Auto Loan Rate Shopping Impact on Credit Score

[MakeItThru]

I have been approved to incur debt for a car. I would like to apply to a few lenders to compare rates. I have read that when applying for auto loans, there is no significant impact to credit score because there is expectation that people will shop rates. Is this true?

I would not want to progressively degrade my credit score with each application. However, based on posts I see people getting rates from 11% to 20%+.

The dealer I worked with quoted me 15.99% from Friendly for 48 mos. with $1000 down. I am having reservations about the dealer now.

[HHM]

Yes, that is true. This MYTH that having multiple pulls on your credit report has been repeatedly denied by the FICO people.

[StartingOver08]

Here is a pretty good analysis of the impact of your inquiries for the FICO model and the Vantage Score model from a Bankrate article:

How inquiries are scored
Inquiries don't count as much as payment history, revolving utilization and other factors that contribute to the calculation of a credit score.
"A single inquiry typically impacts the score by one to five points," says Sarah Davies, senior vice president of analytics and product management for Stamford, Conn.-based VantageScore Solutions LLC. All three major credit reporting agencies -- Equifax, Experian and TransUnion -- developed the VantageScore credit scoring model, which rolled out in 2006. Eight of the top 10 credit card issuers use it.

The actual impact of an inquiry can vary according to your credit history. If you have few accounts or a short credit history, inquiries can cost more points. The amount of points deducted may not be the same for each additional inquiry, as they might be scored in ranges. Past a certain threshold, the consumer could max out on the damage from numerous credit checks.

Hard inquiries stay on credit reports for two years, but the length of time they impact the score depends on the scoring model used. VantageScore takes them into account "generally as long as they remain on the consumer's credit file," according to Davies. FICO scores, the industry standard, count them for the first year once they appear on the credit report.

With both VantageScore and FICO scores, the impact of the inquiry remains constant during the period that it factors into the score.

Multiple inquiries generated when rate-shopping for a mortgage, auto or student loan are consolidated by credit scoring models when done within a certain window of time. The FICO scoring model ignores mortgage, auto and student loan inquiries in the 30 days prior to scoring. Mortgage, auto and student loan inquiries older than 30 days are lumped as one inquiry whenever they fall within a 14-day span. Newer versions of the scoring model count the shopping period as any 45-day span. VantageScore lumps such inquiries that occur within a rolling 14-day window as one inquiry.

http://www.bankrate.com/finance/credit-cards/how-credit-inquiries-affect-credit-score.aspx