Will applying for a loan be bad for my credit?

[fs5]

I want to take a car loan out. My credit is decent but not spectacular. So I want to see what kind of interest rate I would get if I applied for a loan MYSELF. If the interest rate is something that I don't like then I'll refuse the loan and get a co-signer.

The question is will it be bad for my credit if I do that? (Instead of just applying with a co-signer from the start.)



bonus: Where's the best place to apply for a car loan (online or otherwise)?

 

[iamwiz82]

it will show up as a credit query. This is not good but you are allowed a few every year.

 

[RossMAN]

Best place to apply for a car loan is either with your local bank (whom you have an established relationship with) or a local credit union.

Most CU's these days are offering 2.99% - 4.75% APR on auto loans.

 

[JetsFanatic]

Originally posted by: iamwiz82
it will show up as a credit query. This is not good but you are allowed a few every year.

Yup...don't to it a kabillions times

 

[Vic]

No.
A inquiry here and there will NOT hurt your credit. That is an old myth based on an old credit scoring model that has not existed for about a decade. These days, it takes A LOT of inquiries to do any damage to your score, but then again, inquiries only make up 10% of your score, so any damage (even in an extreme case) would be minimal. Also, you are allowed unlimited inquiries in a single industry in a 14-30 period (depending on bureau) to be counted as only 1. This is to enable people to shop for the best deal for a car or a mortgage (but not credit cards) without being penalized.

Text
Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

 

[fs5]

thanks for the responses, I think I'll apply at Meriwest online right now!

 

[DWray]

Another note/tip:

If you give the dealership permission to check your credit, be prepared for several inquiries to hit your report as they will take a "shotgun" approach to shopping out a loan for you.

If they ask for your driver's license for the test drive or to "make a copy" for their records, be very clear that they are not allowed to run a credit check if you have your own financing already lined up.

Whether this really hurts your score, I don't know. But I know I had about 4-5 hard inquiries per report when I allowed the dealership a chance to beat my pre-arranged financing (they did not).

 

[Dug]

Another note-

Most banks don't allow for a lower interest rate with a co-signer.
If your proposed co-signer signs first and you become the co-applicant, then there is a possibility for a better interest rate. Depends on the bank though.

 

[feralkid]

Originally posted by: Vic
No.
A inquiry here and there will NOT hurt your credit. That is an old myth based on an old credit scoring model that has not existed for about a decade. These days, it takes A LOT of inquiries to do any damage to your score, but then again, inquiries only make up 10% of your score, so any damage (even in an extreme case) would be minimal. Also, you are allowed unlimited inquiries in a single industry in a 14-30 period (depending on bureau) to be counted as only 1. This is to enable people to shop for the best deal for a car or a mortgage (but not credit cards) without being penalized.

Text
Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

Thank you!

It seems every time someone asks a question of this nature, a thousand knees jerk to the old "It'll hurt your credit" jig.

Besides, why does one ask "Will applying for a loan be bad for my credit", when the whole point of having "credit" is to get "loans".

 

[fs5]

Originally posted by: Dug
Another note-

Most banks don't allow for a lower interest rate with a co-signer.
If your proposed co-signer signs first and you become the co-applicant, then there is a possibility for a better interest rate. Depends on the bank though.

actually I just got approved for a $20k loan, 5 years, at 4.99%. I'm happy with the rate because my credit isn't that great. I asked about having a co-applicant and they said the interest rate could drop down to as low as 3.25%.

Working at the numbers that's about a $900-$1000 saved...