Does It Hurt Your Credit Score to Pre-Qualify for a Car Loan?

You'd like to trade cars but you're also saving for a house and you're worried that getting a car loan might affect your credit score, hurting your chances for a mortgage. That's a valid concern. Most of your credit score is based on how much you owe and your payment history, but sometimes inquiries about new loans can affect that score. A lot depends on you and how you look for a car loan.

FICO Rates Credit

All three major credit bureaus rely on ratings compiled by the Fair Isaacs Corp. and called FICO scores. All sorts of lenders check FICO scores, so checking on car loans can generate a lot of inquiries to FICO. Generally if all the inquiries concerning a car loan are within a 30-day period and you get a loan, your score won't be affected because it's obvious you were shopping for the best deal.

Good History Helps

Car loan inquiries will have a greater impact if you have few accounts and a short credit history. About 65 percent of your FICO score is based on the total amount you owe and your payment history. If you have a good record of getting and paying loans promptly, car loan inquiries probably won't hurt you. FICO says paying bills on time and keeping credit card balances low is more important than car loan inquiries.

Type of Inquiry Matters

Inquiries on your credit score can be "soft" or "hard," and the impact will vary with the type of "pull." A "hard pull" when you apply for a car loan can affect your credit score by about 5 points for up to six months, so don't take this step until you're ready to pre-qualify or get a loan. If your credit score is already good, this won't really hurt you. A "soft pull" is a simpler inquiry just to verify you have credit and it won't hurt your score.

Be Careful About Pre-qualifying

Be careful about trying to pre-qualify for a loan online. These inquiries often generate "hard" pulls on your credit report. If you go through your regular bank or credit union or through a car dealer to pre-qualify, you'll probably generate only one inquiry, which will not hurt you. Do your pre-qualifying quickly, too. Trying to pre-qualify several times over several weeks can hurt more than doing it within a week or two.

About the Author

Bob Haring has been a news writer and editor for more than 50 years, mostly with the Associated Press and then as executive editor of the Tulsa, Okla. "World." Since retiring he has written freelance stories and a weekly computer security column. Haring holds a Bachelor of Journalism from the University of Missouri.