Mar
14
2012

Renewing pre-approved car loan likely will cause hard inquiry

Dear Experian,

I applied and was approved for an auto loan through my credit union, which I have numerous accounts with – mortgage, savings, money markets, and credit cards. Twice I’ve let the preapproved loan expire and asked to have it re-approved. I have not made a decision on a car. Each time I have it re-approved I get a notice that includes my credit score. It’s always really good. Am I harming my credit scores by letting the loan offer expire and resubmitting again? I need to do this for a third time (and this time I plan to use it!), but wondered how this fits into what you’ve told us before about inquiries with “existing creditors.”

- LGD

 

Dear LGD,

When you ask that the loan be re-approved, you are effectively applying for a new loan. Even though you have other accounts with this particular lender, an application for a new loan results in an inquiry that will be shared with other lenders and can affect your credit scores.

Recent credit inquiries can concern creditors because they may indicate you could have added debt they don’t know about yet. That’s why you often are asked to explain recent credit inquiries when you apply for a mortgage. The older the inquiry, the less important it is.

While credit inquiries may have a negative impact on credit scores, inquiries alone will most likely not cause you to be declined credit. Negative information will invariably have a greater impact on scores than credit inquiries.

If your credit scores are very good, as you indicate, you probably don’t need to worry too much about the inquiry. Because you have a long, positive relationship with your lender, the single inquiry may have even less importance to its decision.

Thanks for asking.

- The “Ask Experian” team

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