What Is Credit Seeking And How Can It Affect Your Credit Score.

If you have been recently turned down for a car loan

, the most important thing you can do is to be patient and not to engage a behavior called "credit seeking". Credit seeking or some times referred to as "credit hunting" means an individual is submitting his or her credit application to number of loan providers within a short period of time. Lets imagine you walked into a Honda dealership full of hopes and expectations for a brand new car, after a test drive you have signed the deal with the sales person. It maybe few days before you heard back from the sales person only to tell you "they are working on your file at the moment, it maybe few more days"! This may come to you as a shock since you didn't think you had bad credit to begin with, but if your credit score is border line on been a bad credit applicant. This can be a rude awakening to your financial situation. The best thing you can do for yourself is to stay calm, and cancel your current contract with the dealer and eliminate as much small debts as possible.

But more often than you can imagine, people actually start to look around for a better deal. And in doing so they try to submit multiple credit applications to multiple dealers only to find out none will approve them for a car loan. The explanation is quite simple; every time you do a credit report on yourself you are in danger of lowering your credit score. There are two types of inquires you can run into, the first type is called a "soft inquiry" that's where the customer will request his or her own credit report for personal use. This type of credit inquiry usually will not affect a person's credit rating at all. The other type is called a "hard inquiry" where it is been requested by a dealership or a car loan provider. This will indeed lower your credit score every time a credit report is produced, the average drop in score will range from 3-5 points. This may not seem like a lot but when you applied to 6 dealers in your recent shopping spree you will be looking at a 30 point drop which put you into another credit category entirely.

Keep in mind there is nothing positive about credit seeking, imagine you are the car dealer number five and after you pulled the credit report from the customer. The report will show he or she has been busy shopping around for a vehicle that will not install any confidence in you regarding that customer. And not to mention it is illegal to sign multiple bills of sales from dealerships. So the next time you are been declined for credit, just wait out the grace period and apply only after your credit score improves.

by: Rick Li

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