ANDY'S CONSUMER TIP OF THE DAY: Be cautious of 'hard inquiries' on your credit report

ANDY'S CONSUMER TIP OF THE DAY: Be cautious of 'hard inquiries' on your credit report

MEMPHIS, TN (WMC) - You're about to watch a story you'll never get to see on TV.

Take 11 minutes to watch my Facebook Live post about how and why I had to kill a great consumer credit protection story because of the ignorant and reckless behavior of the consumer I was championing.

What the consumer did to sabotage the story was inexcusable. But what happened to him is why you should be careful about giving written or verbal permission to an auto dealer to run what's called a hard inquiry on your credit report. A hard inquiry is simply a check by a lender to see if you are credit-worthy to qualify for the loan or line of credit the lender is considering offering to you.

It's perfectly legal for a lender--or in this case, an auto dealer who offers financing--to run a hard inquiry as long as the consumer provides written permission to do so. But it's highly possible that the phantom car loan that appeared on this consumer's credit showed up because he gave consent for a hard inquiry to an auto dealer who was neither selling him a vehicle nor financing one for him.

You should only give written permission to an auto dealer to run a hard inquiry on your credit if:

  1. You have chosen a car on the lot, negotiated a deal, and you're ready to sign.
  2. You're sure you want to finance through that auto dealer.

If you're shopping loans with your bank or credit union -- or you're shopping multiple dealers looking for the best deal -- do not provide written consent for a hard credit inquiry to a single auto dealer. The consumer blog team at credit bureau Experian has written that generally speaking, a hard inquiry won't necessarily hurt your credit score, but if you're doing it just to see how you may qualify then walk away from the deal, you've left an empty inquiry that could damage your credit score.

"When considering a large purchase, such as a new car, consumers should get a copy of their credit report well in advance to make sure that everything in it is accurate," the Experian team wrote. "Doing so will also give an idea of areas that might need work to improve the credit standing before applying for the car loan."

Oh, and don't fake a lawyer's demand letter to try to extort thousands of dollars from an auto dealer who's dinged your credit.

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