Avoiding Credit Report Scams

Car dealers can use your credit report to change the financing terms. Dealers can also use financing to try and add costs for services you don’t need. When a dealership wants your credit information, make sure you understand why and how a credit check can affect your credit score.

A car dealership that misuses your credit history to increase the cost of a vehicle could be committing fraud. Talk to a dealer fraud attorney for legal advice if you are the victim of an auto loan scam.

What Is a Vehicle Credit Report Scam?

A credit check for a car loan is a hard inquiry on your credit report. Too many hard inquiries on your credit report can lower your credit score. Having lower credit can make it hard to get a loan. You may have to pay higher loan rates or have higher monthly payments.

Some dishonest car dealers may try to run a credit check without your consent. They can use your credit report to pressure you into buying a car or get you to pay a higher interest rate.

A used car dealer asking to run a credit report when you don’t need financing can be a red flag. If you’re aware of a credit report scam, report it to the Federal Trade Commission (FTC). You can also report unfair business practices to the Consumer Financial Protection Bureau.

Are Dealerships Required To Run a Credit Check?

Auto dealerships aren’t required to run a credit check if you’re purchasing a vehicle with cash. But if you’re financing through the dealership, you’ll generally have to agree to a credit check. A credit check gives the salesperson an idea of your personal finances. You can get approved for a lower interest rate if you have a strong credit rating. A credit check can also help the dealership identify possible fraud or identity theft.

Can a Dealership Raise the Car Loan Rate After a Credit Check?

Your credit report can play a role in another type of dealership scam. A yo-yo financing scam involves selling you the car but later increasing the loan’s interest. Car dealerships use spot financing to get you to agree to a deal with a lower interest rate. However, the purchase agreement may have language that the financing isn’t final.

Scammers can later tell you the financing fell through, and you have to sign a new financing agreement. The dealership may have already sold your old car if you traded it in. They then pressure you to accept the more costly rate. Unfortunately, there is no specific federal law against the practice.

Some states have consumer protection laws addressing this type of scam. In states like California and Maryland, dealers have a limited time to notify you of the financing change. You don’t have to accept the new terms. In Maryland, the dealership also has to refund all payments, taxes, and fees.

How Can You Avoid a Credit Report Scam?

The simplest way to avoid a credit report scam is to buy a vehicle outright instead of financing. If you pay for a vehicle with cash, cashier’s check, or credit card, they shouldn’t have to run a credit check. If you’re not financing the car through the auto dealer, you can negotiate the price without getting tricked by the financing terms.

You can also secure auto financing through your bank or credit union before going to the dealership. If you already have financing approval from your financial institution, you don’t need to deal with the dealership’s credit application.

You can also freeze your credit to avoid unwanted credit checks. Freezing your credit prevents car dealerships or others from accessing your credit. It also prevents anyone from taking out a new loan in your name. You can still access your credit report, but others can’t. If you want to let a lender check your credit report, you can temporarily unfreeze your credit. Contact the three major credit bureaus to freeze your credit:

• Experian
• Equifax
• TransUnion

Are There Penalties for an Unauthorized Credit Check?

Unauthorized credit checks can lower your credit rating. The Fair Credit Reporting Act (FRCA) regulates consumer credit reports. A salesperson who willfully accesses your credit report without your consent can be liable for damages. The penalties for unauthorized credit inquiries can include:

• Actual damages
• Statutory damages of up to $1,000
• Punitive damages
• Attorneys’ fees

How Can an Auto Fraud Lawyer Help After a Credit Scam?

If a car dealership rips you off or ruins your credit with an unauthorized credit check, an auto fraud lawyer can help. A lawyer can review your case and tell you about your legal options. They can file a civil lawsuit against the dealership for fraud and help you get your money back. If you’re a victim of auto dealership fraud, contact a dealer fraud lawyer to understand your legal options.