When shopping for a car, it is common for auto dealers to submit your information to multiple lenders in an effort to find the lowest interest rate and most favorable loan terms. This practice allows you to benefit from lenders competing for your business. The same practice is used for mortgage lending. Each time your credit report is reviewed by a different lender, an inquiry will appear showing who accessed the report and for what purpose.

Experian lists each inquiry into your credit file for two years, so that you have a complete record of who has reviewed your credit history. That said, car loan and mortgage inquiries made within a short period of time will only be counted as one inquiry when calculating your scores. Read on to find out why.

Most Credit Scores Will Count Multiple Car Loan Inquiries As One

Lenders know that multiple applications for a car loan within a short period of time indicate you are shopping for the best terms, not buying multiple cars. Scoring systems have been designed to reflect that reality.

Therefore, as long as the inquiries were all made within a certain period of time, usually 14 days but sometimes longer, they are counted as just one when calculating your score.

The practice of counting multiple auto loan inquiries as just one enables you to shop for the best rates and terms without hurting your credit scores. The same applies when shopping for a mortgage loan.

However, each inquiry made will still appear individually on your credit report so that you have a complete record of who has accessed it. At Experian, inquiries remain on the credit report for two years.

How Inquiries Impact Your Credit Rating

For other types of credit, lenders may view multiple recent applications as a sign of risk, so it's best to keep inquiries to a minimum by applying only when you really need it. Although too many recent inquiries can have some negative impact on your credit rating, that impact is typically small and temporary.

While inquiries remain part of your credit report for two years, the longer ago they occurred, the less they will affect you. If your credit history is good overall, it's unlikely that your application would be declined based on inquiries alone.

Source: https://www.experian.com/blogs/ask-experian/multiple-inquiries-when-shopping-for-an-car-loan/

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.