Can Car Loan Pre-approval Be Resent?

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January 27, 2012

A car loan pre approval can make one's life easier. With the pre-approval we know the minute we walk into the dealership how much money we can look to spend and don’t have to worry about haggling over the financing. But is a pre-approval a guarantee of a loan?

The short answer to this is yes. A pre-approval can be rescinded. Until you sign your name on the dotted line there are several circumstances which could result in this. Here are a few things to watch out for:

Credit Score Changes

Lets say as an example you start shopping for a car loan on June 1st and you have a credit score of 730. You get a pre-approval from a company and it sounds good. You start shopping for your car and you find the one you love on June 30th. You start the negotiation process over the car, and reach a consensus on July 3rd. Suddenly, your pre-approval has disappeared. What happened? The first thing you should do is check your credit report. In most cases a pre-approval will disappear when there has been a big drop in your credit score. It can take a few months for anything to appear on your credit report. If you made a few late payments in April it may not show up on the report until sometime in July. The same can be said for any negative items on the report. Not only should you know what your score is when you start looking, but you should also be aware of anything negative that’s floating around out there.

Scams and Bushing

Although this practice is not legal in many states, it is in many others. You go and look at the car, fall in love, then sign paperwork and drive the car home. A few days later you receive a phone call from the dealership saying that the financing didn’t go through. You must return the car or try to finance the car a different way. This is called Bushing. The dealer may have known that they couldn’t get you in the car at the originally stated rate, or they didn’t even try the day you drove it home. They rely on your emotions to want to come in and put more money down and sign at a higher rate. This isn’t always a case of the pre-approval being rescinded. It most cases it’s a scam. Many states have outlawed this practice, but it’s still a legal tactic in some places. Don’t leave the dealership with the car until you can verify the financing has gone through and the documents are filled in completely.

A pre-approval isn’t always a guarantee of credit. In fact, most pre-approvals will contain verbiage similar to “upon further credit review” which basically gives the bank an out if they want it. When you get a pre-approval act on it quickly, understand what’s on your credit report, and keep your eyes open for scams.

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