Will Rate Shopping Hurt Your Credit Score?

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - September 7, 2018

Because buying a car is a big purchase, and often involves making multiple auto loan requests, many borrowers worry that shopping around for the best interest rate will affect their credit score. Generally, rate shopping won’t affect someone’s score, but there are some instances where it can.

Rate Shopping Shouldn’t Hurt Your Credit if You Follow These Tips…

Credit scores are affected by hard inquiries. A hard inquiry is when a potential buyer gives their information to a lender. Each time someone applies for new credit it’s listed as a hard inquiry. When a hard inquiry is made, it means that a lender or bank has accessed that person’s credit reports. Because hard inquiries affect credit scores to some extent, it’s important to know just how to avoid multiple hard inquiries while rate shopping for an auto loan.

The impact of a hard inquiry depends on what type of credit is being shopped for and what credit scoring model is being used. The three major credit bureaus generally identify that someone is shopping for an auto loan based on the inquiry.

But, be aware that even though the credit bureaus recognize auto loan rate shopping, that doesn’t mean someone has all the time in the world to shop. To avoid having your credit score hit with multiple hard inquiries, make sure you shop within the allotted time frame, which can be between 14 and 45 days, depending on the bureau. When car buyers stick to this time frame, your credit score only takes a hit for one hard inquiry, regardless of how many auto loan applications are filled out.

What’s a Soft Inquiry on a Credit Report?

A soft inquiry is the exact opposite of a hard inquiry. Instead of a lender accessing a report based on an application for credit, a soft inquiry acts a background check. A soft inquiry allows a person or third party, such as a lender, to check a credit background. For example, soft inquiries happen when you check your credit yourself, or when a lender want to offer a pre-approval. The best thing about soft inquiries is that they don’t affect someone’s credit score at all.

Don’t Be Afraid to Shop

Without rate shopping, potential borrowers are limiting themselves, which is why CarsDirect recommends all car buyers do some research to find the best deal. When rate shopping, make sure you know how long you can shop for so your credit score isn't negatively affected.

If you need an auto loan but are worried about finding the best rate, let CarsDirect help. We work with a nationwide network of dealers that have the lending resources available to help people with bad credit get financed. Take the first step today and fill out or free-of-cost online auto loan request form.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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