The internet makes it possible and easy to comparison shop for loans.  Whether you’re looking for a car loan, student loan, mortgage or debt consolidation loan – there are a number of websites that exist to help you compare rates and loan terms.  Whenever you need to borrow money, it’s a good idea to weigh your options but you need to be careful that you aren’t damaging your credit score in the process.

Most loan comparison websites give you a list of possible rates for the various types of loans.    These rates actually mean nothing to you, because the loan rates an individual receives is based on their credit score and credit history.  Just because there are car loans available with 0% interest for the life of the loan doesn’t mean you will necessarily qualify for that rate.  In order to get offers from lenders that are specific to what you qualify for, you have to enter your social security number.

Lenders use the social security number to do a hard pull of your credit report.  Each time the information is obtained by a potential lender, your credit score will be effected as you are seen by lenders as someone who is desperate for cash and high risk. When you have multiple inquiries in a short amount of time, you’ll start receiving loan offers with less and less desirable interest rates due to the lowered score and increased number of inquiries.

It’s always better to “shop around” before making a big ticket purchase, but in the case of shopping for loans you are better off not entering your social security number on multiple sites.  The only way to find out what rates you would qualify for when loan shopping online is to enter your social security number and chance lowering your credit score if you decide the first offer isn’t good enough and go on to check several other sites.

The exception to this rule is when comparison shopping for automobile loans and mortgages.    The company that calculates credit scores claims that all automobile and mortgage inquiries made in the previous 30 days are ignored when the score is calculated.  Prior to the 30 days,  multiple inquiries for a car loan or for a mortgage are treated as a single inquiry when made within a 14 day period.

In order to get the best rates, use the internet to narrow down your top lender choices.  Find out what you can regarding their requirements for qualifying for the loan or how they calculate the interest rates on their loans before you enter your social security number or fill out an application.  Sometimes you can use the internet to narrow down your top choices of lenders, then call each of them to get more information.  If you know your FICO credit score and have a general idea of your credit history, they should be able to give you an estimated interest rate which you can use to compare your choice lenders before making the official application for the loan.

This entry was posted on Monday, February 9th, 2009 at 2:22 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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