Hello, its christian younger, and I want to welcome you to another automotive best practice of the week in today’s episode, we’re going to tackle the question that often comes up in the automotive industry and that is does running your credit report actually lower or hurt your credit Score when you’re shopping for a car truck van or an SUV now in today’s video we’re going to learn the precise answer to that question, plus I’m going to go ahead and give you a word track.
That will help take this question from becoming an objection, and that way it doesn’t stall your sale now, if this is your first time to our channel and you want to improve your sales skills, learn how to use psychology to help close more car deals and receive Unbiased dealership, product and service reviews go ahead and hit the subscribe button and then make sure you go ahead and click the bell.
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This issue about running a credit report lower in the score can range anywhere from just a simple innocent question, all the way to an objection or even a complaint.
So what makes understanding how the credit companies determine what a credit inquiry is and how it affects your score important.
So you can keep your sale moving forward to gain a better foundational understanding of this question.
Let’s first address what a credit score is and why it’s so important to a car loan.
Now, back in the late 80s, a company called the Fair Isaac corporation today, you’re, probably more familiar with the acronym FICO.
They went ahead and developed a three digit scoring system that they based off people’s credit histories.
Now, today, lenders use this to determine people’s ability to repay that loan in a term that affects how much money they’ll allow you to borrow the terms and how much time they’ll give you to repay that loan and then finally, the amount of APR or interest they’ll Charge you whenever you’re borrowing that money the reason the question does run in the credit report, actually lower the score.
It’s so difficult to answer it’s because it really depends.
It depends on what type of credit Inc where it is and then number two it depends on.
Why the credit was being run in the first place and you see there’s two types of credit inquiries.
One of them is called a soft enquiry.
A soft credit inquiry would be, for instance, if an employer as part of the hiring process, pulls the credit history and wants to see what type of credit report you have.
Another type would be is if you pulled your own credit history just to see if there was any fraudulent activity going on.
In your credit report, the other type is called a hard credit.
My example of these would be credit card applications mortgages current automotive loans.
In these situations, you’re borrowing money, so they can lower your credit score.
How much you might ask? Well, it would matter on how many lines of credit you have and how long you’ve had those lines of credit.
For instance, the shorter amount of time that you have these lines of credit that could impact your credit score a little bit more in these situations, possibly lower in it up to five points.
In fact, FICO finds that statistically people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their credit report.
So, yes, multiple inquiries can lower your credit score.
Now.
There’s some good news: first credit inquiries: they only account for about 10 % of the overall FICO score and as they should, because ability to repay payment history and your overall debt, there are probably more important factors in risk assessment for an automotive loan and secondly, when You’re arranging a loan for an automobile or a home mortgage, those multiple inquiries are only counted as one and, if you think about it, it makes sense.
I mean when you’re looking to borrow a large amount of money.
It only makes sense that you’re going to shop for the best APRs and because credit reporting companies understand the financially responsible people we want to shop around for the best APRs.
They know they’re gon na have to apply to several lenders for the best rates in the best terms, therefore, all credit inquiries during a certain period of time, or only count it as one now, the timeframes uses between fourteen and forty five days, depending on which version Of the FICO scoring system that the lender is using some of the newer versions allow for up to 45 days for these types of inquires.
Now that we’ve learned how multiple credit inquiries for an automotive loan have little to no effect on the overall credit score, let me share with a word track, we’re trick.
You could use if you’re meeting resistance to run in a guest credit bureau when you’re trying to put together a car deal.
Let’s pretend that you and your guests have just returned from a demonstration drive and your guest shares with you that they want to buy the car if you can fit into their monthly budget of $ 300 per month.
Now you want to make sure you’re quite an accurate monthly payment, so you ask the guest if they would provide you some credit information, so you can pull their credit history.
The guest flat-out denies you and says: no.
I don’t want you to run my credit, because I don’t want to lower my FICO score now to keep your sale on track.
Let me offer you the following work tracking.
It goes like this folks, I completely understand and most of our guests.
They think the same way because the credit scoring system could be so confusing.
I always wondered myself: why does shopping for a good rate actually lower my credit score and then here about a year ago I was refinancing my house and I found out that whenever is shopping for a mortgage or an automotive loan, multiple credit inquiries only count as One: here’s a recent article by my FICO score.
It explains it a little bit further and then I’d hand the article to the guests and I’d watch their body language.
If I felt like they were ready to move forward.
I’d ask a minor question that carried with it a more of a major decision.
Like did you want to pop water coffee? Why collect the information, so we can run their credit and get you an accurate payment and then that should keep your sale moving forward.
Well, there you have it.
The answer to the question: when shopping for a car does running a credit report lower your score and in case that question turns into a complaint or an objection.
We give you a word Trek, so you can handle it effectively.
Now, speaking of handle objections effectively in the car business, if you’d like to see more videos on handling common objections that you’re given by customers when purchasing a vehicle, please go ahead and click on one of the videos.
It’s going to be coming up right about now.
