Frequent car rentals with debit card shouldn't clobber credit
Credit Score Report
Dear Credit Score Report,
Great article regarding rental car companies and debit
card credit checks. My question is: If the same customer rents several times a
month on a debit card and gets several credit checks a month by the same car rental
company, will their points triple? How does that work? - Jenny
When you rent a car using a debit card, the rental agency may
perform a credit check, causing a drop in your credit score. And while multiple
credit checks can increase the damage, industry experts say it's unusual for
car rental agencies to perform several credit checks on the same customer in
I'm glad you enjoyed my column on credit checks for car rentals. As I noted previously, when renting a vehicle with a debit card, car
rental agencies may check your credit to determine how likely you are to make additional
payments (such as for vehicle damage) if necessary. In other words, it's a precautionary
step by the rental agency. These types of credit checks fall under the
"hard inquiry" category, which can lower your credit score
by a few
points -- as opposed to a "soft inquiry," such as when you check your own
credit, which has no impact on your score. Recent hard inquiries can "have
a slight negative impact on scores. Multiple inquires can be slightly more negative," says Maxine
Sweet, vice president of public education for credit bureau Experian. That
means credit checks can add up. If you experience three in one month, for
example, the damage to your credit score may triple.
But rental industry experts say repeat customers aren't
likely to have their credit checked that often. "I do not know of any
rental car company that runs a credit report multiple times in a short time
period," says Sharon Faulkner, executive director of the American Car
Why not? Faulkner says that if a customer has a good rental
history -- such as always returning the car on time -- and the customer's
employment status remains the same, it isn't necessary to repeatedly look at
their credit reports. "Rental car software is capable of storing this
information so you do not unnecessarily run multiple credit checks on one
individual," she says. There's also a cost associated with performing
multiple credit checks that may discourage the rental agency from checking too
frequently. "Credit reports for businesses are not free and can be costly,"
But in the case of a specific company, it's worth making
sure. Ask the car rental agency how often it performs credit checks on returning
customers who use debit cards. Also, before signing any documents, carefully
read them to see whether or not a credit check will occur. Taking these steps
will help you know what to expect.
Of course, if you rent cars from more than one agency, each could perform a separate credit check, since each agency won't already be aware
of your credit history. "This is
not information that rental companies share with each other or any other
organization," Faulkner says. (Some rental agencies, meanwhile, don't check
any customers' credit. For example, Enterprise says its
policy is to not run credit checks.)
Therefore, if you're concerned about losing some credit
score points, find a rental agency that only performs a single credit check in
a given time period -- and stick with it. Otherwise, you can always rent with
a credit card.
See related: 'Hard' inquiries have limited credit score impact,
Credit check by car rental firm won't hurt score for long
Jeremy M. Simon is a former CreditCards.com reporter who wrote about credit scoring, economic data, credit card crime and other issues. He is based in Austin, Texas. He is a graduate of Vassar College and has previously worked for Thomson Financial in New York City, where he wrote about the stock markets, and Texas Monthly, as well as several publications in Austin.
Published: July 5, 2011
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