Will applying for car loans with multiple lenders hurt my chances of getting a loan?
skifreak38 asked:
I’m fresh out of college and in need of a new car. I’m shopping for rates - filled out a credit application with the dealer, and a couple online. One of the lenders I applied with online wrote at the bottom of an email to “be sure not to apply in multiple places as it would hurt my credit score and negatively affect my chances of getting a loan!”
I’m fresh out of college and in need of a new car. I’m shopping for rates - filled out a credit application with the dealer, and a couple online. One of the lenders I applied with online wrote at the bottom of an email to “be sure not to apply in multiple places as it would hurt my credit score and negatively affect my chances of getting a loan!”
Is this true?! If so, how am I supposed to compare rates?
No, if you do it all in the same time period (no more than 2 weeks)
No, it’s not true, it’s a ploy from lenders to get you to NOT shop around, unless you apply for loans from, lets say 20 places, and you do it a few times, you wont hurt your credit score. Just remember to pay the bill on time!
Each time someone does an “inquiry” into your credit bureau, you’re taking a 5 point hit on your credit score. Shopping around at 4 different places could possibly take 20 points off your credit score.
Auto finance is what I do for a living and all inquiries made in a 14-day period are lumped together and only count as one, they all show but your score only gets dinged once.
Same for when people are looking for a mortgage.
Yes, it is true. Your FICO credit score depends on several factors. Businesses can inquire about your credit report. In addition, you, yourself can check your credit report. Neither of these checks negatively impact your score. However, about 10% of your score is based on inquiries performed when applying for new credit (such as, a new car loan) and this is also sometimes called a ‘hard pull’ of your credit report.
When you apply for new credit (a credit card, any type of loan, mortage), your lender(s) pulls your credit report and scores to check your credit and each credit bureau (equifax, experian and transunion) documents the pull. Also, if a dealership checks your reports, that will also count as a hard pull on your credit file.
If you have too many pulls in a short period of time (say one month), then it may look like you applying for too much credit and your FICO score will drop. In general, when shopping for new credit or when planning to make a large purchase, it’s best to do all your shopping within a 2 week period. If you do this, then each credit bureau will only count the multiple inquiries as one inquiry.
FYI - Inquiries remain on your report for 2 years, so you don’t want too many showing up at once because it affects your credit score for a long time.
Another word of advice. It’s probably better to get approved for the auto loan first. It gives you A LOT more leverage at the dealership. It also helps to access your reports and scores yourself. That way, you can print and bring them to the dealership and show them your scores and they won’t have to pull them.
no-you are allowed to shop for rates in a timely manner