Most credit scoring systems allow people to shop for the best rates on car loans without having a negative impact on their credit scores. They do so by counting all inquiries for auto loans within a given period of time as a single inquiry. That time period may vary from one credit scoring system to another. But shopping for rates within a 14-day period will ensure inquiries are counted as only one for scoring purposes, or excluded entirely by some scoring systems. A two-week period allows plenty of time for a person to be preapproved by their own lender, or for a car dealership to shop their loan application with multiple lenders.
Multiple Inquiries May Appear From Just One Application
When a car dealership submits a credit application, we may send it to many different lenders with which the dealership has relationships. The process usually only takes a few minutes and enables lenders to compete for the loan and for the car dealership to help their customer find the best loan terms.
Often, the customer can pick the car they want, apply for credit, get approved and drive off the lot within a matter of hours, all without leaving the dealership.
Each individual lender that accesses the borrower's credit report will appear on the report as a separate inquiry. But, because credit scoring systems count multiple auto loan inquiries as a single inquiry, this process of shopping for the best rate does not affect a person's ability to qualify for credit.
Order a Credit Report Prior to Applying for New Credit
When considering a large purchase such as a new car, consumers should get a copy of their credit report well in advance to make sure that everything in it is accurate and up to date. Doing so will also give the consumer an idea of areas they might need work to improve their credit standing before applying for the car loan.
Pay Attention to Credit Score Risk Factors
We also encourage everyone to get a copy of their credit score at least once when they request their personal credit report. A credit score will come with a description of what items in a person's credit report are most affecting the score, both positively and negatively. Those credit score risk factors are specific to the individual's personal credit report and will help them identify the steps they need to take to become more creditworthy.
