How will applying for an auto loan on-line at several places affect my credit rating?
I heard that comparing auto loans before shopping for a car is a prudent thing to do. But I've also heard that every time you apply for a loan your credit rating is negatively affected. What's the truth?
This is a common misconception about FICO scores. While having too many inquiries on your report can lower your score the timing and frequency make a difference. Because it's common for most people to shop their loan to multiple lenders the scores block out a period, usually 30 days, to count as a single inquiry. So if you're shopping for a loan it's best to do it all at once. They'll all show up on your report but the scores will only count them once.
Where you hurt yourself is if your shopping for a new credit card, loan, line of credit etc every couple of months. Usually the number of inquiries are counted over a 12 month period. And it's worse if you were shopping recently vs. 6 months ago. The recency makes a difference as well. Which is why it's best not to do anything 6-12 months prior to a mortgage application.