I run an auto dealership that sells luxury automobiles. I understand that multiple inquiries within a “shopping” timeframe do not hurt an individual’s credit score. Can you explain what the timeframe is and any other tips we can pass along to our customers? LLS
You are correct that most credit scoring systems allow people to shop for the best rates on car loans without having a negative impact on their credit scores. They do so by counting all inquiries for auto loans within a given period of time as a single inquiry.
That time period may vary from one credit scoring system to another. But shopping for rates within a 14 day period will ensure inquiries are counted as only one for scoring purposes, or excluded entirely by some scoring systems.
A two week period allows plenty of time for a person to be pre-approved by their own lender, or for a car dealership to shop their loan application with multiple lenders is a practice commonly referred to as “shopping the rate”.
When a car dealership “shops the rate” for a loan application, they send it to many different lenders with which the dealership has relationships. The process usually takes only a few minutes and enables the lenders to compete for the loan and for the car dealership to help their customers find the best loan terms.
Often, the customer can pick the car they want, apply for credit, get approved and drive off the lot within a matter of hours, all without leaving the dealership.
Each individual lender that accesses the borrower’s credit report will appear on the report as a separate inquiry. But, because credit scoring systems count multiple auto loan inquiries as a single inquiry, the process of shopping for the best rate does not affect a person’s ability to qualify for credit and reduce their score.
Rod Griffen, Director, Consumer Education and Awareness