Are you considering taking out an auto loan and want to know what a dealer will see when they run your credit?
Maybe you are waiting to find out if you are approved for your dream car and want to know what checks will be run?
Perhaps you are curious and want to know more? Whatever your reason might be, we have the answer for you!
We know how daunting the thought of having your credit checked can be. Your mind starts racing, wondering what could be unearthed and if it will impact your chances of securing the loan or not.
For many of us, the chance to own our car comes through auto loans provided by car dealers. The last thing we want is to ruin our chances and be stuck commuting on foot forever.
Thankfully, you don’t need to worry a moment longer! Today we are here to walk you through what car dealers see when they run your credit.
Keep reading to have your mind put at ease and find out what your car dealer will see!
What Does Running Your Credit Mean?
For those that need it, let’s have a quick recap! Running your credit is when a lender will check your credit score and history to determine whether they will move forward with your loan or not. You can run your credit yourself doing what’s known as a ‘soft inquiry.’
This will not impact your credit score and show you your score and what has determined it, such as your payment history and if you have made payments on time.
Companies can also run your credit. These are known as ‘hard inquiries’ and are used to determine whether you will be approved for mortgages or auto loans.
These checks will stay on your report for two years and allow lenders to see your credit history, payment history, if you have any debt, and if you have ever declared bankruptcy.
The higher your number, the better your credit score is, and the more likely lenders agree to the loan.
Credit reports show lenders if you can pay back any loans based on your previous credit history and are commonly used these days.
What Do Car Dealers See When They Run Your Credit?
Let’s get into it! When a car dealer runs your credit (after filling out a credit application), they will see your financial history. It will show the length of your credit history, your payment history, any outstanding debt you have, and roughly 30 different credit-related factors.
All of these factors are used to determine whether you are a good candidate for credit or not.
A credit bureau creates your credit score that combines the factors mentioned above to create a score. The score, known as the FICO score, can range from 350 to 800.
The higher your number is, the better your credit score is, and the more likely you will be approved for credit and loans.
So your car dealer will see how long you have been borrowing money and paying bills.
Longer credit history will provide more detail and show dealers that you have been proven to take out credit and pay it back (if your credit score is good).
This includes any household bills, mortgages, previous car finance, credit cards, and any other loans you might have had. It will indicate whether you have missed payments in the past or have made them late.
These factors can lower your credit score. Usually, the date of these missed payments can be seen, allowing the dealer to see how long ago it was.
They will also see if you have defaulted on a loan or if you have declared bankruptcy. This information can be taken from public records and will usually contain the filing date and the type of bankruptcy.
A credit report will also show if you have any debt that has been passed along to a collection agency. This happens when you fail to make payments on a loan or credit card, and you will then need to pay the collections agency. Sometimes this can result in court appearances, too, and is something you should try to avoid as it can negatively impact your credit.
Your car dealer will use this to determine if you can repay the money you borrow to pay for the car. The last thing they want is a fight to get their money back.
Car dealers often approve of those with good credit scores or higher. The score they accept can vary from dealer to dealer, so it’s worth asking the question before having the credit check run.
When a company like a car dealership runs your credit, it can negatively impact your score.
Often, this isn’t by much, but it will remain on your credit report for two years that you have had your credit checked. Having multiple checks on there can impact your score as it suggests to lenders you have explored several avenues to get credit before coming to them.
In some cases, this can look as though you have issues securing credit or are trying to borrow a large amount of money that you cannot afford to pay back.
For most people, a car dealer running a credit check should not be an issue. Good credit will be considered and allow you to move forward with the transaction.
Those with poorer credit scores might need to put down a larger deposit to secure the loan or have a co-applicant sign the loan.
Ideally, the co-app should have a higher credit rating than yours to aid your case. Make the most of free credit reports online that don’t impact your score to check your credit before applying for a loan.
A car dealer should only run a credit check when you are purchasing the car or taking out a loan to make the purchase. You don’t want them to run a check unnecessarily, leaving you with an impacted score!
And there you have it; car dealers will see a few different things when running your credit! They will see how long you have had credit for, your payment history, and any outstanding debt you might have.
Be sure to run your credit beforehand to check its score, and remember that any missed payments can impact you in the future. Be sure to contact your lender if you have any issues making a payment!