Auto purchasing has an interesting twist that needs to be discussed because of the nature of the business is sometimes questionable. You have heard of the “car salesman” that refers to dishonesty. Well, I have met some very honest and very honorable car salesmen and also some very dishonest salesmen. So, buyers beware. Let’s talk about how it relates to your equifax credit scores.

When going and buying a vehicle there are several mistakes buyers start out doing. They first go to one showroom and then another with salespeople hot on their tail to get them to qualify for a loan. So, they sit down with a salesman and the first thing he asks for is their social security number. The reason is he wants to find out what the buyer can qualify for. You can already see the problem. The salesman is going to pull their credit and see what their credit score is. This is just fine if this is the only place you look and the only place you purchase from, but most people go shopping and then you have a problem of multiple inquiries. This gets complicated right here because depending upon what scoring module the auto dealer uses to pull the credit, determines whether each credit pull is counted. Multiple inquiries can be very damaging to your credit score. The solution is to go to www.MyFico.com and pull your own credit, print it out and then go shopping. Ask the dealer to see what you can get with your score and find out pricing, rates, etc. before making a decision.

Another unique challenge with auto dealers is the fact that most do financing in house and actually make more money by financing you than by letting you get your own financing. Be forewarned… the auto dealer that offers credit-building financing is probably not helping you at all and is probably helping to further damage your credit. They will use a finance company that is a permanent damage on your credit reports whether you pay on time or keep your balances low just as long as you have the finance company on your credit reports. The reason is that finance companies are bad credit anytime you have them on your credit reports. The credit bureaus see them as companies that only deal with high-risk borrowers, have high interest rates and low qualification standards. Stay away from finance companies. (See secret # 62)

The solution is to go to your bank, credit union, etc, get your financing in place before you go shopping, negotiate a deal with the auto dealer then let them know that you already have your own financing. You will get a better deal and a lot more car for your money if you wait till the contract is signed before letting them know that you have your own financing.