Dealerships, banks, credit unions — they all use your credit report and credit scores to get an idea of how risky it would be to give you an auto loan.
If you have good credit, you should be able to count on a car loan with low interest rates; if you have bad credit, car loans with reasonable interest rates are harder to obtain.
Your credit report is a record of your credit history, and typically shows information such as:
- Personally identifying information (PII) like your name, gender, birth date, address, Social Security number (SSN), and employment.
- Information about current and past credit accounts.
- Public records often dealing with bankruptcies and financial judgments against you.
- All credit history inquiries (whenever you or another party has requested your credit report).
- Any consumer statements you’ve posted to explain the situation should a credit dispute not be resolved in your favor.*
* Per the Fair Credit Reporting Act (FCRA), you have the right to seek corrections for inaccurate credit information.
Credit Reports and Car Loans
Your credit report will have a big impact on your ability to get approved for an auto loan at a low rate.
Car loan lenders will especially take into consideration any items regarding past or current auto loans. If you have had a car repossessed due to failure to pay a past car loan, you can expect to have a difficult time getting approved for another car loan.
On the other hand, if you have a history of paying car loans on time, you will probably find that lenders will be more willing to give you a competitive car loan.