How to shop for a new car without damaging your credit score

When checking if you’ll qualify for bank finance on a new car, a dealer usually does a “hard inquiry” that impacts your credit score for 12 months, even if you don’t accept the contract, putting you in a worse position for your next inquiry despite your financial status remaining the same.

“A hard credit inquiry leaves a ‘footprint’ on the bureau, irrespective of acceptance of credit or not,” said Lebogang Gaoaketse, WesBank Head of Marketing and Communication.

“This is an indication that the individual is looking for credit or is credit hungry and will be noted as such.”

Being credit hungry could indicate that you may have gotten yourself into hot financial water or could possibly be taking on more credit than you can handle, which would make it difficult to pay back your loan.

A hard inquiry doesn’t impose a set amount of pre-determined number of points on your score, however.

“It all depends on the number of inquiries in a specific industry within a specific timeframe,” said Gaoaketse.

“However, if an inquiry variable is not used within a scorecard, the inquiry will have no impact on the buyer’s credit score.”

Therefore, he said the best way that shoppers can check their potential for qualifying for car finance without damaging their credit score with a hard inquiry is to use tools such as a vehicle finance calculator and apply for finance directly only after being completely sure of which car they want.

What is a good credit score?

A credit score ranges anywhere from 300 to 850 with a higher number being preferred by lenders.

It is calculated using your payment history (35%), credit utilisation (30%), length of credit history (15%), types of credit used (10%), and new credit inquiries (10%).

Elements that hurt your score include:

• Hard inquiries
• Late payments
• Too much debt
• Maxing credit cards
• Opening and closing credit accounts

According to financial services institution RCS, a good credit score is classified as follows: