Financial Planning and Analysis

Can a Car Dealership Run Your Credit Multiple Times?

Understand how car dealerships process credit applications and their true impact on your credit score when buying a car. Shop smarter.

Purchasing a vehicle often involves securing financing, a process that requires a review of one’s financial history. Lenders and dealerships assess this history to determine eligibility and set terms for an auto loan. Understanding how this assessment works can help individuals navigate the financing aspects of buying a car.

Understanding Credit Inquiries

When your financial history is reviewed, it typically involves one of two types of credit inquiries: soft inquiries or hard inquiries. A soft inquiry occurs when a credit report is accessed for purposes like pre-approvals for credit offers or checking your own credit. These inquiries are recorded on your credit report but do not impact your credit score.

In contrast, a hard inquiry happens when you formally apply for new credit, such as a mortgage, personal loan, or an auto loan. Hard inquiries can cause a slight, temporary dip in your credit score, typically by a few points, though the effect usually lessens after a few months and generally stops impacting the score after one year. While hard inquiries remain on your credit report for up to two years, their influence on your score is often minimal and short-lived.

Dealership Credit Application Processing

Car dealerships frequently submit a single credit application to multiple lenders to find the most favorable financing terms for a buyer. When you authorize a dealership to do this, each lender may perform a hard inquiry on your credit report.

However, credit scoring models, such as FICO and VantageScore, are designed to recognize this common practice of “rate shopping” for specific types of loans. For auto loans, multiple hard inquiries made within a concentrated period are often treated as a single inquiry for scoring purposes. FICO scores typically consider inquiries within a 45-day window as one event, while VantageScore models usually apply a 14-day rolling window for this consolidation. This means that comparing loan offers from several lenders within these timeframes generally has a limited impact on your credit score.

While individual inquiries will still appear on your credit report, the scoring algorithms account for the fact that you are seeking one loan, not multiple. Therefore, despite seeing several hard inquiries listed, the cumulative effect on your credit score is typically equivalent to that of a single inquiry if completed within the designated window.

Managing Your Credit During Car Shopping

Before visiting a dealership, it can be beneficial to get pre-approved for an auto loan from your bank or credit union. This step provides a clear understanding of your creditworthiness and the interest rates you might qualify for, offering a benchmark for comparison with dealership offers. Pre-approval processes often involve a soft inquiry, which does not affect your credit score.

When applying for financing at a dealership, you will provide consent for credit checks. It is advisable to ask the dealership about their process and how many lenders they intend to submit your application to. This transparency helps you make informed decisions.

After shopping for a car, regularly checking your credit reports is a prudent step to ensure accuracy and identify any unauthorized inquiries. You can obtain a free copy of your credit report weekly from each of the three major nationwide credit bureaus—Equifax, Experian, and TransUnion—through AnnualCreditReport.com. This official website allows you to review your financial history and address any discrepancies promptly.

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