Know your credit tier
Credit Score Tiers and Typical APRs
| Credit Tier | Score Range | Typical APR | Lender Type |
|---|---|---|---|
| Super Prime | 781-850 | 3.5-6.0% | Banks, credit unions |
| Prime | 661-780 | 6.0-9.0% | Banks, dealers |
| Near Prime | 601-660 | 9.0-13.0% | Credit unions, online |
| Subprime | 501-600 | 13.0-18.0% | Dealer financing |
| Deep Subprime | <500 | 18.0%+ | Specialized lenders |
Fix fast wins before applying
Credit Utilization Quick Fixes
Pay down balances: Target <30% utilization on all cards (<10% is even better)
Time your payments: Pay before statement closing date to show lower balances
Request limit increases: Lowers utilization ratio without paying down debt
Don't close paid-off cards: Keeps available credit high and accounts aging
Credit Report Cleanup (30-60 days)
Dispute errors: Check all three bureaus (Experian, Equifax, TransUnion)
Pay off collections: Small collections can be paid for delete
Request goodwill deletions: Ask for removal of late payments from good standing accounts
Become an authorized user: Family member with excellent credit can boost your score
Get multiple pre-approvals
Lender Shopping Strategy
Credit Unions
- • Often lowest rates
- • Member-focused service
- • Flexible underwriting
- • Local decision making
National Banks
- • Competitive for prime credit
- • Relationship discounts
- • Online applications
- • Fast approval process
Online Lenders
- • Streamlined process
- • Competitive rates
- • Quick pre-qualification
- • Direct dealer payment
Pre-Approval Checklist
Documents You'll Need
- □ Driver's license
- □ Proof of income (pay stubs, tax returns)
- □ Proof of residence
- □ Bank statements
- □ List of debts and monthly payments
Information to Compare
- □ APR (not just interest rate)
- □ Maximum loan amount
- □ Term options
- □ Fees and closing costs
- □ Pre-payment penalties
Time your application correctly
The 14-30 Day Shopping Window
FICO scoring: Multiple auto loan inquiries within 14-30 days count as a single inquiry
VantageScore: 14-day window for rate shopping without multiple hard pulls
Strategy: Apply to all lenders within 2 weeks to minimize credit impact
Timing: Shop rates first, then look for cars with pre-approval in hand
Rate Shopping Timeline
Week 1-2: Credit Prep
Pull credit reports, dispute errors, optimize utilization
Week 3: Rate Shopping
Apply to 3-5 lenders within 10 days, compare offers
Week 4: Car Shopping
Shop with best pre-approval, negotiate price separately
Use pre-approval to beat dealer finance
The Pre-Approval Power Play
✓ What to Do
- • Bring written pre-approval letter
- • Negotiate car price first, financing second
- • Let dealer try to beat your rate
- • Read all paperwork carefully
- • Take photos of documents
✗ What to Avoid
- • Negotiating monthly payment only
- • Accepting first finance offer
- • Signing without reading
- • Adding unnecessary products
- • Letting them "work numbers"
Dealer Finance Office Script
Opening: "I have a pre-approval at [rate]%. If you can beat it without add-ons, I'll finance here. Otherwise I'll use my lender."
If they counter: "Show me the APR and terms on paper. I need to compare total cost, not just monthly payment."
For add-ons: "Remove all optional products. I'm only accepting the agreed-upon price and financing terms."
Final check: "This matches our agreed price of $X with $Y down at Z% APR for W months, correct?"
Watch for fees, add-ons, and "yo-yo" financing
Common Dealer Markups to Avoid
Rate Markups
- • Lender offers 6%, dealer quotes 8%
- • "Dealer reserve" = their profit
- • Legal in most states (2% markup cap)
- • Protection: Bring pre-approval
Unnecessary Add-ons
- • Extended warranties
- • Gap insurance (cheaper elsewhere)
- • Paint protection/VIN etching
- • Just say no to all add-ons
Yo-Yo Financing Scam Protection
The scam: "Your financing fell through, come back to sign new (worse) terms"
Reality: Often the original financing was fine, they want more profit
Protection: Get "guaranteed" approval, read all fine print
Response: "I'll return the car and use my pre-approved lender"
Term length strategy
Why Shorter Terms Win
| Loan Amount | 48 Months @ 6% | 72 Months @ 7% | Difference |
|---|---|---|---|
| $25,000 | $587/month | $383/month | -$204/month |
| Total Interest | $3,174 | $2,568 | +$3,394 |
Lower monthly payment costs $3,394 more over the life of the loan. If payment feels tight, choose a cheaper car instead.
Frequently Asked Questions
Do multiple auto loan inquiries hurt my credit?
No, if done within 14-30 days. Credit scoring models recognize rate shopping and count multiple auto loan inquiries as a single inquiry for scoring purposes.
Are credit unions really cheaper than banks?
Often, yes. Credit unions average 1-2 percentage points lower than banks because they're non-profit and member-owned. However, shop around—some banks offer competitive rates to attract customers.
What term length gets the best rate?
Shorter terms (36-48 months) typically offer the lowest rates. Lenders see them as less risky, and you pay less total interest even if the rate is the same.
Can the dealer mark up my APR?
Yes, legally in most states up to 2%. If a lender approves you at 6%, the dealer can quote 8% and keep the 2% difference. This is why pre-approval is crucial for comparison.