When you're out shopping for a new truck or SUV, credit checks are just a normal part of dealing with lenders and dealership finance managers. Even though these checks can clip your score a bit, the actual impact is pretty minor and doesn't last long. Let's break down exactly what happens to your credit score when you apply for a car loan.
Key Takeaways
- If you visit more than one dealership to compare interest rates, the scoring system bundles all those credit pulls into one inquiry if you do it within a 45-day window.
- One credit check from a lender typically drops your score by fewer than five points (and not for long).
- Pulling your own credit file before hitting the lot or getting pre-screened for a special financing deal will never hurt your score.
What Happens to Your Credit Score After Applying for a Car Loan
The data behind FICO scores shows that people who suddenly take on a bunch of new debt tend to be a higher risk for lenders. Because of that, folks who rack up a ton of random inquiries are viewed as more likely to face a financial pinch than people who aren't looking for loans.
But auto checks don't actually carry much weight. Lenders care more about whether you pay your bills on time and how much you already owe. A single pull usually just takes off a few points--exactly how much it shifts, however, depends on what your report looked like to begin with.
How the System Handles Rate Shopping
The scoring software is actually designed to avoid penalizing smart buyers who want to compare interest rates across different banks and dealerships. Because of this, any auto loan checks that happen within 30 days of your final approval are ignored by the scoring model.
If your shopping takes a little longer, the system automatically groups all auto-related inquiries made within a 45-day window and treats them as a single pull. Just keep in mind that this bundling trick only works for the exact same type of loan. If you shop for a truck loan and a home mortgage in the same month, those will count as two separate hits. Getting your homework done ahead of time lets you gather all your dealership quotes within a tight window so you don't ding your score.
Credit Checks That Leave Your Score Alone
Only hard inquiries, which happen when you officially fill out an application for a new auto loan or credit card, will touch your FICO score. The system ignores soft inquiries. This includes things like checking your own credit monitoring apps, background checks from lenders sending you pre-approved mailers, or your current credit card companies reviewing your file. Getting quotes for auto insurance companies won't hurt your numbers either.
Get the Ball Rolling on Your Next Ride
Knowing how the credit system handles auto loans keeps you in control. If you have any questions about how a future vehicle purchase will affect your credit, or if you want to map out the best rate-shopping strategy before you visit the lot, reach out to Alan Jay AllStar today so we can help--it's the Alan Jay Way!