Getting pre-approved for an auto loan can help you shop for your dream car with confidence, knowing exactly how much you can afford to spend. However, many people are hesitant to apply for pre-approval because they’re afraid it will negatively impact their credit score. The good news is that there are ways to get auto loan pre-approval without affecting your credit score. In this article, we’ll explore some of the options available to you.
What is auto loan pre-approval?
Auto loan pre-approval is when a lender reviews your credit history and financial information to determine how much money they’re willing to lend you for a car. With pre-approval, you’ll know the interest rate and terms of your loan before you start shopping for a car, which can help you stay within your budget and avoid overpaying for a vehicle.
How does pre-approval affect your credit score?
When you apply for any type of credit, including auto loan pre-approval, the lender will typically pull your credit report to review your credit history and assess your creditworthiness. This is known as a hard inquiry, and it can lower your credit score by a few points.
However, the impact of a hard inquiry on your credit score is usually minimal and temporary. It typically lasts for about 12 months and is only one of several factors that affect your credit score. The benefits of getting pre-approved for an auto loan usually outweigh the small impact of a hard inquiry.
Options for getting auto loan pre-approval without affecting your credit score
If you’re concerned about the impact of a hard inquiry on your credit score, there are several options available to you for getting auto loan pre-approval without affecting your credit score:
- Shop around for lenders: Rather than applying for pre-approval with one lender, shop around and compare offers from several lenders. This will give you an idea of the interest rates and terms you can expect without multiple hard inquiries on your credit report.
- Use pre-qualification tools: Many lenders offer pre-qualification tools that allow you to get an estimate of your loan terms and interest rates without a hard inquiry. Pre-qualification is not a guarantee of approval, but it can give you a good idea of what to expect.
- Consider a soft inquiry: Some lenders offer pre-approval with a soft inquiry, which doesn’t affect your credit score. Soft inquiries are typically used for informational purposes and don’t appear on your credit report.
Conclusion
Getting pre-approved for an auto loan is a smart move for anyone shopping for a car. While a hard inquiry may temporarily lower your credit score, the benefits of pre-approval usually outweigh the small impact. By shopping around for lenders, using pre-qualification tools, and considering lenders that offer a soft inquiry, you can get auto loan pre-approval information without affecting your credit score. This will help you shop for your dream car with confidence, knowing you have the financing in place to make it happen.
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Patrick M. is Editorial Director for the always expanding DriveSafe Online library of courses. With over two decades of experience developing award-winning training, he now focuses on innovating online driver safety training. Pulling from his background in journalism, he steers the wheel behind the creation of top-tier content that promotes a better journey—whether on the digital highway of learning or the real roads we travel every day.