How to avoid car dealers running credit reports.

How to avoid car dealers running credit reports.

First of all what is a credit report? And why would you care if a car dealer runs it? Credit reports are a report on your credit history, the loans you have contracted, the higher purchase transactions you have made, the credit cards you own, with details of how often you paid, if and when you were late, if you have foreclosed a house, declared bankruptcy, etc… It is a report on your finance history, everything. Credit reports are then used to prepare a credit score which quantifies the risk you pose as a borrower. The risk of not paying that is. These credit reports and scores are invaluable to business as they can quickly divide customers in good customers and bad customers with one stroke, or click.

There is a drawback for the customer or borrower however, well, various drawbacks. For instance, a customer might lose leverage and bargaining power if the car dealer owner knows she or he has bad credit. Secondly, having a finance company or business check your credit report can actually lower your credit score. Credit scores are set up in a way that a borrower trying to take on many loans and being denied the loans is seen in a negative light and provides a bad score for the borrower.

That is why borrowers are required to grant their authorization before  a company is allowed to run a credit report on a potential customer. However according to some experts (see http://www.cbc.ca/consumer/story/2008/05/12/credit-cars.html?ref= for sources) car dealers are running credit reports without asking their potential clients.

How is it done? Really easily. You enter your local car dealer, look at the cars, find a car you like which is around your price range and ask to give it a test ride. The salesmen with a smile the size of a watermelon on hormones, says no problem, I will just need to keep your driving license. With the driving license in his power he is now able to contact the credit report company. Running a credit report is so common nowadays that some credit report companies fail to check or confirm the borrower has authorized the credit report.

What can you do? A good piece of advice is to arrange a price on the car before you hand over your license and take it for a spin. You only really need to test drive a car when you know it is the one you want and the price is right. Test driving is a technique car salesmen use to get you to fall in love with the car. Nothing wrong with falling in love with your car but it is possible you will end up paying more for it if you allow them to check your credit report before you negotiate a price.

Remember the credit report and score is to help finance companies to set an interest rate that is suitable to the risk the borrower. It is not there to affect the buying price of the car. Use your consumer rights and make sure credit reports are only carried out with your consent.