Vehicles are one of the most expensive purchases most people make. Because of this, many people apply for automobile loans. When someone inquires about a loan, the lender asks a credit bureau for a copy of their credit report. A credit report is a detailed accounting of someone’s credit history, or score. The results determine how much confidence the lender will have that someone may be able to pay back a big debt.  

A loan request is viewed as a risk to lenders. When someone applies for a loan, credit bureaus sometimes slightly decrease the applicant’s credit score. But we recommend that people shop around for auto loans from a number of different lenders because some lenders offer better interest rates than others. An interest rate is the amount a lender charges for the use of funds, expressed as a percentage of the original loan. The lower the interest rate, the less someone will pay over the life of a loan, which is usually many years. Loans can help people afford an expensive purchase like a new car.  

People who shop around for the best auto loan rate should try to fill out all their loan applications within 2 weeks. This is known as rate shopping – when someone makes a number of inquiries for a single purpose (such as searching for the best rates on an auto loan). The major credit bureaus will recognize that the applicant is shopping around, and only count the requests as one hard pull, if shoppers keep within a given credit bureau’s allotted time frame for rate shopping  – usually between 14 and 45 days, depending on the bureau. To be safe, people who are shopping around for the best auto loan rate should try to fill out all their loan applications within 14 days. 

For many, the assumption that multiple individual loan inquiries will have a negative impact on their credit score has been enough for them to steer away from finding the best deals. However, people should take advantage of the rate shopping time frame. Even a slightly lower interest rate can add up to big savings over the life of an auto loan, so it’s best to gather and compare quotes from different lenders.