Applying for any type of credit can be nerve-wracking, but financing a car is an extra big purchase. On top of that, you’re probably wondering whether a car loan has an impact on your credit score.
You’ve probably heard that the act of applying for a car loan can harm your credit score. In all honesty, it depends on what type of applications you are putting through. There are two types of credit applications: one uses a hard search, and the other a soft search. A soft search can only be seen by you and the organization doing the search, and it’s not recorded on your file and is not harmful to your credit. Ideally you want to use a soft search, but that’s not always possible.
Many car finance brokers perform a soft search when you apply for a loan and can then match you up with lenders they think will approve you.
In an ideal world, you would know you would get approved before you even applied. This car finance checker does just that. You can figure out your chances of being approved and your likely interest rate, allowing you to also search cars within your expected budget.
Another thing that can have a damaging impact in your credit score is too many applications in a short period of time, whether for car finance or otherwise. Numerous credit applications signal to other lenders that you are desperate for credit. This creates serious concerns over your ability to repay loans, which is the number one factor in getting approved for car finance.
If you have very poor credit, it can be difficult to get car finance. In this case you are best off using a company that specializes in car finance with bad credit in order to be matched up to lenders that have the best chance of approving you.
One of the best ways car finance can help improve your credit is if you pay your loan in full, on time, every month. You should use your car loan as a stepping stone, especially if your credit is poor, in order to rebuild your credit.
Car finance can definitely help improve your credit score. But doing it wrong will cause more harm than good.
This is a collaborative article.
The News Wheel is a digital auto magazine providing readers with a fresh perspective on the latest car news. We’re located in the heart of America (Dayton, Ohio) and our goal is to deliver an entertaining and informative perspective on what’s trending in the automotive world. See more articles from The News Wheel.