfaction ratings and transparency. We also considered the responsiveness and helpfulness of each lender’s customer service team.

*Data accurate at time of publication.

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