I came across this question: “Can I sue a car dealer for excessive hard credit inquiries?” When reviewing the search terms on my blog and I thought this is a good topic for further discussion.

First of all, what is a difficult query?

There are two types of credit inquiries, hard and soft.

A hard inquiry is a credit inquiry that is done for the purpose of obtaining credit. These types of inquiries are usually done for things like home, auto, or personal loans. Credit inquiries from Landlord and Tenant Appraisal Services are also considered difficult inquiries.

A soft inquiry is a credit inquiry that is requested for informational purposes. If you apply for your own credit through a site like AnnualCreditReport.com, this is considered a soft inquiry and does not deduct points from your score. Additionally, the creditors you currently do business with can perform a gentle consultation to review the account and assess your current credit worthiness. Offers of “pre-approved credit are not counted as comprehensive inquiries. Insurance and employment credit inquiries also fall into this category, as they are not made for the purpose of granting you credit.”

How many points can be deducted for a credit inquiry?

o Each “hard” credit inquiry (meaning the consumer has applied for some form of credit, causing the creditor to review the credit report or score) that is counted typically does not subtract more than five points from a person’s score .

Auto loan inquiries

Auto and home loan inquiries have been treated a little differently since 2004. Due to the fact that most people like to compare home and auto loans, the credit bureaus recognized the fact that each consultation had a negative impact on credit scores because of the multiple sweaters. This practice was hurting the consumer’s credit score and was not allowing them to search for the best rates and terms.

So Fair Isaac changed the rules for home and auto loan credit inquiries a bit:

o The credit scoring model recognizes that many consumers look for the best interest rates before buying a car or home and that their search may cause multiple lenders to request your credit report. To compensate for this, multiple auto or mortgage inquiries in any 14-day period count as a single inquiry.

o In the most recent formula used to calculate FICO scores, that 14-day period has been extended to any 45-day period. This means that consumers can shop around for a car loan for up to 45 days without affecting their scores. But the old 14-day rule might still apply to some lenders who aren’t using the new version.

o The most recent version of FICO was put online at all three credit bureaus – TransUnion, Equifax, and Experian – in 2004. Lenders typically take months to adjust their processes to accommodate revised formulas, and some lenders never They adjust.

o The FICO score ignores all mortgage and auto inquiries made in the 30 days prior to the score. If you find a loan within 30 days, the inquiries won’t affect your score while you’re shopping for rates.

How to avoid multiple harsh automated queries

If you want to avoid multiple hits on your credit while shopping for a car loan, you’ll need to set aside a two-week period to fully focus on getting your financing.

or Find out what your credit score is:

In order to shop for a loan without multiple credit inquiries, you will need to know what your credit scores are. This will also help you determine if it is “bankable” or if you are going to have difficulty obtaining financing.

You can get an estimate of your FICO Score to get an idea of ​​the current range of your scores, or you can buy a 3-in-1 report with FICO in an easy-to-read report for just $ 39.95 so you can know exactly what your credit scores are. .

or Get pre-approved at a bank:

Now that you know what your credit scores are, call the local banks in your area and ask, “What is the minimum credit score needed to get pre-approved for an auto loan?”

If you know that your credit scores are within their “approval guidelines,” ask what their interest rates are and their terms, such as how much down payment they will require.

Once you have determined the lender with the most favorable terms, go to that bank and apply. Some banks even have an 800 Phone Loan Center or online application process available so you don’t have to go anywhere.

Once you have been pre-approved by the lender of your choice, you typically have 30 days before the pre-approval expires.

If you decide to go this route, not only are you getting the best interest rate without generating multiple credit inquiries, but you will also find out how much is approved, making it easier to buy a car in the long run. to run.

or Get auto financing if it’s not “bankable”

If your credit score falls below what you consider “bankable,” you will need to find financing elsewhere. There are several ways to do it.

1. You can go through an online Vehicle Finance Network. These networks have access to multiple lenders and their guidelines. They will have to check out your credit to find out what your scores are, but then you will have access to many auto loan financing companies that specialize in consumers with “less than perfect credit.” Once they have determined which lender you have the best chance of being approved with, they will submit your application.

2. Go shopping for a car and when you find the car you want, the dealership will be more than happy to send your loan application to various lenders. Remember, if you decide to go this route, you have 14 days of unlimited credit withdrawals to count as 1 withdrawal.

If you continue to do so month after month, you will see that approximately 5 points are deducted from your score each time your credit is withdrawn.

The answer to the original question: “Can you sue a car dealer for excessive inquiries?”

Civil Liability for Conscious Breach: “Anyone who obtains a consumer report from a consumer reporting agency under false pretenses or for no permissible purpose will be liable to the consumer reporting agency for actual damages suffered by the consumer reporting agency. consumer or $ 1,000, whichever is greater. “

This boils down to ….. READ WHAT YOU SIGN! If you applied for financing with a car dealer, you must have completed a loan application. Did the documentation you signed say they would send your application to multiple lenders?

If you did not grant them permission to withdraw your credit, then you may have a case to sue for $ 1,000, but in my opinion, it will be much more complicated than it is worth. The easiest way to handle the situation to your advantage is to dispute inquiries with the credit bureaus that are reporting them.

If the creditors who pulled your credit cannot demonstrate a “permitted purpose,” the credit reporting agencies will eliminate these inquiries. If creditors come back stating that they had a permitted purpose, you have every right to ask for documentation to prove it. Again, if they cannot provide that documentation, the credit reporting agencies will have to eliminate the query.

Once the query or multiple queries are removed, you should see an increase in your credit scores. It is a bit of work on your part, but it is much easier than trying to sue for $ 1000.00.