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New Contributor
Posts: 95
Registered: ‎01-03-2011
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A "note" about dealerships running your credit.

[ Edited ]

I posted this in another thread, but thought it may be helpful to everyone. 

 

When buying a car, you will usually have your credit pulled at least twice. This practice is used by the dealer as a negotiating tool. 

 

1) DEALERSHIP runs your credit, usually pulls all 3, with scores. 

2) LENDER will then pull your credit AGAIN. Each lender the dealer submits to will probably also pull your report(s). 

 

There ARE rules in place to only show one inquiry on your report - but in my experience, since DEALERSHIPS are not auto lenders (as a general rule) .... you'll see one from the dealer and one from the lender. This has been my experience 3 times. 

 

The dealer wants to know your credit profile to use to try to "prove" to you why you need to pay a higher rate. 

 

If you KNOW your credit is a-tier, demand that the dealer not run your credit, and have them submit direct to the factory bank. 

 

The thing to remember is: dealer's don't have any say in if you will get credit, and at what terms - that is between you and the bank. All the dealer is doing it facilitating the transaction. With that being said, dealers can sometimes "make a call" to the bank to obtain better terms, if they have a good relationship w/ their lenders. But again, this is a the discretion of the bank itself. 

 

The above really only makes sense if you have good/great credit and will have no issue being approved by the factory bank. If you've got some issues, smart dealers will need to see your profile to know how to structure the deal and which banks to sent it to. If you have fantastic credit, the you don't really need the dealer's help to get approved, so my point is valid. All the dealer needs to do is submit your info to their lender and wait for the approval. 

 

Happy Buying. 

 

edited for spelling. 

Valued Contributor
Posts: 2,712
Registered: ‎08-13-2009
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Re: A "note" about dealerships running your credit.

Thanks Hunter!

Established Contributor
Posts: 849
Registered: ‎12-11-2010
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Re: A "note" about dealerships running your credit.

Hunter, Thanks for this post. I wish you had posted two weeks back :smileytongue:, I was confused with the fact that even though BMW approved me, why it is showing two pulls one with dealerships name and another with BMWFS.


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Valued Contributor
Posts: 1,668
Registered: ‎02-18-2009
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Re: A "note" about dealerships running your credit.

[ Edited ]

hunter399 wrote:

I posted this in another thread, but thought it may be helpful to everyone. 

 

When buying a car, you will usually have your credit pulled at least twice. This practice is used by the dealer as a negotiating tool. 

 

1) DEALERSHIP runs your credit, usually pulls all 3, with scores. 

2) LENDER will then pull your credit AGAIN. Each lender the dealer submits to will probably also pull your report(s). 

 

There ARE rules in place to only show one inquiry on your report - but in my experience, since DEALERSHIPS are not auto lenders (as a general rule) .... you'll see one from the dealer and one from the lender. This has been my experience 3 times. 

 

The dealer wants to know your credit profile to use to try to "prove" to you why you need to pay a higher rate. 

 

If you KNOW your credit is a-tier, demand that the dealer not run your credit, and have them submit direct to the factory bank. 

 

The thing to remember is: dealer's don't have any say in if you will get credit, and at what terms - that is between you and the bank. All the dealer is doing it facilitating the transaction. With that being said, dealers can sometimes "make a call" to the bank to obtain better terms, if they have a good relationship w/ their lenders. But again, this is a the discretion of the bank itself. 

 

The above really only makes sense if you have good/great credit and will have no issue being approved by the factory bank. If you've got some issues, smart dealers will need to see your profile to know how to structure the deal and which banks to sent it to. If you have fantastic credit, the you don't really need the dealer's help to get approved, so my point is valid. All the dealer needs to do is submit your info to their lender and wait for the approval. 

 

Happy Buying. 

 

edited for spelling. 


 

You are completely incorrect and I daresay spreading false information.

Under the Patriot Act and other Federal Laws, a Dealership is considered a banking institution and MUST establish identity for all of their customers they do business with.

 

1- A dealership may Need your SSN for titling and registration.

2- A dealership will need it for cash transactions greater then $9,999.99.

 

Under the USA Patriot Act, Auto Dealerships were specifically defined as Financial institutions, and were then forced to maintain a rigorous customer identification program.

A credit application is the easiest way for a dealership to utilize a Customer Identification Program- as mandated by law.

http://www.privacyrights.org/fs/fs31-CIP.htm

 

 

A HUGE MISCONCEPTION IS:

The establishment of "customer identity" procedures is to establish that the customer is who he says he is. You are correct that a credit report rarely has information that makes that easier. That is not the point of the laws.

 

The reality is that the customer identification protocols are to make sure that the person is not on a "Banned" or watch list. That the institution is actually doing business with someone that they are legally allowed to.

 

Customer Identification Programs were introduced via the USA Patriot Act. The NIADA tried to get an exemption for car dealerships but it did not go through.

http://www.fincen.gov/statutes_regs/frn/comment_le​tters/old_comment_files/stockampamlvs.pdf

The NADA also chimed in

http://www.fincen.gov/statutes_regs/frn/comment_le​tters/old_comment_files/metreyamlvs.pdf

 

A nice summary of requirements is here:

http://www.m-s-lawyers.com/CM/Publications/Patriot​ActImpacts.asp


A NIADA summary of how/why and what dealerships must do to remain compliant with federal law is here:

http://www.niada.com/PDFs/Publications/USAPatriotA​ct.pdf

 

Information about Customer Identification Programs (CIPs) is available here:

http://www.privacyrights.org/fs/fs31-CIP.htm#2

Please understand that it is MANDATED that EVERY CUSTOMER the dealership sells a car to be checked against OFAC, and that a dealership maintains records of not just the person and the transaction bit also that the records were checked. Not checking on one Customer is a minimum $50,000 fine.
 
Important to note:
 
If you are bringing your "own" financing it is probable that the dealership does not truly need to establish identity since the institution you are using has already done this. By the same thought, since the fine is $50,000 for not obeying federal law I am quite sure the Dealership is doing it to ensure complete compliance with the law and also to simply to cover their a$$ets. Either way it is the cost of doing business for both you as a consumer and the dealership in this day and age. Talk to your congressman or senator if unhappy.
 
A credit report costs money, if you were leaving with the car anyway why would the dealership spend unnecessary money on the deal?
 
A credit report shows all inquiries. FICO SCORING only counts them as one.
Signature line begins:
Credit is not a right, but a business transaction, one that takes into account risk, and charges accordingly based on that risk.
Your credit score is an aspect of your credit profile. Important? yes but just an aspect. Contributing/supplemental information determines the finer point of the deal. Ask any question, respect me not to get mad if the answer is not the affirmation you are looking for,
Established Contributor
Posts: 849
Registered: ‎12-11-2010
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Re: A "note" about dealerships running your credit.

Hi usmc, Thanks for all the detailed info. But in my case why  am I seeing two pulls? One with dealerships name and next day from BMWFS?


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Valued Contributor
Posts: 1,668
Registered: ‎02-18-2009
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Re: A "note" about dealerships running your credit.

[ Edited ]

One pull is the dealership, the other is with the financing company.

 

Thats how it works, they are independent to each other.

 

Now look at it this way:

 

You want the car, you went through the sales process, Dealership runs you credit to prove you are Viable as a customer and to cover their butts in regards to OFAC/Patriot Act.  Also, in the event you bring yo urown credit to see if they have someplace that could get you a better rate.

Finance calls the Finance company, the in turn run your credit for a few reasons, like to see if your score is what the dealership claims, to get a proper picture of you, and so they have it in their files that you passed OFAC and Patriot ACT.


YES you got two hits, yes you may have had a few point drop in score. That is the cost of using credit.

Signature line begins:
Credit is not a right, but a business transaction, one that takes into account risk, and charges accordingly based on that risk.
Your credit score is an aspect of your credit profile. Important? yes but just an aspect. Contributing/supplemental information determines the finer point of the deal. Ask any question, respect me not to get mad if the answer is not the affirmation you are looking for,
New Contributor
Posts: 95
Registered: ‎01-03-2011
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Re: A "note" about dealerships running your credit.

I don't really like the implication that i am purpously spreading misinformation. I didn't know all of the information you posted (thanks for that), but the general idea of my post is still true. 

 

The goal of my post was to help customers determine how to talk to dealer's about running credit. If you can get them to NOT run your reports, why not have that in your queue of negotiating tactics? I never once said to NOT give dealers your SSN.

Valued Contributor
Posts: 1,668
Registered: ‎02-18-2009
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Re: A "note" about dealerships running your credit.

My post was a cut and paste that I end up putting up every 3-4 months.

 

And some people do feel if they are paying cash they should not need to give a SSN.

 

Most dealerships get your SSN from the credit application you supply.

Signature line begins:
Credit is not a right, but a business transaction, one that takes into account risk, and charges accordingly based on that risk.
Your credit score is an aspect of your credit profile. Important? yes but just an aspect. Contributing/supplemental information determines the finer point of the deal. Ask any question, respect me not to get mad if the answer is not the affirmation you are looking for,
Valued Contributor
Posts: 1,668
Registered: ‎02-18-2009
0

Re: A "note" about dealerships running your credit.

[ Edited ]

hunter399 wrote:

 

The goal of my post was to help customers determine how to talk to dealer's about running credit. If you can get them to NOT run your reports, why not have that in your queue of negotiating tactics? I never once said to NOT give dealers your SSN.


How does that benefit someone? I mean not running a report?

 

A dealership is among other things a "filter" for between the public and the finance companies. By running the report they screen the customers and can best figure out where, if anywhere best to get the person financed.


is there a profit margin for the dealership? Yes. but they are a business not a charity.

 

 Do you know how many people go into a dealership saying they have great credit and are 500s?

 

A dealership runs your credit to:

1- See if you are viable

2- See where to take your loan or how to structure your deal.

3-To comply with Federal Laws in regards to Patriot Act compliance.

 

The profit spread a dealership can get (at least in my state) is capped by law- there is no they got you bought at 1.% and are selling you the loan for 13.4%


So again I do not understand how being steadfast in not running a report is a negotiating ploy.


The easiest way around that is to bring your own financeing and see if the dealership can beat it.

 

And believe it or not a Dealership can have a lot of say in you getting financed or not. I have personally watched the Dealer Principal call a bank and get them to finance a deal, or lower a rate. dealership's finance managers know the names of their counters at the banks and call them on tricky deals all the time.

Signature line begins:
Credit is not a right, but a business transaction, one that takes into account risk, and charges accordingly based on that risk.
Your credit score is an aspect of your credit profile. Important? yes but just an aspect. Contributing/supplemental information determines the finer point of the deal. Ask any question, respect me not to get mad if the answer is not the affirmation you are looking for,
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Senior Contributor
Posts: 4,336
Registered: ‎09-06-2008
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Re: A "note" about dealerships running your credit.

 


usmc58555 wrote:

 

 Do you know how many people go into a dealership saying they have great credit and are 500s?


true, but we are not all liars :smileyhappy:

 

 

in my case, we ended up with 6 inquiries total, over all CRAs.

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