Credit applications and your car loan

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When you apply for car financing from Auto Credit Express, we ask consumers who are pre-qualified not to apply for credit elsewhere until they have become acquainted with the dealer where they are placed. Why? to have too many credit questions can be a red flag for the lenders they work with.

How lenders view credit applications

While the impact of credit searches on your credit score is modest, your ability to get approved for an installment loan (loans, mortgage, etc.) can take a while.

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Credit searches or credit checks happen when creditors, lenders, retailers, auto dealers, mortgage lenders, or anyone else get a copy of your credit report from any or all of the credit bureaus.

Questions are listed on your credit report and come in two types:
credit inquiries

  • Difficult questions: Those performed by lenders as a result of your credit application. Hard questions can stay on your credit report for two years, and they can negatively affect your credit score for a year. For most consumers, each will lower your credit rating by five points or less, according to FICO.
  • Soft questions: Credit checks performed by people who are not looking to lend anyone money. These include credit checks on you personally, companies from whom you have not applied for credit (for marketing or other purposes), and potential employers. Soft questions do not affect your credit score.

When you apply for several lines of credit in a short time, lenders take a closer look. In their view, this could be seen as a sort of red flag, as research has shown that people with lots of investigations are much more likely to file for bankruptcy than those without investigations.

Multiple studies indicate that the applicant may not be living within their means and experiencing financial difficulties, as a result, they could damage their ability to successfully repay these bills.

For example, car lenders calculate the amount of an applicant DTI and PTI ratios. These calculations relate to your monthly recurring debt and how much of your income is “available” to repay a car loan. If you have a lot of questions, a lender won’t be able to accurately calculate these important ratios because it can’t take into account credit obligations you’re about to get approved for.

The bottom line: It’s best to avoid applying for credit in the six months or so before applying for a major loan.

Shopping the loophole

Many consumers looking for a large loan, such as a car loan or a mortgage, want to check the rates of many different lenders to find the best deal. This practice is known as review shopping.

Even if your rate shopping leads to multiple lenders conducting an investigation, your credit score doesn’t reflect it. Scoring models can discern the nuance of shopping for the best deal, so your credit rating won’t go down for every survey done.

In this case, the scoring models may determine that a consumer only wants to take out one car loan or one mortgage. So they won’t penalize you for checking out multiple lenders, as long as it’s for the same type of credit and the rate shopping is completed within a 30-day period.

Does Auto Credit Express carry out your credit?

Many consumers who want to apply for car financing at Auto Credit Express I wonder if we do a credit check. The answer: We don’t manage your credit, but the dealership we place you with will. So when you apply with us, expect to see one credit application in your reports.

If you have less than perfect credit, our free service is the easiest way to find car financing. We can immediately match you with the dealer near you that gives you the best chance of getting a loan approved, regardless of your credit history.

To get started, all you need to do is check out our fully secure and no-obligation online request. The sooner you sign up, the sooner you can drive off the lot with your next vehicle.

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