Multiple applications for a car loan

Shopping around for a car loan is always a good idea. However, applying for every loan offer you see is not recommended. This is because every time you apply for a car loan, that application is listed on your credit file. This is known as a "hard inquiry". Having too many hard inquiries on your credit report will affect your ability to be approved for credit in the future.

Our guide will show you how to shop around without being subject to hard enquiries and affecting your credit score.

Find out more about what your credit report looks like

When will shopping around for a car loan affect my credit rating?

Technically, submitting your personal and financial details as part of a loan application will result in a mark on your credit file. The credit provider will need details such as your name and driver's licence number to be able to bring up your credit file and then be able to list the inquiry.

However, it may not be obvious that an inquiry will be listed. For instance, the credit provider may advertise it as a "quote" or an "initial consultation" but even if you don't follow through with the loan, you could see it listed in your file as an inquiry. If you have multiple inquiries listed on your file in a short space of time this will affect your credit score and make lenders wary of lending to you in the future.

Finder survey: Have Australians of different ages ever had a car loan application rejected?

How to reduce the hard inquiries on your credit report

If you have existing hard inquiries on your credit report, you have the option to contest them with your credit reporting agency, and possibly the credit provider(s) that made the hard inquiries. However, you only have the option to do this if the hard inquiries in question are a result of identity theft. If the credit inquiries are found to be fraudulent, you can have them removed from your credit report.

To avoid fraudulent activity on your credit report, you can check your credit file regularly with the 3 credit reporting agencies: Equifax, Experian, and illion (formerly Dun & Bradstreet). Checking your file periodically will allow you to pinpoint any unusual activity on your report. Checking your file is also free to do.

However, if you made the hard inquiries yourself, the only option you have is to wait it out. It takes 2 years for a hard inquiry to be removed from your credit report. Credit reporting agencies will do this automatically – you don't have to contact them to make this happen.

The alternative to making hard inquiries on car loans is to find a lender that provides pre-approval, or soft credit inquiries.

How soft inquiries work

A soft credit inquiry, sometimes also called a soft credit check or a soft credit pull, is where a lender pre-approves you for a loan based on the personal and financial information you provide, without making a hard credit inquiry. Soft credit checks do not affect your credit score.

Many car loan lenders offer pre-approval on their loans. Pre-approval means that if all of the information you have provided is true and you pass a full credit check, you will be offered the loan. For more information regarding pre-approval on car loans and where to find lenders that offer pre-approval, please visit our guide.

The difference between "hard inquiries" and "soft inquiries"

It's important to understand the difference between these two types of credit inquiries.

How many hard inquiries is too many?

There is no one number that is "too many", but generally, 1 credit inquiry every 3 to 6 months is not considered to be risky behaviour by lenders and shouldn't affect your credit score too much.

Is it worth applying for a car loan with multiple lenders?

No. Applying for multiple car loans in a short period of time could potentially harm your credit rating and hinder your chance of being approved for a loan.

That being said, if you already have one car loan, you can apply for a second loan. The second application you submit will likely ask for details regarding your existing debts, and may be less inclined to lend to you if you already have a car loan outstanding. However, if you are able to show financial capacity to repay the second loan (based on your income and financial credentials) this may not pose an issue.

How do I check my credit file and credit score?

You can check your credit score for free on Finder. You can also order your credit file for free every 12 months or if you've been rejected for credit in the past 90 days. Your free credit file will be delivered to you within 10 days. However, if you want it delivered sooner or aren't eligible for a free credit file, you can pay a fee for it as well.

What happens if I don't get approved when I apply for a car loan?

If you do your due diligence and shop around for the best rates, fees and features without applying, but you don't get approved when you do apply, you may be wondering what to do now. If you don't need to purchase the car straight away you might consider waiting 3 months to apply with another lender. Even waiting a couple of weeks may make you look like less of a risk to a lender.

If you are in a position where you do need to make the car purchase quickly, consider calling the lender to explain your situation and finding out whether or not your recent rejection will be an issue. You can also consider finding finance with a car loan broker.

Can I apply for a car loan if I have a bad credit history?

If you have bad credit you can compare lenders that specifically work with bad credit applicants. Depending on how bad your credit history is, it may also be worth getting in touch with your current bank to see if it would be willing to consider your application. Make sure to contact your bank before submitting an application.

Before you begin your search, build up a small deposit and examine your budget to decide how much of a car loan monthly repayment you can afford. Then begin to research and compare the different lenders that specialise in high-risk car loans before making your final decision.

Don’t make further negative marks on your credit report by applying for more than one. Most of these types of lenders will analyse your credit rating without it showing up on your report to ensure that you will qualify before they process your application.

Frequently Asked Questions

• Can I apply for car loans with multiple lenders at the same time?

  Yes, you can apply with several lenders at once, but each application may trigger a credit enquiry on your credit file. Too many enquiries in a short time can lower your credit score, so it's better to compare pre-approval options or use a broker to reduce the number of full applications you need to make.

• Does applying with multiple lenders hurt my credit score?

  Each formal car loan application can appear on your credit report as a separate enquiry. If lenders see many recent credit enquiries, they may view you as a higher-risk borrower. To minimise impact, use eligibility tools or conditional approvals before submitting full applications.

• Can I get different car loan rates from different lenders?

  Yes. Car loan rates vary from lender to lender based on your credit profile, income, the vehicle type and its age, as well as whether the loan is secured or unsecured. Comparing car loans can help you find a more competitive rate.

• What happens if I'm approved by more than one lender?

  If you receive multiple approvals, you can choose the offer that best suits your needs-typically the one with the most competitive rate and terms. Once you accept an offer and the loan settles, you should withdraw or decline any other applications.

• How can I compare multiple car loan offers effectively?

  Always look at the interest rate first. The lower the rate the better. But look beyond the headline interest rate and compare the comparison rate, total loan cost, fees, repayment flexibility and any restrictions on the vehicle.

• Is it better to use a broker when applying to multiple lenders?

  A broker can submit your application to several partner lenders on your behalf, which can save you time and reduce the number of credit enquiries. Brokers also help match you with lenders likely to approve your application based on your financial profile.

• Can I refinance my car loan if I find a better offer later?

  Yes. If you find a loan with a lower rate or better terms, you can refinance your existing car loan. Just make sure to factor in any early termination fees and refinancing costs before deciding if it's worth switching.

• Do lenders have access to see if I've applied elsewhere?

  Lenders can see your recent credit enquiries through your credit report. They won't see the outcomes of those applications, but a high number of recent enquiries might raise red flags.

• Will applying with multiple lenders increase my chances of approval?

  Comparing multiple lenders first, then applying with one lender after making sure you fit its criteria is the best approach. Making multiple applications will just hurt your credit score and decrease your chances of approval.

• Can I apply jointly with someone else across multiple lenders?

  Yes, joint applications are allowed by most lenders, but both applicants' credit reports will be checked. Ensure both parties are comfortable with the level of exposure to multiple credit enquiries before applying with more than one lender.

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Written by

Matt Corke

Head of Publishing Ventures

Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio

Co-written by

Bria Horne

Writer

Bria Horne was a writer for Finder, with a specialist knowledge of personal loans, car loans and business loans. Originally from the UK, Bria has been a professional personal finance writer in Australia for over 2 years. She has an M.A and B.A in Philosophy and Literature from the University of Sussex, and previously worked on the UK’s leading hospitality publication. See full bio