Question:
Dear Steve,
My husband did a pre-approval on an auto loan. He only gave his permission to pull out his credit file with one auto dealer whom he intends to purchase the car from. Found out from credit report – eight entities pulled out his credit file – simultaneously in two days! Putting a ding on his credit score.
Is the described practice lawful? I.e., can any entity pull out a consumer’s credit report — by authorization of a third party? (In this case, the authorized party is the auto dealer.)
If not lawful – what is my recourse? Can I contact credit bureau and file a dispute – for unauthorized access to consumer’s credit file?
Thank you!
Emma
Answer:
Dear Emma,
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Auto dealers will typically shop applications to find the lowest interest and/or lender that will approve the applicant.
Credit inquiries that happen has you describe are treated as only one inquiry on your credit score. As the people at FICO credit score say, “Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, FICO Scores ignore mortgage, auto, and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won’t affect your scores while you’re rate shopping. In addition, FICO Scores look on your credit report for mortgage, auto, and student loan inquiries older than 30 days. If your FICO Scores find some, your scores will consider inquiries that fall in a typical shopping period as just one inquiry.
For FICO Scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO Scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO Scores.” – Source
So the issue isn’t if multiple inquiries appear but if they have radically changed your husband’s credit score. The only way to tell would be if you had check his score using a free service like Credit Karma, before and after the dealer visit.
Keep in mind, as you continue your car shopping that unless the dealer specifically says they will only be running the application through one lender, multiple lenders may be polled to find the best deal.
If you want to avoid such issues then you can always arrange your own vehicle financing through your credit union or other lender, and their are many. This way you can go to the dealer with pre-approved financing and use that pre-qualification to negotiate the best deal.
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