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Can You Sue a Car Dealer For Excessive Hard Credit Inquiries?
I had a question, “Can I sue a car dealer for an excessive hard credit inquiry?” when I was going through the search terms on my blog and thought it would be a good topic for further discussion.
First, what is a hard query?
There are two types of credit inquiries, hard and soft.
A hard inquiry is a credit inquiry made to obtain credit. These types of inquiries are usually made for things like a home, car or personal loan. Credit inquiries from Landlord and Tenant Screening Services are also considered hard inquiries.
A soft inquiry is a credit inquiry requested for informational purposes. Applying for your credit through a site like AnnualCreditReport.com is considered a soft inquiry and will not deduct points from your score. In addition, creditors with whom you currently do business can make a soft inquiry to perform an account review and assess your current creditworthiness. “Pre-approved credit offers are not considered hard inquiries. Insurance and employment inquiries also fall into this category as they are not made with the intention of giving you credit.
How many points can be deducted for a credit request?
o Each “hard” credit inquiry (meaning the consumer has applied for some form of credit that forces the creditor to check the credit report or score) that is counted typically subtracts no more than five points from a person’s score.
Car loan inquiries
Car loan and home loan inquiries are handled slightly differently since 2004. Since most people like to shop for both home and auto loans, the credit bureaus recognized the fact that each inquiry had a negative effect on credit scores due to multiple pulls. This practice harmed the consumer’s credit score and prevented the consumer from searching for the best prices and terms.
So, Fair Isaac slightly changed the rules for auto and home loan credit inquiries:
o The credit scoring model recognizes that many consumers are looking for the best interest rates before buying a car or home, and that their search may result in multiple lenders requesting their credit report. To compensate for this, multiple car or mortgage inquiries in any 14-day period count as one enquiry.
o In the latest formula used to calculate the FICO score, this 14-day period has been expanded to any 45-day period. This means consumers can shop for a car loan for up to 45 days without affecting their score. However, the old 14-day rule may still apply to some lenders who do not use the new version.
o The latest version of FICO went online in 2004 at all three credit bureaus – TransUnion, Equifax and Experian. It typically takes lenders months to adjust their processes to accommodate the revised formulas — and some lenders never adjust.
o The FICO score ignores all mortgage and auto inquiries made within 30 days prior to the score. If you find a loan within 30 days, inquiries won’t affect your score while shopping for interest.
How to avoid multiple Hard Auto requests
If you want to avoid multiple times on your credit when shopping for a car loan, you need to set aside a two-week period to fully focus on getting your financing.
o Find out what your credit score is:
In order to shop for a loan without multiple credit inquiries, you need to know what your credit scores are. It will also help you determine if you are “bankable” or if you are struggling to get financing.
You can get an estimate of your FICO score to give you an idea of your current score range, or you can buy the 3-in-1 report with FICO in one easy-to-read report for just $39.95 so you know exactly. what are your credit scores.
o Get pre-approval from the 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 you need to be pre-approved for a car loan?”
If you know your credit scores fall under their “approval guidelines,” ask about their interest rates and terms, such as how much of a down payment they require.
Once you have identified the lender with the most favorable terms, go to that bank and submit an application. Some banks even have an 800 phone loan center or an online application process so you don’t have to go anywhere.
If you are pre-approved by your chosen lender, you usually have 30 days before your pre-approval expires.
If you decide to go this route, not only will you get the best interest rate without multiple credit inquiries, but you’ll also know how much you’ll be approved for, which will make buying a car easier in the long run. to run.
o Getting auto financing if you’re unbankable
If your credit score drops below what you consider “bankable,” you’ll need to find financing elsewhere. There are several ways you can do this.
1. You can go through the vehicle financing network. These networks have access to multiple lenders and their guidelines. They have to pull your credit to find out your scores themselves, but then they 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 getting approved, they will forward your application.
2. Go car shopping and when you find the car you want, the dealership will be more than happy to submit your loan application to multiple lenders. Keep in mind that if you choose to go this route, you have 14 days of unlimited credit draws that count as one draw.
If you continue to do this every month, about 5 points will be deducted from your score each time your credit is taken.
The answer to the original question – “Can you sue a car dealer for asking too hard?”
Civil liability for knowing noncompliance: “Any person who receives a consumer report from a consumer reporting agency under false pretenses or knowingly without an impermissible purpose shall be liable to the consumer reporting agency for actual damages caused to the consumer reporting agency or $1,000, whichever is greater.”
It comes down to… READ WHAT YOU’RE SIGNING! If you applied for financing from a car dealership, you must have completed a loan application. Did the papers you signed say they would submit your application to multiple lenders?
If you didn’t give them permission to pull your credit, you could end up with a $1000 lawsuit, but in my opinion it’s more trouble than it’s worth. The easiest way to resolve the situation in your favor is to dispute the inquiries with the credit bureaus that report them.
If the creditors who obtained your credit cannot prove “permitted purpose”, the credit bureaus will remove these inquiries. If the creditors come back and confirm that they had an authorized purpose, you have every right to demand documentation from them to prove this. Again, if they are unable to provide this documentation, the credit reporting agencies must remove the request.
Once the inquiry or inquiries are removed, you should see an increase in your credit score. It’s a little work for you, but a lot easier than getting sued for $1,000.00.
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