Our readers often ask us how badly their credit is going to be affected when they use our service. Firstly, Auto Credit Express isn't a lender, so we never pull your credit. But that doesn't mean your credit won't be checked. Let's take a look at how the process works, and how you can get the most out of your shopping experience with the least amount of damage being done to your credit.
Why Is My Credit Being Pulled?
You can't be approved for most types of financing without a lender first looking into your credit reports and scores. People ask us about this part of the auto loan process all the time. Take this question we recently received:
"I let my application expire. If I were to apply again, do you do a hard credit pull, and could you potentially turn me down for credit for a car?"
When you fill out our fast, free auto loan request form, you're requesting to be put in touch with a dealership in your area that works with people in tough credit situations such as bad credit, no credit, and even bankruptcy. We aren't a lender, so we aren’t the ones that pull your credit.
However, the dealership partners we work with send your request to their lender or lenders to see if they're able to help you get the loan you're looking for. When this happens, your credit is pulled (looked at).
In order for a lender to determine if you're a good fit for them, they look at your credit reports and this is known as a hard pull or hard inquiry. These types of credit inquiries are initiated when you begin the process of requesting credit and can drop your credit score temporarily, but the drop is typically only between five and 20 points for up to 12 months.
On the other hand, if you don't ask for a new line credit, like all those prequalified credit card offers you get in the mail, or if you're checking your credit yourself, it's considered a soft pull. These don't harm your credit score.
Can I Minimize Credit Score Damage?
The more you space out your search, the more damage can be done. This is because there's a tactic you can use that allows you to shop for a specific type of credit within a short period of time – usually two weeks. It's called rate shopping.
By applying for multiple loans of the same kind within two weeks, the credit bureaus can tell that you're looking for a certain type of credit, and not just applying willy-nilly. If you keep your search for a loan to the rate shopping window, all the credit checks show up on your reports, but only one hard pull impacts your credit score.
Rate shopping allows you to compare interest rates and loan terms between a few lenders without each of them damaging your credit score. Done correctly and quickly, you can reduce hard inquiry damage to your credit score and choose the right auto lender for your situation.
How Car Loans Impact Your Credit
Auto loans can impact your credit in many ways; both good and bad. It's all about how you handle the loan. If you purchase a vehicle for cash, it has no chance to help you build credit. However, if you're financing, the act of taking on the loan and your timely payments over the life of the loan can build a higher credit score.
Since auto loans are typically several years long, they can help you build a positive payment history, which accounts for 35% of your FICO credit score – the most widely used credit scoring model among lenders. However, if you struggle to make your payments, or fall behind on your loan, the negative impacts can be devastating. Negative marks can harm your credit score quickly, while building it can take time.
Ready to Build Your Credit With an Auto Loan?
If you're ready to build your credit, a car loan is an excellent way to start. Not sure where to go from here? We've got you covered. At Auto Credit Express, we've built a nationwide network of special finance dealerships that are signed up with subprime lenders. These lenders know that there's more to a borrower than a credit score, and are more often willing to take a chance on a borrower in this boat.
Of course, you have to prove that you meet a few requirements before you can qualify for lending. Most subprime lenders are looking for consumers with the ability, stability, and willingness to take on an auto loan. You can read more about the requirements of a subprime loan right here on our site.
Or, if you're ready to get the process started, simply fill out our zero obligation auto loan request form. We'll get right to work matching you with a dealership in your area.