How to Apply for a Car Loan

Auto Loan: Get Your Credit in Check

The moment you decide a loan is in your future, check your credit. Your credit score, also known as a FICO score (Fair Isaac Corp. for the organization that founded the system) predicts your likelihood to repay a loan. Scores range from 300 to 850, with the average American having a score of 675. A top-tier score (or prime) is 700 to 850, near-prime is 620 to 700 and subprime is less than 620 [source: Buss].

How do you know where you fit? Check out your credit report from the three main credit bureaus -- Equifax, Experian and Trans Union. Thanks to the Fair and Accurate Credit Transaction Act, you can obtain a free report annually from each of the bureaus. Visit to get started. You can get an idea of your credit standing via the report, but for the actual score, you'll need to pay a fee. If you are married and your spouse will be on the loan, be sure to check his or her score as well.

If you find that your score needs some improvement, try the following:

  • Correct errors directly with the credit bureaus: There is a 50 percent chance of having a mistake on your report. Correct any errors and follow up to make sure the corrections are reflected on your report. It can take 60 to 90 days to have outdated information corrected [source: Bankrate, Inc.]. Also, bureaus must be able to support bad marks on your credit. Ask for proof.
  • Contact the company you have a dispute with: If there is a mistake with a specific company, contact that company with supporting documents and ask your contact to send corrected information to the appropriate bureau.
  • Support your case: Include a brief description of your side of a dispute in your report.
  • Improve your behavior: Make payments on time. Pay off cards with high balances. Close some, but not all, of your old inactive accounts; the bureaus want to see that you have credit available. Keep older accounts with good history. Don't open cards or go over your limits. Avoid large bills on credit cards, including corporate cards.

In addition to your score, your profession, proof of employment, home ownership and the ability to justify any issues on your report can also enhance your credit worthiness.

Now that you've taken this important step in the loan process, it's time to determine how much you can afford.