When shopping around for an auto loan, one of the first things lenders check is your credit report. What exactly do they look for? Will a loan officer simply look at your credit score and say yes or no? Here's how your credit rating will impact your ability to get a car loan. 

How your credit score affects the loan's interest rate
As a rule of thumb, the lower your credit score, the higher the interest rate on your auto loan. According to the Consumer Federation of America, a borrower with a low credit score (500-619) will likely pay at least $5,000 more on a $20,000, 60-month auto loan than another person with a higher credit score. 

Why do lenders impose higher interest rates on borrowers with poor credit scores? Well, it's basically their way of covering the risk to their businesses. A person with a credit score of 590, for example, is more likely to miss loan payments than someone with a rating of 720. The Simple Dollar listed the interest rates auto lenders would probably assign based on a $20,000, 60-month agreement:

• 720-850: 3.31 percent
• 690-719: 4.64 percent
• 660-689: 6.76 percent
• 620-659: 9.48 percent
• 590-619: 13.86 percent
• 500-589: 14.95 percent

See if you can get preapproved for a car loan.

Getting approved for a car loan 
To make things easier on yourself, look to get preapproved for a car loan. Before you visit your lender, research the type of vehicle you want to buy. Note the year, make and model, and then visit Craigslist to determine how much dealers and private sellers are charging for the car. This will give you a ballpark figure as to how much money you'll need. 

Suppose you're willing to pay $14,000 for a vehicle based on your budget and the listings you saw online. Go to the lender and ask to be preapproved for a $14,000 loan. Don't forget to bring proof of income - the loan officer will use this information to confirm your ability to pay back the debt. Then, he or she will make a hard inquiry and retrieve your credit report. Based on your rating, you'll either be approved for the amount you requested or for a less amount. 

Do you take out the loan on the spot? No. Wait until you know which car you want to buy. Then, go back to the lender where you were preapproved and take out a loan for the exact amount you'll have to pay for the new vehicle. No sense taking out a $14,000 loan for a $13,000 car!

If you don't have a credit score  
What if you've never owned a credit card or taken out a loan? In this situation, you may want to consider obtaining an alternative credit report. These reports factor in your rent and utility bill payment habits. So, if you've been living on your own and paying for water, electricity and cable, your alternative credit score will show lenders how financially responsible you are. If you want to learn more about non-traditional credit, learn how it works.