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Question By
DuelleMarley

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If I apply for a car loan with two different lenders, will that lower my credit score?
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When you apply for a car loan, the lender will do a hard inquiry on your credit report, meaning they pull your credit report to check your history and credit score to determine approval for your loan application. Hard inquiries show up on your credit report for two years.

Credit inquiries are one of the five key components that affect your credit score and every hard inquiry will slightly lower your credit score. A lender may perceive a consumer who has had too many credit inquiries as desperate for credit or as a potential credit risk. So be mindful of how many different lenders you go to apply for an auto loan because it can add up to bigger drop on your credit score than expected. Check out the graph of the distribution of credit score to number of credit inquiries from the Credit Karma community for a sense of how many hard inquiries can impact your credit score.

You can check how many inquiries you have at CK, just visit:

https://www.creditkarma.com/report/inquiries

By the way, checking your credit score through Credit Karma is a soft inquiry, not a hard inquiry, and will not lower your credit score.

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When you apply for a car loan, the lender will do a hard inquiry on your credit report, meaning they pull your credit report to check your history and credit score to determine approval for your loan application. Hard inquiries show up on your credit report for two years.

Credit inquiries are one of the five key components that affect your credit score and every hard inquiry will slightly lower your credit score. A lender may perceive a consumer who has had too many credit inquiries as desperate for credit or as a potential credit risk. So be mindful of how many different lenders you go to apply for an auto loan because it can add up to bigger drop on your credit score than expected. Check out the graph of the distribution of credit score to number of credit inquiries from the Credit Karma community for a sense of how many hard inquiries can impact your credit score.

You can check how many inquiries you have at CK, just visit:

https://www.creditkarma.com/report/inquiries

By the way, checking your credit score through Credit Karma is a soft inquiry, not a hard inquiry, and will not lower your credit score.

Reply by
PaulYoungPak

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Because the law requires that your personal credit report list all organizations that have requested it, the inquiries cannot be removed.

However, most credit scoring systems allow people to shop for the best rates on car loans without having any significant negative impact on their credit scores. Today, credit scoring systems count all inquiries for auto loans within a given period of time, usually around 14 days, as a single inquiry.

Car dealerships often send your application to multiple lenders at the same time in a process called “shotgunning” to find the best loan terms. As a result, lenders compete for the loan and the consumer benefits by getting the best rates and finance terms available to them.

If the drop in your score was in fact due to the loan application with the auto dealer, it should have had the same impact, whether there were eight inquiries or just one.

It is also important to be aware that the impact of inquiries decreases over time, so your credit scores should rebound fairly quickly, assuming there are not other issues with your credit history.

source: Experian Q&A

http://www.experian.com/ask-experian/20120229-inquiries-for-multiple-car-loan-applications-cannot-be-removed.html

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Dear Moderator, I'm confused, please advise. You said about auto loan inquiries:

"the inquiries have to happen within a specific time frame usually 30-90 days. Secondly, the inquiries will all appear on your report. However, they will only be counted as one if they are within the right time frame."

I aggressively shopped around for car loans well within 30 days' time before I bought my new car. However, ALL of these inquiries showed up separately (8 instead of 1) on my credit report, and as a result I have a VERY BAD inquiry score!!!! Why??? It doesn't seem fair, and what can I do to get this fixed?? Thanks for any help.... ~Meech

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Reply by
garystidham

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they will all show on your report but when they calculate your score they consider it as one because it is for the same thing the only thing they dont do this for is credit cards

again they will all show on your report as different checks on your report but it is only calculated as 1 pull on your report

it is calculated toward your score as 1 not appear as 1

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I am looking for a loan for $2000.00. I got scammed in 2007 for $1800 and am still in the hole. I just need this boost to get back on track. I had a bankruptsy in Feb 2009 and now all other debt is coming off and and can pay off the rest. Any suggestions.

Reply by
kemper60

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I would say your not going to be able to get a loan...of any kind...No Bank will take a chance on you!!

Reply by
robynh66

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or try a credit union. mine will do a secured loan 18 months after discharge of a banko.

Reply by
shawnj1234

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No BANK will take the risk for 2 years! However if you are in a bind and are williing to pay the price a finance company will!!! there are several that charge an outragious fee and interest but it will help you get back on track.

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What is the best way to shop around for good auto lending then? If each credit check by auto lenders is a hard inquiry, is there a way for them to do soft inquiries until you go to actually do the deal?

Inquiries for big purchases like auto and home are considered a single inquiry if you apply within 30-45 days. This is done so that shopping for rate on large purchases don't hurt your score.

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Reply by
shawnj1234

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If you are shopping for a new or certified used car loan the best thing to do is look at all 3 credit scores, most all banks and dealer used credit sources use experian if your score is in the high 700's you'll get a rate of 2.9-4.9 anything down to 650 will get you about 8.9 anything below that and you most likely will have a very hard time getting credit or it'll be in the high 18 plus percent rate.

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I had an two inquiries on my account for a re-finance on my mortgage where I did not take on any new debt and ultimately re-financed with one of the companies. Additionally, I had an inquiry for an auto loan, to see what it would cost. I decided not to get the loan, but the inquiry is on my record. I have not take on any new debt in the last year, and have in fact lowered it. How long do these inquiries remain on my record, and is there any way to request them removed...like the auto financing that I was looking in to, but did not get?

Inquiries generally stay on your credit report for 2 years. There is no way to remove them if they are accurate. Most lenders only look at recent inquiries but so it should not affect your score after a few months.

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CK Moderator

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Thanks!

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I've been slowly over the past 7 month rebuilding my credit from a 544 to a 588 and I still have some work to do. My goal is to get to the 650 range before I start looking into auto loans. Which will be in the next 3 to 4 months. I know this is probably still considered a short history of improvement. But If I make it to 650 in the next 3 month will it still be hard for me to get a decent auto loan?

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Reply by
shroompoppy

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Getting a loan at 650 will not be difficult, *if you have a steady job and proof of income. There are a few things lenders will be looking for to consider the risk of you loan. The first will be debt to income ration; maintaining less than 20% would be ideal. The second is your ability to pay debts that you already owe, have closed accounts isn't a bad thing; as long as they aren't recent (i.e. 6 months or longer). The third is the amount of inquries you have, or how desperate you are; keep the loan requests close when you start, Experian recommends 14 days.

Some other things you can do to help youself-

1. If you have full time employment, but it is not on your credit report, write all three agencies and provide the information so it can be added; it shows you're proactive.

2. Since you have waited so long, perhaps you have sought secured credit, as in a card. Wells Fargo currently has the lowest APR, but I hear citi has better benifits and will upgrade as per agreement unlike Wells Fargo. If your going to apply for a loan soon don't open any new credit as this would cause your score to go down.

3. If you have already gotten your free three credit reports, consider buying your reports before you go shopping. Know whats on them and that all information is correct. Pulling your own credit is a soft inquiry and should have no effect, avoid the off name credit report companies.

4. Use a credit union if you can, they usually deal in subprime lending and you will get a much better interest rate than most likely anywhere else.

5 Make sure you have money for a deposit. For a car expect to need anywhere between 500-1000 depending on where you live. For a larger vehicle, such as a truck, expect to have 1500-2000.

6 Consider finding someone who might be willing to cosign. Although most times people we know are in the same boat. If you do use a cosigner, beware bait and switch offers, and ensure you put both signitures on the same loan document listed in the proper place.

Good luck on finding a car, and great job on the determination in improving your credit worthiness.

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I just wanted to say thanks to those that have answered questions. I've read the answers and have learned alot. 

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I applied for car loan and shop with 3 dealers and 3 banks( Done within 30 days) but reflected as 6 new hard inquiries. It should be one inquiry only as you pointed out. What should I do?

The inquiries will count as one when calculating your credit score. But the 6 inquiries are accurate if you applied at all 6.

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Reply by
Cland1236

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Two years ago I refinanced my mortgage. I had 5 inquires from my looking. I had always been told they would count as ONE since they were all mortgage related and withing 30 days or less. THAT DID NOT HAPPEN. I was hit on all 3 bureaus just as if I had applied for 5 separate loans. My score has just now recovered and in December the last one will fall off.

I wish it were the way you say CK, but realty is they all effect the score, regardless of what they tell you - at least they did mine.

A few things to note, the inquiries have to happen within a specific time frame usually 30-90 days. Secondly, the inquiries will all appear on your report. However, they will only be counted as one if they are within the right time frame. Regardless all will appear on your credit report.

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