Buying a car can be an exciting experience, but when a dealership shotguns your credit, that excitement can quickly turn into frustration and confusion. This practice, which involves sending your credit application to multiple lenders at once, may seem like a way to get you the best financing deal, but it can have unexpected consequences on your credit score and credit report. Understanding what it means when a dealership shotguns your credit is crucial for protecting your financial health and making informed decisions in the car buying process.
What Does It Mean When a Dealership Shotguns Your Credit?
The Basic Concept
Shotgunning your credit refers to the process where a car dealership submits your credit application to several banks, credit unions, or financial institutions simultaneously in an attempt to secure loan offers. The goal is to generate competition among lenders to provide you with better financing terms. While the intention may be positive, the impact on your credit report can be significant.
Multiple Hard Inquiries
Each time a lender pulls your credit report for approval, it typically results in a hard inquiry. Unlike soft inquiries which do not affect your credit score hard inquiries can cause your score to drop slightly, especially if several occur within a short time. When your credit is shotgunned, you may see five, ten, or even more hard inquiries appear on your report within a matter of days.
Why Do Dealerships Shotgun Credit Applications?
Financing Incentives
Dealerships often make money not only from selling cars but also from arranging financing. They may receive commissions from lenders for every loan deal closed. By submitting your application to multiple lenders, they increase the chance of securing a financing deal and earning additional income.
Higher Approval Chances
If you have less-than-perfect credit, shotgunning might be a strategy to increase the odds of loan approval. By casting a wide net, dealerships hope at least one lender will say yes even if the terms are not ideal for you.
Rate Shopping
Some dealers argue that submitting to multiple lenders helps the customer by providing competitive interest rates. While this might be true in some cases, it should be done transparently and with your permission.
Impact on Your Credit Score
Short-Term Effects
Hard inquiries typically lower your credit score by a few points each. When your credit is shotgunned, multiple hard inquiries can add up quickly. This may result in a noticeable dip in your score, especially if your credit history is limited or if you’ve had recent credit issues.
Credit Reporting Windows
The credit scoring models used by FICO and VantageScore may group similar hard inquiries made within a short period usually 14 to 45 days into one, especially when related to auto loans. However, not all lenders report to all bureaus in the same way or within the same time frame, meaning you might still see multiple entries.
Long-Term Implications
While hard inquiries fall off your credit report after two years, they only impact your score for the first year. Still, having too many recent inquiries can make you look financially unstable or desperate for credit, which may influence future lenders’ decisions.
What Can You Do If a Dealership Shotgunned Your Credit?
Check Your Credit Report
Start by reviewing your credit reports from all three major bureaus Experian, Equifax, and TransUnion. Look for multiple inquiries made on the same date or within a short window. Note which lenders performed the checks and whether you authorized them.
Dispute Unauthorized Inquiries
If the dealership submitted your application to lenders you didn’t authorize or exceeded what you agreed to, you may be able to dispute the inquiries with the credit bureaus. Explain the situation clearly and provide any documentation that supports your case.
File a Complaint
In cases of abuse or deception, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or your local Attorney General’s office. Some states have laws that require dealerships to get explicit consent before running credit checks.
How to Prevent Credit Shotgunning in the Future
Ask Before Signing
Before giving a dealership your Social Security Number or signing any documents, ask how many lenders they plan to contact. Make it clear that you only authorize your credit to be pulled once or by a limited number of lenders.
Get Pre-Approved
One of the best ways to avoid shotgunning is to secure financing from your own bank or credit union before going to the dealership. A pre-approval letter shows you’re a serious buyer and gives you better negotiating power.
Limit Your Timeframe
If you are rate shopping for a car loan, try to complete all inquiries within a 14-day window. This minimizes the potential impact on your credit score due to the way scoring models group inquiries.
Tips for Handling Credit After It’s Been Shotgunned
- Monitor your credit score using free tools or paid services to track any changes.
- Avoid applying for other types of credit (credit cards, personal loans) in the short term.
- Pay all your bills on time and keep your credit utilization low to help rebuild any damage.
- Contact the lenders listed in the inquiries to ensure no unwanted accounts were opened.
Is Shotgunning Ever Justified?
Pros of Rate Comparison
In a controlled and transparent way, comparing loan offers from multiple lenders can be beneficial. If you understand what’s happening and agree to the process, it could help you get the best auto loan rate available.
When It Crosses the Line
Shotgunning becomes a problem when it’s done without informed consent, in excessive numbers, or without regard to your credit health. Dealerships should always disclose how many credit pulls will occur and why.
If you’ve found yourself saying, The dealership shotgunned my credit, you’re not alone. It’s a common but often misunderstood practice in the car-buying world. The key is to stay informed, ask the right questions, and take control of your credit information. By being proactive, checking your credit reports, and taking preventive steps for the future, you can protect your financial reputation and make smarter car-buying choices. Always remember that you have a right to know how your personal information is used and a responsibility to safeguard it.