Many borrowers hold off on applying for credit with a few different lenders in a week, but it’s actually a good strategy to have your credit pulled multiple times in a few weeks! Here’s why.

Hard Inquiries and Your Credit Score

The Impact of Multiple Credit Pulls on Your Credit ScoreWhen you apply for new credit, most lenders pull your credit reports and check your credit score. This is because lenders use your credit score and history as a way to get an idea of you as a borrower, and how you’ve handled repaying borrowed money. The FICO credit scoring model in particular is the most commonly used by auto lenders.

However, when a lender pulls your credit, it usually lowers your credit score a little bit. The three major credit bureaus – TransUnion, Equifax, and Experian – keep track of how many times you apply for new credit, and log them on your credit reports under the inquiries section. Borrowers who tend to apply for new credit frequently may be relying on credit too much, so the credit bureaus keep track of hard inquiries.

The good news is that hard pulls only impact your credit score a little bit, typically around five to 10 points per hard inquiry. The even better news is that hard pulls can only hurt your credit score for up to 12 months, and they completely fall off your credit reports after 24 months.

Hard inquiries don’t punish you for applying for new credit forever. In fact, you can apply for credit multiple times from the same type of lender and have only one hard pull reflected on your credit score.

Rate Shopping for a Car Loan

Rate shopping is the process of applying for the same type of credit with multiple different lenders within a specific time period, which is usually two weeks. The FICO scoring model knows that when you apply for new credit a few times within a short period of time, you’re looking for the best rates or deals.

A smart car shopper usually takes their time when they’re looking for a lender, and applies with a few different ones and compares their options. However, when you have bad credit, you sometimes don’t get approved by everyone you apply with. This doesn’t mean you can’t apply with multiple lenders, though – it’s worth it to try if you have a few lenders lined up.

Your Credit Score and New Credit

Borrowers with less than perfect credit can struggle to get approved for an auto loan. Typically, borrowers with credit scores below 660 are considered to have bad credit. Borrowers with scores in this range tend to have better luck getting car loans if they work with subprime lenders.

Getting into a subprime auto loan usually means finding a special finance dealership that’s signed up with these lenders, and we know where they are. Here at Auto Credit Express, we’ve created a nationwide network of dealers over the past 20 years, and we’ll look for one in your area at no cost once you fill out our car loan request form. There’s never an obligation, so get started now!