Does Applying for a Car Loan Affect My Credit Score?

If you’re shopping for a new or used car around Palm Beach County, you might wonder just what pitfalls to avoid. The good news is that shopping for a car is much more straightforward than many West Palm Beach drivers think, but it pays to do a little research on your car loan vs. credit score. Why? If you plan properly, you can go through the process without losing any points off your credit score – and you might even end up growing your credit! Learn how to apply for car financing the right way, and get the ball rolling with Earl Stewart Toyota.

Car Loan vs. Credit Score

Does applying for a car loan affect my credit score? Yes and no.

• When you apply for car financing, this is what is called a “hard inquiry” on your credit score. This can drop a few points from your score.
• However, getting a car loan can add to your overall credit history. In the long-term, you will see a positive impact – assuming you pay promptly.
• Overall, the few points you lose during a hard inquiry will be quickly recovered as you pay off your loan.

Prequalification vs. Preapproval

Another important distinction is how you apply for your loan. You may hear the words “prequalification” and “preapproval” as you navigate through various financing sites, and these are two distinctive terms. How do they differ?

• Prequalification involves a “soft credit inquiry”. This does not affect your credit score, though the offer you receive is not set in stone. It may change throughout the loan process, so be prepared.
• Preapproval involves a “hard inquiry”. This does affect your credit score temporarily, and it requires quite a bit more information on your end than prequalification. However, you will get the exact amount you can borrow at the end of the process. Some lenders even will provide you with a check for use at the dealership.

Learn More with Earl Stewart Toyota

So, does applying for a car loan affect my credit score? Yes, but it is minor and temporary. If you want to learn more about the relationship between your car loan and credit score, feel free to contact us at Earl Stewart Toyota. Our team would be happy to help you apply for your car loan in Earl Stewart Toyota, and we can help you find just the right offer to meet your needs.