Opting into dealer-arranged financing means potentially relinquishing control over who views your financial information.
Jan 5, 2024|3 min read
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QuickTakes:
- What happens when a car dealership runs your credit?
- How car dealers check your credit
- Information you typically provide to dealers
- Can car dealerships run your credit without permission?
For a simplified car-buying experience, many drivers turn to dealer-arranged financing. Rather than seeking out loans from financial institutions yourself, you can let your dealership run a check of your credit and find you an offer. However, this process may come with its own set of trade-offs.
If you want to minimize additional financing steps, dealer-arranged financing can be convenient. But it may be less ideal for customers who are worried about their privacy and the potential for unwanted "hard" inquiries.
What Happens When a Car Dealership Runs Your Credit?
If you decide to let the car dealership handle your financing, then you are allowing them to run a hard credit check that they then send to their lender, or lenders, of choice. While letting dealerships handle the financial aspect of your purchase may be convenient, it also means a lack of control over which lenders are available to you and who has access to your financial information.
Unless a dealership provides their own in-house financing, it's likely they will pass along your financing contract to the bank, credit union, or third-party lender of their choice. Although dealerships may have a preferred lender, some dealerships choose to "shotgun" your credit information to multiple lenders, which is a tactic dealers use to make lenders compete to give you the best rate.
Many dealers contact around five lenders and then choose a single loan offer to present to you. If this is a privacy concern for you, be sure to check with your dealership to understand their process before submitting an application.
How Car Dealers Check Your Credit
Car dealerships tend to have their own individual systems to complete, file, and organize credit applications. These include a variety of dealer-specific tools, such as RouteOne and Dealertrack.
These tools help dealerships process and send your credit report to lenders, and they might store your financial information — even after your application is approved. For example, RouteOne holds onto this data for up to 60 days so dealers can go back and review as necessary.
Information You Typically Provide to Dealers
When applying for an auto loan pre-approval through a car dealership, the information and documentation you provide may vary depending on the dealership's unique requirements. However, there are a few commonly requested documents you may need, such as:
- Social Security number
- Driver's license or alternate identification
- Employment status
- Income information
After you provide this information, the dealership typically requests a hard inquiry into your credit report. If you want to avoid providing this information to a dealer, consider securing financing from your preferred lender beforehand.
Can Car Dealerships Run Your Credit Without Permission?
Under the Fair Credit Reporting Act, lenders are allowed to request soft credit inquiries, such as those used for pre-approval letters or other pre-screened offers, without telling you. However, hard inquiries can impact your credit score and typically require written consent.
If you notice a hard inquiry has been made to your credit without your permission by a car dealership, contact them to see whether this was an accident. Hard inquiries can temporarily hurt your credit score, so any unwanted checks should be handled quickly. You may also place a freeze on your credit to protect yourself from the possibility of unwanted credit inquiries or dispute them with credit bureaus.
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FAQs
A dealership checking your credit score is a soft inquiry and won't affect your credit. Any hard credit check triggered by a loan application will appear on your credit report, shaving points from your credit score.
What happens when a dealership runs your credit? ›
What does a car dealership see when they run your credit? When they run your credit, they get a report and credit score from one or more credit reporting agencies. This will help them gauge the risk of granting you car financing.
Can a dealership run my credit without my permission? ›
A dealership's finance and insurance manager (or other dealership personnel) cannot run your credit report without your permission and must ask for your signature or verbal permission.
How long does it take a dealership to do a credit check? ›
The credit check literally takes a minute once they enter your application info into their system. If you have a high enough score, debt to income ratio is good and there are no other issues, the approval can also take a minute.
Can you remove hard inquiries from a car dealership? ›
You can request the removal of hard inquiries from your credit report by pointing out unauthorized checks or going through a formal dispute process with major credit agencies. Whether you're looking to buy a house, lease a car, or get a loan, lenders need to check your credit.
How many points do you lose when a dealership runs your credit? ›
Never fill out a loan application at a dealership before you've picked a vehicle and are ready to buy. A dealership checking your credit score is a soft inquiry and won't affect your credit.
What credit score is needed to buy a car? ›
The credit score required and other eligibility factors for buying a car vary by lender and loan terms. Still, you typically need a good credit score of 661 or higher to qualify for an auto loan. About 69% of retail vehicle financing is for borrowers with credit scores of 661 or higher, according to Experian.
Can I tell a car dealership not to run my credit? ›
Yes, the salesperson or manager is required that you sign a consent to request your credit report. They have to know that.
What is shotgunning credit? ›
Although dealerships may have a preferred lender, some dealerships choose to "shotgun" your credit information to multiple lenders, which is a tactic dealers use to make lenders compete to give you the best rate. Many dealers contact around five lenders and then choose a single loan offer to present to you.
How many times is a dealership allowed to run your credit? ›
When a consumer seeks financing through an auto dealership, the financing may be done by the dealership itself or by a third-party lender. If the dealership is, itself, the lender, a credit application permits the dealership to pull a consumer's credit one time.
When purchasing a car, most car dealerships run your credit score to determine if you are eligible for a loan. These scores come from a variety of different credit bureaus (TransUnion, Equifax, and Experian) that collect data from creditors.
How long does a car credit check last? ›
Hard inquiries stay on your credit report for two years, but your FICO® Scores will only be impacted by hard inquiries posted in the last 12 months, according to Experian. You can request a free credit report from each of the three credit bureaus once a year.
Can car dealerships give you a copy of your credit report? ›
They don't have to give you a copy of your credit report. The credit report is pulled for the benefit of the dealership. If you are denied credit, you are entitled to a free copy of your credit report, but you get that through annualcreditreport.com, not the dealership.
Why do car dealers want to run your credit? ›
Car salespeople run credit checks to estimate your buying ability and reliability as a potential customer. Having a good credit history indicates to the salesperson that you're serious about making commitments and truly have the means to buy your car.
How many inquiries is too many when buying a car? ›
Ultimately, it's up to the lender to decide how many inquiries is too many. Each lender typically has a limit of how many inquiries are acceptable. After that, they will not approve you, no matter what your credit score is. For many lenders, six inquiries are too many to be approved for a loan or bank card.
Can a car dealership run your credit without your approval signature? ›
Or, when shopping for a car, can a car dealer run a credit check on you without your permission? The short answer is no — a car salesman or soon-to-be-ex-spouse can't get a copy of your credit report without permission, and that's due to the Fair Credit Reporting Act (FCRA).
Does running your credit for a car hurt your credit? ›
Shopping for the best deal on an auto loan will generally have little to no impact on your credit score(s). The benefit of shopping will far outweigh any impact on your credit. In some cases, applying for multiple loans over a long period of time can impact your credit score(s).
Is it bad to have your credit pulled? ›
In general, credit inquiries have a small impact on your FICO Scores. For most people, one additional credit inquiry will take less than five points off their FICO Scores. For perspective, the full range for FICO Scores is 300-850. Inquiries can have a greater impact if you have few accounts or a short credit history.
Can I sue a company for running my credit without my permission? ›
If you notice hard pulls on your credit that you did not consent to, you can demand the creditor remove the inquiry. If they do not do this, you can sue under the Fair Credit Reporting Act (FCRA).
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