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How much does car loan preapproval change your credit score?
I want to get car loan preapproval to help me plan a budget, but I'm worried about what it might do to my credit score. How much does preapproval drop your credit score?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Car loan
preapproval is a smart move for the very reason you said: it helps you budget and can act as a negotiation tool in the car-buying process. However, it does cause a temporary drop in your credit score by about five to 10 points. This is due to the lender conducting a hard inquiry on your credit, or pulling your credit. The silver lining is that all three credit bureaus allow you to have as many hard inquiries as you want for a car loan in a 14-day period, and it only counts as one. That’s because they know you’re shopping around and not frivolously applying for credit.
If you’re really worried about your credit score and don’t want the ding on your credit, you could also go for car loan prequalification. Prequalification is similar to preapproval in many ways, except it only does a soft inquiry on your credit, which doesn’t affect your score. It provides the same upsides, such as estimating your budget and interest rates, as well as whether you may be approved.
One thing a prequalification doesn’t do is guarantee approval for a car loan. This is in contrast to a preapproval, which means you’re all but approved for the car loan.
Whether you go for preapproval or a prequalification, you should also start to think about your car insurance, since your lender will likely require full coverage car insurance. To easily get the best deal on the coverage you need, check out the
Jerry
app. We’ll get you personalized rates from top providers, so that all you need to do is pick the plan that works best for you. And once you pick one, we’ll even help you switch!Best of luck with the loan!
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- Gregory R.
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