The Trouble With Running Credit Reports
Consumers should avoid having businesses run their credit reports unnecessarily because it will lower their credit rating slightly, consumer advice experts say. According to the Experian Web site: "10% of your credit score is based on inquiries or 'credit checks.' Every time you apply for credit, a 'hard inquiry' is placed on your credit report. Having too many hard inquiries could indicate to lenders that you're trying to overspend."
Car salesmen are eager to run a customer's credit report and often say it is for the buyer's convenience, and will speed up the car-buying process, says Chris Kukla, senior vice president of the Center for Responsible Lending. "But they really want to know if they can easily finance you," he says. "The result of the credit report has an impact on what the buyer pays for the car, and whether they get a hard sell for additional products in the finance and insurance office."
Marv Eleazer, finance director at Langdale Ford in Valdosta, Georgia, agrees. "This is a ruse and designed to get access to the customer's credit report in order to qualify a customer to various finance sources the dealer uses," he says.
Buy here, pay here car dealers often demand a credit report early in the car-buying process, Kukla says. Often, the car's price isn't even posted on the windshield. After seeing the result of the credit report, the dealer can adjust the price to maximize his profit, Kukla says.
Kukla says many car buyers with mid-tier credit assume they can only get financed at the dealership, and as a consequence, they arrive on the car lot with no idea of their credit worthiness. Instead, he tells car shoppers to look for a loan from a bank, credit union or other outside lender first. With pre-approved financing in hand, they are in a stronger position to negotiate at the dealership.