Does Selling a Financed Car Hurt Your Credit?
Purchasing a car with the help of financing can be a great way to get the car of your dreams, but it can also come with some risks. For example, selling a financed car can have a big impact on your credit score. But, is it always bad for your credit?
The Potential Impact On Your Credit Score
When you sell a financed car, it may not necessarily lower your credit score. However, it could lead to a drop in your credit score depending on how long the loan was and how much of it you’ve paid off. Here are some scenarios to consider:
- The loan was paid off in full: If you’ve paid off the loan in full, selling the car shouldn’t have any impact on your credit score. In some cases, it may even boost your score depending on the length of the loan and when it was paid off.
- The loan was paid off within 24 months: If you paid off the loan within 24 months, it’s unlikely that the sale of the car will have any impact on your credit score.
- The loan was paid off after 24 months: If you paid off the loan after 24 months, selling the car could potentially have a negative impact on your credit score. This is because the loan may appear on your credit report for up to seven years and any disruptive changes can potentially lower your score.
Taking Necessary Precautions
If you’re planning to sell a financed car, it’s important to take certain precautions. First, you want to make sure the title is officially transferred with the appropriate documents. You also want to make sure the lender is paid off in full and the loan is officially closed. It’s also a good idea to request a copy of the loan closing documents in order to prove that the loan was paid off and the car was sold. These documents can be used to back up your side of the story in the unlikely event that you experience a drop in your credit score because of the sale.
Final Thoughts
In short, selling a financed car can have an impact on your credit score. However, the impact depends on the terms of the loan and your repayment history. If you’re considering selling a financed car, it’s a good idea to speak with a financial advisor or legal professional before you do so to ensure the sale doesn’t negatively impact your credit score.
