Getting pre-approved from multiple credit unions
May 4, 2014 9:18 AM Subscribe
I'm currently shopping for a new used car. Will trying to get pre-approved from multiple credit unions have any negative impact on my credit?
I visited a couple of credit unions in person this past week, and the exact point where your credit score puts you into a lower risk category seemed to be different for each. As I now continue my search online, the credit unions will list their lowest possible APR available on auto loans, but not what score you need to get it. I'd like to apply for pre-approval at multiple credit unions to see which will actually give me the best rate, but I don't know if multiple credit inquiries will somehow negatively impact my score. For what it's worth, I'm in Texas and my Experian score is at the low end of excellent.
I visited a couple of credit unions in person this past week, and the exact point where your credit score puts you into a lower risk category seemed to be different for each. As I now continue my search online, the credit unions will list their lowest possible APR available on auto loans, but not what score you need to get it. I'd like to apply for pre-approval at multiple credit unions to see which will actually give me the best rate, but I don't know if multiple credit inquiries will somehow negatively impact my score. For what it's worth, I'm in Texas and my Experian score is at the low end of excellent.
Best answer: How much of a difference are you expecting? A half percent on a $10,000 48 month loan is about $3 a month. If you have excellent credit I can't see the difference being that significant from any credit union.
Something else to consider - many of the manufacturers are offering 0% interest over 4 or 5 years on a new car. You may be able to buy new for not that much more out of pocket over the term of the loan, especially if you are shopping in a high demand class like fuel efficient sedans where the used market is favoring the sellers.
posted by COD at 10:47 AM on May 4, 2014 [1 favorite]
Something else to consider - many of the manufacturers are offering 0% interest over 4 or 5 years on a new car. You may be able to buy new for not that much more out of pocket over the term of the loan, especially if you are shopping in a high demand class like fuel efficient sedans where the used market is favoring the sellers.
posted by COD at 10:47 AM on May 4, 2014 [1 favorite]
Best answer: An actual FICO score should not be more significantly changed by multiple inquiries in a short period for the same sort of credit line than it would be for one. In the past, this was not the case, but not too long before the credit crunch they supposedly adjusted the algorithm to not penalize you for shopping around.
That said, inquiries have never made a huge difference in score and auto loans, like home loans, are less about your exact score and more about your overall financial picture. This is in contrast to credit cards, where a certain score will almost certainly get you an approval unless your debt to income is completely out of whack or you have bad history with a particular lender.
Typically, the first inquiry will drop you by 5 or 10 points at most, the next several will only be worth one or two off, and beyond that nothing unless it gets to be a ridiculous number. Even then you're more likely to have a problem with a credit analyst seeing a huge whack of inquiries and becoming concerned than any meaningful change in the score itself.
In short, don't worry about it unless you're in a really marginal situation. And the advice about considering a new car isn't bad these days. Some types of used cars don't get you the discount they should.
And personally, I would advise against limiting yourself to credit unions. There are plenty of fine local and regional commercial banks that will not screw you, just like there are plenty of credit unions that suck. When we were shopping around for a car loan, the regional commercial bank we have our checking accounts with had the best interest rate of them all for the term and loan size we required.
posted by wierdo at 2:58 PM on May 4, 2014
That said, inquiries have never made a huge difference in score and auto loans, like home loans, are less about your exact score and more about your overall financial picture. This is in contrast to credit cards, where a certain score will almost certainly get you an approval unless your debt to income is completely out of whack or you have bad history with a particular lender.
Typically, the first inquiry will drop you by 5 or 10 points at most, the next several will only be worth one or two off, and beyond that nothing unless it gets to be a ridiculous number. Even then you're more likely to have a problem with a credit analyst seeing a huge whack of inquiries and becoming concerned than any meaningful change in the score itself.
In short, don't worry about it unless you're in a really marginal situation. And the advice about considering a new car isn't bad these days. Some types of used cars don't get you the discount they should.
And personally, I would advise against limiting yourself to credit unions. There are plenty of fine local and regional commercial banks that will not screw you, just like there are plenty of credit unions that suck. When we were shopping around for a car loan, the regional commercial bank we have our checking accounts with had the best interest rate of them all for the term and loan size we required.
posted by wierdo at 2:58 PM on May 4, 2014
Response by poster: All great answers. Thanks folks!
posted by ericthegardener at 3:33 PM on May 4, 2014
posted by ericthegardener at 3:33 PM on May 4, 2014
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The preapproval process should normally be a soft pull, which won't affect your score. But you can always ask when shopping around. Unfortunately the banks do not have to disclose the exact score they pulled up on you until you've actually applied (a "hard" pull) and you've been denied. Then they have to share the report they pulled up.
posted by JoeZydeco at 9:49 AM on May 4, 2014