Scoring formula consolidates multiple checks into one
Dear Speaking of Credit,
I recently went to a dealer, with a finance certificate in hand, to purchase a vehicle. I was advised that they needed my information for their records, but they would not pull my credit. They not only pulled my credit, but they did so seven times. I know my credit score and know that I am not eligible for standard financing at this time as I filed bankruptcy three years ago. This is why I went to the dealership with financing. I had been shopping around for the right car for about 16 days. They pulled my credit. What can I do? I have a 10-point decrease on my score as a result. – Natasha
You were clearly right to prepare yourself with a finance certificate, knowing you wouldn’t be eligible for the better rates with a low post-bankruptcy credit score. The car dealership was clearly wrong to check your credit score after promising it wouldn’t.
The rule for a lender pulling credit when the consumer is neither an existing customer or a credit applicant is that the consumer must somehow demonstrate, whether stated or implied, an interest in doing business. Based on this criteria, you walking into a car dealership with a finance certificate in hand can be considered enough authorization for “permissible purpose” to check your credit report or score.
Can you dispute those seven inquiries with the credit bureau? Since the inquiries were generated legally and are no doubt being reported accurately – dates and name of the inquiring company – the credit bureau is under no obligation to remove them. Typically, only fraudulent inquiries – not quite your situation – or perhaps multiple inquiries from a technical glitch, must be deleted.
Credit-shopping damage limited
Your best bet then is to learn to live with those seven inquiries, which shouldn’t be too difficult, as only one of the seven is likely to be having any effect on your score. And that effect will only occur during the first of the two years all inquiries remain on your credit report.
A couple of consumer-friendly scoring features minimize the credit score damage when consumers are “credit shopping” for a mortgage, auto loan or student loan. These features are:
- The 30-day buffer – no score impact for the first 30 days after any mortgage, auto or student loan inquiry.
- The 45-day deduplication – all mortgage, auto or student loan inquiries occurring within any rolling 45-consecutive-day period are considered as a single inquiry.
It’s a good thing for your score that you conducted your car shopping over a 16-day span. That means all of your inquiries occurred within a 45-day period, so only one inquiry will be considered by the score.
Taking such inquiry treatment one step further, when the score evaluates an inquiry, any impact is based on the consumer’s payment history, amounts owed, length of credit history and other factors making up the various scoring categories. Depending on your overall credit profile, an inquiry may or may not affect the score.
If the 10-point decline you experienced sounds like too many points lost simply for having your credit checked, it’s most likely a reflection of the higher credit risk that your prior bankruptcy presents. On credit files with a better history or, in your particular situation, an older bankruptcy, the point loss is likely to be less. Most inquiries take five points or less off the score.
What can you do about this? Assuming you were granted a loan from that dealer, there isn’t anything to do now other than make those payments on time each month without fail, while doing your best to put this inquiry issue behind you. Just establishing that new loan with a positive payment history is likely to help offset that 10-point loss.
Another reason to stop worrying about those inquiries is that until your score substantially recovers from the bankruptcy, perhaps in another year or two, your score alone isn’t likely to qualify you for most kinds of credit at reasonable rates anyway – with or without those inquiries. By the time your score reaches credit-approval-worthiness, those inquiries will no longer be having any effect and, like your bankruptcy, fading away into the distance behind you.