When you apply for a car loan—whether from your dealer, a bank, or a credit union—they will check your credit. This is known as a hard inquiry, and can temporarily affect your credit score. Since multiple credit checks within 45 days generally won’t affect your credit score more than a single check, you have that time to shop around for the best deal with minimal credit score impact.
Most lenders will accept a credit check that is 30 to 60 days old, and the amount of time depends on the lender. Even if your lender needs to run another credit check that affects your credit score, the benefits of shopping around typically outweigh the temporary effect on your credit.
When you apply for a new line of credit, such as a car loan, the lender will check your credit report and score. This results in a hard inquiry being added to your report. Too many inquiries in a short period can negatively impact your credit and loan approval odds. But what exactly is considered too many when seeking a car loan?
What Is A Credit Inquiry?
A credit inquiry is when a lender accesses your credit report to evaluate you for a new line of credit or loan There are two main types of inquiries
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Soft inquiry – This is when you check your own credit report or a lender does a pre-qualification check. Soft inquiries don’t impact your credit.
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Hard inquiry – This is when a lender does a full credit check as part of a loan application. Hard inquiries can lower your credit score slightly and remain on your report for two years.
When you apply for a car loan, the lender does a hard inquiry to fully evaluate your creditworthiness. This results in an inquiry being added to your credit file. Too many recent inquiries is seen as a potential risk factor by lenders.
How Many Inquiries Is Too Many?
The answer differs from lender to lender, but most consider six total inquiries on a report at one time to be too many to gain approval for an additional credit card or loan.
Here are a few key points on credit inquiries and car loan applications
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Most lenders allow up to 5 or 6 inquiries on your credit report within the last 12 months before they may deny your application or offer less favorable loan terms.
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The impact of each additional inquiry diminishes significantly after the first 2 or 3 in a short period.
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FICO and VantageScore credit scoring models count all auto, mortgage, or student loan inquiries within a 45 day period as just one inquiry. This allows you to shop for the best rates without hurting your score.
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Inquiries remain on your credit report for 24 months, but have little impact after the first 12 months.
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Inquiries alone rarely result in a loan denial for applicants with otherwise good credit profiles. Multiple recent inquiries are just one factor considered.
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Checking your own credit report does not result in a hard inquiry and won’t impact your score. Monitoring your credit is recommended.
Strategies To Minimize Inquiries When Seeking A Car Loan
If you want to limit inquiries when shopping for a car loan, here are some tips:
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Check your credit report and score first so you know where you stand. Monitoring your credit is key.
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Research lenders and current auto loan rates and terms so you can narrow down the best options. Pre-qualification with a lender is a soft inquiry.
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Only formally apply after deciding on a vehicle and negotiating the purchase price. Don’t apply until you are ready to buy.
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Limit applications to no more than 5 lenders within a 45 day period. Apply to the top picks.
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If denied by a lender, ask for an adverse action notice stating why before applying elsewhere.
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Allow 30-45 days between credit applications when possible. Inquiries impact lessens over time.
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Maintain low credit utilization and continue paying all bills on time during the car shopping process.
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Consider adding a co-signer if you have limited credit history. This can help gain approval and better rates.
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Be upfront with lenders if you have many recent inquiries. Provide context on the car shopping process.
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If denied, build your credit over 3-6 months and reapply. Scores can improve during this time.
The bottom line is most lenders allow 5-6 inquiries within a 45 period when seeking a car loan. But it’s ideal to limit applications and spread them out when possible. Monitor your credit, research lenders, and only apply when ready to finalize a purchase. With reasonable limits on inquiries and proactive credit management, you can gain auto loan approval on favorable terms.
How to Minimize the Impact of Hard Inquiries on Your Credit
If you apply for multiple car loans in a short period of time, the effect on your credit score will be temporary. However, you shouldn’t apply for other types of loan that require a hard credit check—such as a credit card—at the same time, or your credit score might take a hit.
The best way to minimize the impact of hard inquiries on your credit is to build up a solid score, and to keep your inquiries to a minimum.
Does Paying Off a Car Loan Early Hurt Your Credit Score?
Paying off your car loan early can hurt your credit score. Anytime you close a credit account, your score will fall by a few points. If you want to protect your credit score for other big purchases, it can be best to wait to pay off your car loan.
How Do Multiple Car Loan Inquiries Impact Your Score? Can They Be Removed?
FAQ
Is 3 hard inquiries in a year bad?
There’s no such thing as “too many” hard credit inquiries, but multiple applications for new credit accounts within a short time frame may point to a risky borrower. Rate shopping for a particular loan, however, may be treated as a single inquiry and have minimal impact on your creditworthiness.Oct 14, 2024
Do multiple hard inquiries count as one auto loan?
Multiple hard inquiries within a certain time period for a home or auto loan are generally counted as one inquiry.
Is 7 hard inquiries bad?
… from lender to lender, but most consider six total inquiries on a report at one time to be too many to gain approval for an additional credit card or loan
How many inquiries are too many in 2 years?
Quick Answer. There’s no specific number of hard inquiries that’s too many or too few. Although some hard inquiries might hurt your credit scores a little, credit scoring models also ignore many hard inquiries when consumers shop for a new loan.