How Auto Loan Rate Shopping Affects 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.

, - August 20, 2019

When you rate shop for an auto loan, you’re initiating a hard credit inquiry, sometimes called a hard pull. One hard inquiry lowers your credit score slightly, but usually only around five points, so it’s easy to bounce back from once you make a decision and finance a car. However, if you rate shop outside of the typical given time frame of 14 days, you may see multiple hard pulls on your credit reports, which could impact your score even more.

Hard Inquiries Explained

A hard inquiry is when you give your personal information to a lender in order to apply for credit. This gives the lender permission to pull, or check, your credit file to determine if you qualify. A hard inquiry occurs every time you apply for a new line of credit, whether it's a credit card, mortgage, or auto loan.

Rate shopping is designed to avoid multiple hard inquiries affecting your credit score while giving you a chance to find the best deal available. It’s important that you make a decision within the typical 14-day window – if you don’t, you end up having multiple hard pulls affecting your credit score instead of one.

According to FICO, most consumers see a slight drop in their credit scores when they initiate a hard inquiry – generally around five points. If you have a short credit history, it’s possible your credit score could drop further, although it also depends on the type of credit you’re applying for.

For most borrowers, one hard pull isn’t the end of the world. However, continuing to rate shop outside of the typical 14-day rate shopping window can result in multiple hard inquiries impacting your credit score. So, it’s very important that you decide on a lender in a timely manner.

What Is a Soft Inquiry?

Hard inquiries aren't the only kind of credit inquiry, as there are also soft inquiries. A soft inquiry is what you might expect it to be – they don’t impact your credit score at all like a hard inquiry can.

A soft inquiry is initiated in a couple of different ways: when you check your own credit, or when lenders check your credit in an effort to market pre-screened offers of credit to consumers, meaning they aren't a result of a credit application you filled out.

This is great news, because it means checking your own credit won't affect your credit score. This makes monitoring your credit score the smart thing to do, so you can go ahead and check in on how different credit tactics are affecting your score without worrying that you're dropping your score.

The Bottom Line

When looking for an auto loan, rate shop smart – don’t spend too much time and exceed the given time frame. If you do, you run the risk of your credit score dropping more than it should. Also, keep in mind that checking your credit score doesn’t impact it, so don’t be afraid to do so as often as you need to.

If you’re in the market for a car loan, but don’t want to waste time rate shopping and being turned down due to credit issues, 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. Buy a vehicle with confidence, and take the first step today and fill out our free 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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