How Many Times Can a Dealership Run Your Credit?
Navigate the complexities of dealership credit checks when buying a car. Understand the true impact on your score, your rights, and how to manage inquiries effectively.
When buying a car, consumers often wonder how many times a dealership can check their credit. Understanding the distinct types of credit inquiries and their effects is key to navigating the financing process.
Understanding Credit Inquiries and Dealership Practices
When you engage with a car dealership for financing, they perform a credit check to assess your creditworthiness. These checks fall into two main categories: soft inquiries and hard inquiries. A soft inquiry occurs when a person or company accesses your credit report as part of a general background check, such as pre-approvals or when you check your own credit, and does not affect your credit score.
A hard inquiry happens when you formally apply for new credit, like an auto loan. Dealerships conduct hard inquiries as part of the loan application process to evaluate your risk as a borrower. These inquiries require your explicit consent and are recorded on your credit report.
Dealerships often submit your loan application to multiple lenders to help you secure the most favorable interest rates and terms. While this might seem like it would lead to many separate credit checks, credit scoring models account for this common consumer behavior.
Impact on Your Credit Score
A single hard inquiry can cause a small, temporary dip in your credit score, typically by less than five to ten points. However, major credit scoring models, such as FICO and VantageScore, incorporate specific rules to mitigate the impact of multiple inquiries when you are rate shopping for certain loans.
For auto loans, multiple inquiries made within a specific timeframe are generally treated as a single inquiry for scoring purposes. This “rate shopping” window typically ranges from 14 to 45 days, depending on the credit scoring model used. For instance, VantageScore usually groups inquiries within a 14-day period, while FICO’s window can extend up to 45 days. While hard inquiries can remain on your credit report for up to two years, their impact on your score usually diminishes within the first 12 months.
Consumer Protections and Your Rights
Consumers have specific rights concerning credit inquiries and their credit reports, primarily under the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA). Dealerships are legally required to obtain your consent before conducting a hard inquiry on your credit report. This consent is usually secured when you sign a loan application.
You are entitled to a free copy of your credit report from each of the three major nationwide credit bureaus—Equifax, Experian, and TransUnion—every 12 months through annualcreditreport.com. Reviewing these reports allows you to identify any unauthorized or inaccurate inquiries. If you find an inquiry you did not authorize or any other inaccuracies, you have the right to dispute it with the credit reporting agency. The credit bureau is then required to investigate the dispute, typically within 30 days, and correct or remove any unverified or inaccurate information.
If a lender denies your credit application or offers less favorable terms based on information from your credit report, they must provide you with an “Adverse Action Notice.” This notice explains the specific reasons for the decision and informs you of your right to request a free copy of the credit report used in the decision within 60 days.
Strategies for Managing Credit Inquiries
To manage credit inquiries when purchasing a vehicle, obtain pre-approvals from your personal bank or credit union before visiting a dealership. This allows you to understand your financing options and potential interest rates without incurring multiple hard inquiries at the dealership.
When discussing financing at a dealership, inquire about their specific credit check process and how many lenders they plan to submit your application to. This transparency can help you make informed decisions. Complete your car loan shopping within the rate shopping window, ideally within 14 days, to ensure multiple inquiries are grouped as a single event by credit scoring models. After completing your car purchase, review your credit report to confirm all inquiries are legitimate and accurately reported. Should any discrepancies arise, dispute them with the credit bureaus.