Should I Run My Credit Before Going to the Dealership?

Should you run your credit before going to the dealership?  How important is it know your FICO score before going to buy a car?  These are questions that should be considered before getting too deep into the process.  If you're just getting started, don't worry about credit just yet.  However, if you're ready to go, meaning you've shopped, gone on like, looked at a few and narrowed it down to one or two and are leaning towards one, then yes, run it.  Let's take a look at a few scenarios here.

1.  My Credit is Perfect! 

Is it?  What's your score?  How many paid auto loans do you have?  What's your dept to income ratio?  How long have you been on the bureau?  All of these things factor in to determine your credit worthiness.  Are you a home owner?  Is there a chance you might have had some identity theft and not know it?  Did you know you'll have a different score at the Realtor office than at the car dealership?  There's a more than one FICO formula and it's all based on risk. 

2.  My credit is so-so. 

History is important.  Just because you had a snag or two doesn't mean you can't buy a car.  Now if you've had a lot of snags, that's could pose a problem.  You're interest rate might be a little higher but not horrible.  Be prepared and know what is on your credit.  More importantly know why.  Any dealership worth their salt will want your business and will be willing to work with you to get you a good rate.  They will need to tell your story to the bank and explain what went wrong and show how those days are over.  So make sure to know what's there and why.  Very important.

3.  My credit sucks! 

In other words, you've had a lot of snags.  At one point of another you may have to say this to your sales person.  The good news is, they've heard it before, it's pretty common and not much will shock them.  Plus, there's a pretty good chance their credit sucks too!  We're all human.  This also doesn't mean you can't buy.  As with the middle of the road, few snag guy, it's important to know what's on your credit and have a story.  It's also important to be able to prove your income, residence and have some down payment if possible.  You'll probably have a high rate, but it's not forever.  Getting back on track sometimes mean biting the bullet a bit.  Sorry.

4.  So, Should I run my credit before going to the dealership? 

If you haven't seen your history or your score in a year or more, then yes.  You need to run your credit before going in.  You need to keep your inquiries to a minimum as too many can possibly lower your score.  When you run it, no inquires are shown but when it gets run at multiple dealerships, that could hurt you.  As I mentioned earlier, your score will vary depending on what reporting agency is being used and what kind of loan your applying for.  If you're going in for a car loan or lease you want to check your credit to make sure there will be no surprises.  No accidental late payments over 30 days.  Missed a Visa payment once?  Paid it last minute on the 25th day but it took 6 days to process and now you have a 30 day late.  That's a problem that you want to straighten out or at least be aware of it before going in to negotiate a car deal.  You'll also what to make sure everything paid actually shows paid.  For example, let's say you bought a flat screen T.V. 3 years ago and paid it off in 5 months but the lender "forgot" to show it paid in full.  You've got an open account that you're not using?  Close that sucker!

5.  My FICO score is over 700.

Odds are pretty good if you're score is over 700 that you're a responsible upstanding citizen.  However, keep in mind, especially in this current economy, your score is one piece of the pie.  I've seen people with 730 scores get turned down because their history and debt to income ratio made them a perfect candidate for someone who's about to go bankrupt.  Where as a guy with a 655 score gets in with flying colors because he has two paid auto loans with 1 late on a credit card 2 years ago and some medical payments from 5 years ago in collections.  He still made good on his car loan, so a lender will take that into consideration.  Who's more likely to not pay me?  That's what the bank will ask when they look at your credit report.


TIP/SIDEBAR:  When you're at the dealership, BE COOL to the salesperson and the manager you wind up talking to.  Remember, they're people too.  Now if they're rude to you or condescending or unethical, you're free to walk and I would encourage you to do so, but keep in mind and take it from me, there are more good apples in the car salesman barrel then bad ones.  It's just that the bad ones tend to get the most press and even though you may have had a bad experience once or five times doesn't mean that this one will be the same.  Give them the benefit of the doubt and leave your past negative experience in the trunk of your trade...

6.  My Credit Union/Bank is offering X% APR. 

Perfect!  This is what I like to call, your "worst case scenario."  Talk to your bank/credit union.  Make sure you understand their terms and make sure you qualify for their financing.  Give the dealer the opportunity to match it or beat it.  If they can't (sometimes the can't...  really)  Why?  Because if you've got history with this Credit Union or Bank and they've offered you an aggressive rate and the car you want is a hot item right now with no incentives being offered from the manufacturer, then yes, there's a very good chance the dealer won't be able to compete.  But see what they have to offer anyway.  Try to save this discussion for the Finance Manager.  Perhaps he will be able to get you a good rate as part of a package with additional discounts in the extended warranty arena or something.  If he/she's creative, they'll find a way to help you.

Conclusion:  Hopefully this open forum type discussion of a blog will shed some light on the credit aspect part of car buying.  Have a question, comment or concern?  Leave a comment below or join us on the Forum:  http://myforum.davescarsite.com/user/categories.aspx  Thanks for following along and make sure to share this with any and all interested!