Other than the purchase of a home, the purchase of a car may be the most significant purchase most of us will ever make. In fact, when you add up the purchase price of all the cars we buy in our lifetime, it can easily exceed the price of the average home. With all this money at stake, it is important for every car buyer to understand how car dealers and lenders use credit scores to determine interest rates and loan terms.

There are many numbers in our financial lives, from credit card numbers to bank account numbers, but perhaps no one number has as great an impact on our financial life as does the simple three digit credit score. Simply put, the higher your credit score, the lower your interest rate will be, and vice versa. While those with the highest credit scores and cleanest credit ratings will typically have their choice of many different car loans at great rates, those whose credit is damaged will typically be forced to pay a higher interest rate.

One of the most important things the savvy car shopper can do is to carefully review his or her credit report before shopping for that great car. It is a good idea to know what lurks in your credit report before the search for the car begins.

One of the reasons this credit report review is so important is that it is not at all unusual for credit reports to contain errors. A recent review by a consumer advocacy group found that up to half of all credit reports reviewed contained at least one error, and with this kind of error rate chances are good your credit report contains at least one inaccurate entry. Knowing what is in your credit report ahead of time will give you time to change it. If you notice an inaccuracy, be sure to report it to the credit reporting agency at once, and to follow up a few weeks later to make sure the error has been corrected.

With the credit report thus repaired, it is time to start searching for the perfect car, and the perfect car loan. There are many places to shop for an auto loan, including at the dealer, at your bank or credit union, and at various finance companies. Shopping around at all these sources is the best way to find the best possible deal. It is important to carefully review the interest rate, the loan term, and of course the monthly payment when comparing loans.

Brooke Sikula is a freelance writer based in Ventura, CA and writes on a wide range of topics from home improvement to credit repair and everything in between. She is a regular contributor to http://www.loan-mortgage-auto.com and http://www.get-home-improvement.com For more information and advice on credit issues, check out http://www.credit-card-faq.com