Your credit score is a number assigned to you by the credit bureaus. It highlights your history of borrowing and repaying credits and loans on time. Car dealers, banks, loan providers and credit card companies examine credit history before approving a loan. Your credit score can range from 300 to 850 based on your ability to manage finances.
Before we move forward on discussing how credit checks can impact your credit score, it’s important to understand the difference between a hard inquiry and a soft inquiry. Many companies and financial institutions perform credit checks on consumers when they sign up for a loan, but the impact of those checks have on your credit score depends on how they do it.
A hard credit inquiry is made when you apply for a loan and the lender wants to see your past record so he approve or disapprove the loan request. A soft credit inquiry is made when the lender checks your credit report for informational purposes only. Soft inquiries usually don’t affect your credit score.
Hard credit checks
When evaluating loan applications, loan providers often run hard credit checks which can lower your score. This is why it’s important not to apply for a lot of credit products over and over. Since every credit application leads to a hard credit check which has a negative impact on your creditworthiness, you should be confident about your credit history.
Some of the common examples of hard credit inquiries include student loans, auto loans, mortgage applications, and personal loans. One hard inquiry wouldn’t hurt your score. However, if you apply for multiple credit products, this could significantly lower your score. When a number of hard credit checks are made, the bureau assumes that you’re applying for many loan opportunities within a short period of time. Therefore, be careful when applying for loans. Lenders have to see how good you are at managing finances. They can’t evaluate this unless they pull your file and view your history.
Traditionally, auto loan inquiries made over a 45-day period is considered as one inquiry. So, apply for credit in a responsible manner. In case of an auto loan, only apply when you absolutely need it. Plenty of hard checks on your file often leads to subpar interest rates.
Auto loan approval and credit history
You need your score to be as high as possible when it comes down to auto loans because bad credit scores can reduce your chances of getting loan approval. Your financial history tells a lot about your ability to handle loans. For example, how often you make timely payments and in full, credit utilization rate, and the length of your credit history.
What if you have bad credit and needs an auto loan
Is it possible to get approved for a bad credit car loan? While it’s difficult to get approved for a loan with bad credit, Find My Auto is where you can get approved for a car loan no matter your credit score or history. Nevertheless, having a good credit score can make things a lot easier and convenient down the road.