Your credit report is going to be checked by the dealership or outside lender when you apply for a car loan. Not only should you be prepared in terms of knowing your current credit rating, you should also have a grasp on how the credit check process will go and what it could mean for your used car loan. 
Check Your Credit
Before you start shopping for the used car you want to buy you need to check your credit report. Look for errors and areas you can improve upon, as a higher credit rating will improve your car loan options.
Every consumer is entitled to one free credit report annually and you can monitor your credit rating continuously using one of several free online services. Never provide a credit report provider with your personal information unless you are confident that the service is reputable.
Determining Risk & Identity
The two reasons dealerships and lenders want to pull your credit report are to determine the level of risk you represent and to confirm your identity.
When you get a loan for a used car, either in-house with the dealership or through an outside financing source, the lender is taking a risk. How much of a risk being taken on is determined based on the likelihood that you’ll repay the loan, and your credit score is indicative of your payment habits. A lower credit score means the lender is taking a larger risk and usually wants to charge more interest over a shorter loan term. Additionally, the information you provide on a credit application and the information within the report help confirm your identity. Without verifying that you are who you say you are, lenders cannot justify the risk of approving your car loan.
Impact on Your Credit Score
Most consumers know a full credit inquiry, known as a “hard” credit inquiry, will have a small negative credit report impact. At least one of the three major credit bureaus does not count each inquiry on its own, instead grouping credit inquiries into two week blocks. This allows you to get loan offers from more than one resource, like checking both the in-house dealership and outside lenders, without worrying too much about how the credit checks will impact your credit report rating. However, too many “hard” inquiries can give the impression that you are overextending your finances.
Your credit report is among the most important parts of getting a car loan. Lenders look to your report for identity verification and information on your financial history.
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