In this era of instant information, everybody has a tip or trick to help with something, including car buying. Credit issues are one of the biggest things that affect car buyers. If you do enough digging, the internet will tell you anything you want to hear, but knowing how to separate fact from fiction is key. Here, we expose some of the biggest credit myths, and how they can impact your car buying ability.
Most Common Credit Misconceptions
The most common myths we often hear about center on what can negatively impact your credit score.
Myth #1- Checking your credit will hurt your score.
- A common misconception is that the more you check your credit, the worse your score will become. You have every right to know your credit score and what is on your credit reports. There are two types of “inquiries”—soft and hard. When you pull your credit, or give permission to someone, such as a potential employer, to do so, it is a soft pull, and this does not impact your credit score. Other examples of soft inquiries include when lenders sending you pre-approved offers check your credit, or when lenders you already do business with pull it.
- Soft inquiries are not tied to anything specific, such as a new credit application, so potential lenders do not see them. We recommend you are always aware of your credit score and what is on your reports before starting the car buying process.
Myth #2-Shopping around for a loan will hurt your credit.
- One thing we see often, especially when it comes to auto loans, is the myth that shopping around will hurt your credit score. It is true that, when you apply for a loan, a dealer or lender will have to look at your credit, and it will be considered a “hard pull”.
- However, credit scoring is predictive when it comes to rate shopping. Multiple inquires for the same type of loan performed in a short period of time—typically 14-30 days—are looked at as one hard inquiry. The amount of impact this has on your credit will vary for everyone, but, according to FICO, for most people, one additional credit inquiry will often take less than five points off your score.
Two for One Assumptions
Very often, people have misunderstandings about how their credit and their spouse’s credit differ.
Myth #3-You don’t need to worry about credit if your spouse has an excellent score.
- We frequently encounter couples who are looking to be joint applicants, or co-borrowers. One common belief here is that things co-mingle so much that a dealer or lender will view them as one. When you request credit as a co-borrower, both credit scores are taken into account to determine the particulars of a loan, such as the interest rate. This myth probably came about because when spouses enter into a co-borrower arrangement, their incomes can be co-mingled, meaning the total income of both individuals is used to qualify for a loan.
The Worst Myth of Them All
Of the many misconceptions flying around out there about credit and car loans, this one takes the cake.
Myth #4- Bad credit means you can’t qualify for a loan.
- This myth is just plain wrong. There are a lot of lenders who specifically cater to people with credit challenges. Just because you have bad credit, or even no credit, doesn’t mean there isn’t someone out there willing to give you a chance. The key is to find the right lender for you, whose requirements you can meet, and to set realistic goals.
- Know that your credit score alone does not determine if you get a loan, but it will impact things such as vehicle options and your interest rate. Other factors in qualifying for a loan will include your income amount, employment history, and debt to income ratio, to name a few.
Honest Help for Auto Loans
So, don’t believe everything you read. If you have bad credit, there are options available to you, and Auto Credit Express wants to prove it. Let our network of dealers bust the myths and help you find the car that is right for you, even if you are credit challenged. They have lenders that are prepared to help you get the financing you need. Our service is fast and free, so get started today by filling out our online auto loan request form now.