Car Dealer Scams, Part 1 - Misrepresenting Credit Scores
December 22, 2007 - 4:23 AM EST
The following is an excerpt of an e-book entitled, Don't Buy the Lies by Scott Pitman, Owner of Suzuki of Wichita, a car dealership and an AutoApproved partner. You can visit their website at http://www.suzukiofwichita.com/.
Once you've found the vehicle you want and the price has been established, you're entering the credit approval phase. You complete an auto loan application and it is taken by the salesperson to their finance manager for approval. Normally, approvals can be accomplished very quickly. Reputable dealers have both local and national lenders, and in some cases even internal financing capabilities. However, the un-reputable dealers use the financing transaction to unnecessarily maximize their profit.
In this ploy the salesperson will return with your credit application, stating that your credit isn't as good as they had hoped it would be... and, that they weren't able to obtain financing through their preferred source. You're embarrassed and disappointed and you feel you've wasted your time and won't get the vehicle you wanted.
Usually, at this point, the salesperson tells you that they are going to have one last visit with their finance manager because "They are on your side." They're gone for a few minutes only to return with a smile and the "I've got good news!" that they pushed their finance manager to call in a favor with another bank and they were able to get you approved.
What you didn't realize is that the rate of interest you will now be paying is higher than it should be. Often, they will have misrepresented what they learned from your credit score. They may say you have "B" credit when; in fact, you may have "A" credit. Now, you will have to pay the higher finance cost over the term of the loan.
It's not uncommon for dealers to tell you that you have worse credit than you actually do. This allows them to penalize you with higher rates on your auto loan, which allows them to make more money. If a dealer won't show you a copy of your credit score from one of the 3 major credit bureaus, LEAVE. They can't give you a copy of your credit bureau, but they can show you your 3-digit FICO score
The three credit bureaus utilize the FICO score or credit score as part of their overall credit reporting to lenders. In fact, there are many today who actually look no further than the FICO or credit score. In other words, if your credit score is below a certain level, you will not be considered for a loan by certain lenders. On the other hand, if your FICO or credit score is above a certain level, the doors to certain lenders automatically will swing open.
It is worth noting that a reputable dealer with good lending relationships may often be able to get a better rate than you can get on your own. This is accomplished through relationships and knowing what year and make of car you should buy and knowing the effect of amount financed and term on interest rates.
You need to get a copy of your credit report before you begin shopping for a vehicle. If you have this information, their scam won't work on you. You may also want to get a rate quote from your bank or your credit union.
Customers of AutoApproved.com qualify for a Free Credit Report and Score through our partnership with Credit.com. Once you have completed the 30 second auto loan application, you will be directed to a page that will give you more information about this offer.
You will be redirected to a secure page to complete the application.