Consumers with credit problems that are shopping for a new car should know how this process may impact their credit scores
Credit scores and car loans

At Auto Credit Express we believe it's especially important that consumers with poor credit understand the impact that traveling from dealer to dealer or submitting multiple online car loan applications and the credit inquiries that follow will have on their FICO scores.

That's because, for the past two decades, we've been helping car buyers looking for auto loans with poor credit find new car dealers that can give them their best opportunities for auto loan approvals. In some cases these individuals may first try to accomplish this on their own – which is fine. But the fact is if they run into problems or get discouraged and decide to wait, they run the risk of lowering their credit scores even further.

Inquiries and FICO scores

So what happens if you begin the car buying process by visiting multiple dealers or submit multiple online applications over the course of more than a month?

To answer this question we decided to go right to the source. Fortunately, a blog post from FICO discusses what happens to their credit scores when consumers apply for a specific type of credit – such as an auto loan.

Car shopping

According to FICO, auto loan inquiries "that occur 30 days prior to scoring have no effect at all on the FICO score." Outside this 30-day period, any inquiries that happen within any 45-day period are treated as just one inquiry (provided they are all for an auto loan). The same thing will happen if you either decide (because you're rate shopping) or are forced (because you are looking for a loan approval) to drive from dealer to dealer.

The advice FICO has for you: do your shopping in a "reasonably short period." It also helps if you "do your homework."

If you either know or suspect that you have bad credit we believe this "homework" should include obtaining copies of all three of your credit reports and paying for at least one credit score so you'll know where you stand, credit-wise, with auto loans.

Inquiries not affecting FICO scores

According to FICO, the only inquires that affect their credit scores are "those that result from when a consumer actively applies for new credit."

This means that FICO does not consider:
• Consumer disclosure inquiries — consumer requests for a copy of their individual credit report
• Promotional inquiries —lender requests to review for pre-approved credit offers.
• Account review inquiries — lender requests to review existing accounts they hold
• Employment inquiries — requests from potential employers
• Insurance inquiries — requests from insurance companies

Credit score inquiry impact

The article notes that a single inquiry will typically impact a FICO score by less than five points, although this varies and is usually greater if a consumer has few accounts or a short credit history.

Since inquiries are only one part of the "search for new credit" category and that category only accounts for 10 percent of a score, inquiries overall will account for less than 10 percent of credit scores.

The need to factor inquiries

So if inquiries account for less than 10 percent of your credit scores, why should they even affect them at all?

According to FICO, consumers who are looking for credit are riskier than those who aren't. In fact, their data has shown that people with six or more inquiries showing up on their credit reports are eight times more likely to declare bankruptcy when compared to consumers with no inquiries.

But even with that being said, FICO points out inquiries still play a minor role when judging risk – outweighed by both the bill paying habits as well as the overall debt of a consumer.

The Bottom Line

If you have bad credit, you should understand why and how credit inquiries affect your credit scores. It's also important to know that credit scores can be impacted by how long it might take you to find the right kind of dealer – which is where companies like us come in.

Specifically, Auto Credit Express matches applicants that have experienced car credit issues with dealers that can arrange for approved auto loans.

So if you're ready, you can take the next step now by filling out our online auto loans application.