When you’re in the process of buying a car and you’re not buying with cash, you’ll invariably land up at the stage where you need to check that you’ll be able to get vehicle finance in order to purchase.

This is when you’ll typically put in an application with your bank and during this process, the bank will do a number of things, including run a credit check. Applying for vehicle finance, especially if you do it at a couple of banks in order to compare terms, can affect your score.

To put it bluntly, your credit score can take a bit of hit when you apply for vehicle finance.

But your question is, does getting pre approval for vehicle finance hurt your credit score? The short answer to this question is… no, while applying for vehicle finance can affect your score, getting pre approval will not. Here’s a nifty explanation on why this is the case, as well as some extra info on why applications for finance can damage your credit score.

The Hard Enquiry

Credit enquiries are broken down into soft enquiries and hard enquiries. A hard enquiry is when your credit report is viewed in connection with an application for credit, like vehicle finance. Note that we said ‘application,’ because there’s a difference between an application  – a request for finance – and a little request to see if you’d even get approved.

Your credit score is especially affected if you lodge a lot of applications. Too many hard enquiries tends to give the impression that you are taking on a lot of debt and it’s this indication that can take your credit score down. Truly, it’s as simple as that.

The Soft Enquiry

A soft enquiry is when you check your own credit score, or when a creditor checks your score. A pre approval is considered a soft enquiry, because it isn’t an actual application. It’s merely a check so that you have an idea of what you can afford. This in turn improves your chances of getting approved, because you have official documentation confirming your pre-qualification, which proves that you can afford the repayments for the loan.

The take-away here, particularly if this is your first time buying a car, is to understand the difference between an application for vehicle finance and securing pre-approval for vehicle finance.

Hopefully now that you know that if you want to check if you can get vehicle finance, you don’t have to put in an application. You can simply ask your bank for a pre approval.

Once you’re ready to buy your car, you can use your pre approval as part of your application.

If you’re still uncertain about what your credit score means, then we have several helpful articles in our Money category that will explain what your credit score is and tips on how to improve your score.

Feeling informed?

Don’t forget that AA Inform is home to a range of useful tools and resources, including a personal loan calculator, access to multiple car and home insurance quotes, property valuation reports, and much more.