Home > Auto Loans > How Much Will My Credit Score Drop If I Apply for a Car Loan?

Comments 0 Comments
Advertiser Disclosure


Shopping for the best deal on a vehicle loan is smart, right? After all, for many of us, a loan to buy a car or truck will be one of our largest loans. Most of us (84%) rely on financing when purchasing a vehicle, according to data from Experian Automotive (fourth quarter, 2014) and the average loan amount for a new vehicle is $28,381; the highest on record and an increase of almost $1,000 from a year ago. In fact, the average monthly payment is now up to $482. Shaving even a percentage point off the interest rate on a car loan can mean decent savings.

But there is a hidden danger lurking in those applications for auto loans, as a number of our readers have discovered:

I purchased a new car the dealer ran me through 7 different banks to get me the best rate all inquiries are listed separately on my Trans Union report and I lost almost 60 points on my credit score. Is it possible to contact them and fix the inquiries to be only 1 inquiry? – “VStrigle”

I had my own financing lined up with lender I have done business with for over 7 years and I thought I was getting a good rate. Well the salesman at the dealer said he was 95% confident that he could get a much lower rate that what I was getting, so with hesitation, I decided to let him run my credit. I decided at the last minute not to purchase the car mainly because the salespeople were very pushy and they were not going to give me good offer on my car. Well 57 inquires later…(my credit scores dropped 40 – 60 points).- “ricky”

I went to one dealership who ran me against 19 lenders(seriously!). My score dropped 50 points by the next score reporting cycle. – “CE- Mpls”

A single credit inquiry generally has little impact on your credit scores. One inquiry might drop your score 2 to 7 points or so. And multiple inquiries created as a result of shopping for an auto loan are not supposed to hurt your credit scores significantly if you limit your shopping to a short window of time. VantageScore counts all inquiries within a 14-day rolling window as one. FICO scores contain a similar buffer except the window varies — sometimes it is 14 days and sometimes it is 45 days — depending on the FICO score model that is used. (In addition, with these FICO scores all auto-related inquiries in the past 30 days are ignored.)


So how is it that these consumers have seen their credit scores drop dramatically due to auto loan applications? One possible explanation is that the scores they are monitoring are not FICO or VantageScore credit scores, but instead are custom bureau scores or educational scores that do not include a buffer for inquiries. In those cases, if the consumer later applies for credit with a lender that uses FICO or VantageScore scores (most do), those inquiries will be “de-duped” so they are treated as a single inquiry.

Another possibility is that the inquiries are not properly identified as auto-related inquiries by the source, though that’s less likely. And still another possibility is that some of these consumers may have seen their credit scores through one source the first time and another source the second time. Finally, if a new auto loan had already been reported, that could affect their credit scores.

What Can You Do?

How can you protect your credit when you shop for an auto loan? It can be helpful to review your credit reports and credit scores before you go to the dealership, then apply for financing with a trusted lender in advance. (You can get a free credit report summary from Credit.com to see where you stand before you apply. Checking your own credit does not affect your scores in any way.) A credit union or local bank isn’t going to share your loan application with multiple lenders the way an auto dealer will. If you get pre-approved, you can simply tell the dealer you already have financing and don’t want them to pull your credit reports. Not only can this help you avoid possible damage from multiple inquiries, but it can also help you focus your negotiations with the dealer on the car and not the loan.

Getting inquiries removed can be tough. If you are confident you did not authorize a car dealer to access your credit reports, then you could dispute them as fraudulent or unauthorized. If you can’t get them removed, keep in mind that when another lender uses one of the credit scoring models mentioned above, those inquiries may be grouped together as one. And also note: Inquiries are only reported for two years and generally only affect your credit scores for one year. So over time, their impact should diminish.

More on Credit Reports & Credit Scores:

Image: Polka Dot

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team