Does a Car Loan Credit Check Hurt Your Credit Score?

Let’s break down what a car loan credit check really means, how it affects your credit score, and what you can do to minimize any impact.

When you’re shopping for a new car, there’s a lot to think about — the make, model, price, and of course, financing. If you’re considering a car loan, you’ve probably heard about car loan credit checks and may be wondering: Will this hurt my credit score?

At Vancouver Preowned, we know how confusing the car financing process can be, especially when it comes to credit checks. Let’s break down what a car loan credit check really means, how it affects your credit score, and what you can do to minimize any impact.

What is a Car Loan Credit Check?

A car loan credit check is when a lender reviews your credit report to assess your financial history. This helps them determine how likely you are to repay the loan.

There are two types of credit checks:

• Soft Inquiry: Does not affect your credit score. This happens when you check your own score or when a company pre-approves you for an offer.
• Hard Inquiry: May lower your score slightly. This occurs when a lender pulls your credit report during a formal loan application.

For car loans, lenders usually perform a hard inquiry — but the impact is often smaller than many people think.

How Much Does a Car Loan Credit Check Affect Your Score?

A hard inquiry typically reduces your credit score by only a few points — usually around 5 points or less. The effect is minimal because credit bureaus understand that checking your credit for a loan is a normal part of making a major purchase.

However, the impact can be larger if:

• You have many recent hard inquiries for different types of loans (like credit cards and personal loans).
• Your credit history is short or you have a lower score to begin with.

The good news? If you’re shopping for car loans, credit bureaus often treat multiple inquiries within a short period as one single inquiry. This “rate shopping” window usually lasts between 14 to 45 days, depending on the credit bureau.

What does this mean for you?
You can apply for multiple car loans to compare offers without worrying about multiple hits to your credit score — as long as you do it within a short time frame.

Why Does Your Credit Score Drop After a Car Loan Credit Check?

Your credit score drops slightly because lenders view a hard inquiry as a sign that you’re taking on new debt. While this isn’t inherently bad, it signals to lenders that your financial situation might be changing.

But here’s the key:

• The impact of a single hard inquiry is usually small and temporary.
• Hard inquiries stay on your report for two years but only affect your score for about 12 months.

So, while your score might dip for a short time, it will likely bounce back as long as you continue to make timely payments and manage your existing credit responsibly.

How to Minimize the Impact of a Car Loan Credit Check

If you’re worried about your credit score, here’s how to protect it while applying for a car loan:

1. Check your credit score first: Knowing where you stand helps you target lenders that suit your credit profile. You can request free reports from Equifax and TransUnion.

2. Get pre-approved: Some lenders offer pre-approval with only a soft inquiry. This lets you understand your loan options without affecting your score.

3. Limit your loan applications to a short window: Apply to multiple lenders within 14 to 45 days to ensure all inquiries count as one.

4. Keep other credit activity low: Avoid applying for new credit cards or personal loans during this time.

5. Work with trusted professionals: Partner with reputable dealerships, like Vancouver Preowned, to streamline the process and avoid unnecessary credit checks.

Conclusion: Don’t Let Credit Check Myths Hold You Back

A car loan credit check might cause a small, temporary drop in your credit score, but it’s a normal part of securing a loan for your next vehicle. By understanding how the process works and taking a few simple precautions, you can minimize any impact and confidently move forward with your car purchase.

At Vancouver Preowned, we guide you through every step of the financing process. Whether you have excellent credit or are working to rebuild your score, our team connects you with the right lenders and helps you secure a loan that fits your budget.

Ready to drive away in your next car without stressing about credit checks? Contact Vancouver Preowned today — let’s get you behind the wheel!

© 2024 Crivva - Business Promotion. All rights reserved.