How To Reduce Hard Credit Inquiries When Applying for Auto Loans

A specific time frame for loan shopping could cut down on the number of hard inquiries affecting your credit score.

Elliot Rieth | 

Jan 8, 2024 | 3 min read

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Car shoppers looking for the best deal on their auto loan might face a dilemma. Filling out several loan applications can lead to multiple hard credit inquiries, which can affect personal credit scores, potentially impacting a car shopper's future financial opportunities.

The possibility of hurting your credit score with multiple loan applications might initially deter you from shopping around. By properly using loan shopping windows, however, you can get the information you need while minimizing the number of hard inquiries added to your credit report. While these credit inquiries still have a temporary effect on your credit score, shopping for a loan within a certain window of time can help reduce their impact and your stress.

Understanding Hard Credit Inquiries

When you apply to open a new line of credit, this triggers what is known as a hard inquiry. A hard inquiry is the technical term for when a lender requests to look at your credit report to evaluate your risk as a borrower. These inquiries will temporarily impact your credit score, even if only by a few points.

According to the credit-score company Fair Isaac Corporation (FICO), a single inquiry can lower your score by less than five points, but the impact will ultimately vary depending on your credit history. Ultimately, if you are applying for several loans at the same time, the resulting multiple inquiries could have a significant effect on your credit score.

How Long Do Hard Inquiries Affect Your Credit Score?

Hard inquiries typically impact your credit score for about a year, but can stay on your credit report for two years to show your history of applications. These inquiries provide a record of your credit shopping so lenders can better understand your creditworthiness. For lenders, borrowers with multiple credit inquiries in a short period of time could indicate a higher risk.

How Many Hard Credit Inquiries Are Too Many?

Although there is no set limit for the number of credit inquiries you can have on your credit report, it might be in your best interest to limit them. FICO claims that borrowers with six or more credit inquiries on their credit report are eight times more likely to declare bankruptcy than those with none.

Multiple Car Loan Applications Could Hurt Your Credit

Hard credit inquiries are just one of many criteria used to determine your creditworthiness and only play a small part in your overall score. According to credit-score company VantageScore, recent credit inquiries only make up 5% of your VantageScore 3.0 number.

Other factors, such as on-time payments and well-managed debt, can be more significant factors in determining your loan acceptance.

How Loan Shopping Windows Can Reduce Your Credit Inquiries

If you're worried about how shopping for an auto loan rate could impact your credit score, try taking advantage of loan shopping windows. Loan shopping windows are grace periods set by credit companies such as FICO and VantageScore that allow you to compare auto loan rates within a set time frame without the fear of multiple credit inquiries affecting your score.

During this loan shopping window, borrowers can apply for multiple auto loans and only receive a single hard inquiry on their credit report. Keep in mind that this window only applies for loans and is not the same for credit card applications.

Loan shopping windows vary in length depending on the company. The FICO shopping window is 45 days, while VantageScore limits potential borrowers to a 14-day window. Since you probably won't know which risk analysis company's score (e.g., Experian, Equifax, TransUnion) your lender uses to determine your loan, it might be safest to keep your applications within 14 days of each other.

Elliot Rieth

Elliot Rieth is a writer who was born and raised in Michigan, the center of the American automotive industry. With a background in the industry that spans from sales to digital marketing, Elliot has years of experience working directly with dealers and OEMs to create digital content and educate potential customers. When Elliot isn’t writing about horsepower or EVs, he can be found with his two greyhounds enjoying a new book or record.