How Running Your Credit at a Car Dealership Works

When shopping for a new or used car at a dealership, you might have to apply for an auto loan. Although we typically recommend doing the legwork yourself and shopping for an auto loan through your personal bank or credit union, applying for one at a dealership has its benefits.

The main benefit is that you don’t have to go anywhere, and the dealer can help you apply to multiple places at once. Here is some important information you need to know about running your credit at a car dealership.

Credit check: A hard pull versus a soft pull

A row of Hyundai EVs parked inside a dealership, a table of customers speak with a salesperson in the background.
Hyundai dealership | Anindito Mukherjee/Bloomberg via Getty Images

After filling out a credit application at a car dealership, you might wonder if they will do a “hard pull” or a “soft pull.” A soft pull is when a lending company or agency checks your credit score to tell you the range of interest rates and loan terms that you could qualify for. For example, if you have ever received a pre-approval letter in the mail from Capital One or a bank, they have soft-pulled your credit to let you know what you could qualify for.

Keep in mind that this range of interest rates and loan terms is what you might qualify for, and the real rate will only be settled once you apply for the loan. In this case, a soft pull will not show up on your credit report.

A hard pull, also known as a “hard inquiry,” is when a lender checks your credit with the intention of giving you an actual loan. This type of pull will show you the interest rate that you qualify for in addition to available loan terms. Additionally, a hard pull will appear on your credit report and remain there for up to two years.

When a dealer “shotguns” your credit

A person stands outside a Tesla showroom, looking at an electric SUV parked inside.
Tesla Showroom | Soeren Stache/picture alliance via Getty Images

Now that you know what a hard and soft pull is, you need to know what happens after you sign your John Hancock on the credit application. Most dealerships will then fill your information into their system and then “shotgun” – or spread —  it out to multiple lenders in order to shop it around.

In that case, you may see multiple hard inquiries when you check your report on Credit Karma or another app. Don’t worry. According to Jerry Insurance, “the good news is that this should only count against your credit as a single inquiry if all the inquiries were within a 14-day period.”

That means that you need to select a lender within 14 days to avoid any extra hits on your credit report.

Do I need to have my credit checked before a test drive?

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Which Credit Score Do Lenders Use for Car Loans?

No, it’s up to you whether or not you want your credit checked by the dealer. However, it’s worth noting that some dealers will ask to run your credit before doing a test drive so they can estimate your car buying ability and reliability as a potential customer, JD Power reports.

Having a good credit score and history can tell a dealer that you’re serious about buying a car. Also, most dealers will do this if you show interest in a high-end car like a Porsche, for example. After all, no one like a tire kicker, especially if they’re trying to sell a $100,000 car.

Remember that it’s up to you whether or not you want a dealer to run your credit. But at the end of the day, it could be a convenient way to get the deal done.