Last month my husband and I purchased a car from a car dealership. When reviewing our credit report the next month, we noticed 6 auto lender inquiries were made. I want to know why they pulled my credit so many times, what’s the impact on my credit scores, and what do I need to do to remove them?
Answer: When you are applying to buy a car, the finance department will determine the terms of your loan. Once they’ve sold you on the terms, then they will send your application to 3 or 4 lenders to get them to compete with one another for the business.
If your credit score is 620 or less, then your application will probably go to more than 4 lenders, since it will be more difficult to get you approved at favorable terms.
The Process of Sending Your Application to Various Lenders is Called “Shotgunning”
Since the financing department can’t know precisely where to send your application for the best rate, they have to send it to several lenders at once. Both you and the lender benefit from this competition. You get a lower rate and the car dealership gets to maximize their profit.
The problem is that most consumers shopping for a car aren’t aware of the process. All you know is “inquiries can lower your credit scores”, so you understandably get upset when you see a bunch of inquiries coming from several different lenders when you only remember giving permission to one lender.
Shotgunning Won’t Hurt Your FICO Scores
The truth is, FICO (the company that provides the scores lenders use for lending decisions) understands that consumers need to shop around for major purchases like auto and home loans. So they will lump together all the auto inquiries made over a specific period of time and treat them as one for credit scoring purposes.
That means your scores won’t be negatively impacted by “shotgunning”, though there are other possible consequences.
However, Shotgunning Can Keep You From Getting Approved
Some lenders will count your inquiries when you’re applying for a loan or credit card. So while you may have the scores to qualify, they could still potentially deny you based on having too many inquiries.
Removing credit inquiries is a straightforward process. The only inquiries authorized on your credit report are those who can claim “permissible purpose”.
You gave permissible purpose when you signed the credit application with the car dealership. In the fine print, they probably also included the right to send your application to other lenders, as well.
If you believe your credit authorization was abused, then you can dispute the inquiry with both the lender and the credit bureaus.