Q&A; An auto dealer keeps checking my credit. Is that a problem?

Dear Liz: How do I remove inquiries from multiple auto lenders? One of the dealerships pulled my credit at least eight times over a two-day period. I thought this could only be done while the customer is physically at the car lot.

Answer: Dealerships aren’t supposed to check your credit without your permission, and they can’t check your credit if you don’t give them your personal information, including your Social Security number. Some dealers use deceptive methods to get your personal information, such as claiming they need your Social Security number for you to take a test drive. (They don’t.)

If you did give permission, though, there’s not a lot you can do about multiple inquiries. Dealerships can, and will, check with multiple lenders to see what rates and terms they’ll offer you. If your credit isn’t great, multiple inquiries may be necessary to find you a loan.

The good news is that multiple auto loan inquiries in a two-day span won’t hurt your credit that much or for that long. Most credit scoring formulas don’t count each auto loan inquiry separately, but instead aggregate such inquiries together and count them as one. The ding against your credit scores is typically small and lasts only a few months.

Ideally, though, you wouldn’t continue to do business with a dealership that wasn’t crystal clear about why it needed your personal information and how it was going to be used. Also, consider applying for a car loan from a local credit union before you step onto a car lot. Credit unions are member-owned and tend to have good rates and terms, without the runarounds and add-ons that are so prevalent at car dealerships.

Q&A: Learning an expensive car loan lesson

Dear Liz: My grandson bought a new car with a loan that has a 24% interest rate. He owes $17,000, and the car is now worth $5,000. What options does he have to get out of this situation?

Answer: The best solution would be to refinance, but that can happen only if your grandson has some equity in the car or is able to get a lower-rate, unsecured personal loan to pay off the car loan. Your grandson probably would need good credit and steady employment to get a personal loan, as lenders are scrutinizing applications more closely these days.

Otherwise, his best course is to “drive out of the loan,” or keep making payments until he owns the vehicle free and clear. He should be making extra principal payments, if possible, to speed up that day.

You can encourage him to hang on to this car as long as possible after it’s paid off so that he can save up the cash for his next car. If he can learn from this experience to pay cash for cars, or to have at least a 20% down payment, then the expensive lesson may have been worth it.