PenFed Financing FYI - They do a hard pull when you join

[DigitalFusion]

Hey All,

I've seen quite a few financing posts, where PenFed is recommended. Since my normal credit union only does 'classic' car loans on a case-by-case basis and wont commit to the 1.99% rate without having an actual VIN, I figured I would join PenFed by applying for a membership and opening a savings account in order to make sure I have a second option when the need arises. Before doing so, I poked around a bit. PenFed, like most CU's will do a hard pull on your credit report just to join. If you are joining with the intent to pull a loan right away, this is a non issue since they will need the hard pull to approve the loan. However, if you are planning to join and your potential purchase date could be more than 60-90 days away, but less than 2 years, I would recommend waiting since hard pulls can effect your credit score for 12-24 months and they will need to do another hard pull after 60-90 days.


EDIT: Another thing to keep in mind, is if you have some blemishes on your report, or some higher balances on credit cards that you intend to pay off/down prior to taking out the loan, PenFed will use the inital pull to determine the rate/approval of your loan if its within the first 60-90 days. You would also be better off waiting to apply until those items are completed.

 

[JD Cross]

Excuse my ignorance but what is a "hard pull"

 

[DigitalFusion]

A hard pull happens when you apply for a loan, credit card, or line of credit, etc. Basically its a record of a lender checking your credit report because you have applied for some type of credit. They are also known as Inquiries. They stay on your credit report for up to 2 years, and they do effect your score.

a soft pull is when you check your own credit report or when places like credit card companies check you for a preapproval and things like that. A soft pull does not effect your credit score

 

[solidol]

Yes they do.

 

[JD Cross]

So a "hard pull" is just a formal credit check by a lender on someone who has applied for a loan?
Why would a check by a bank or other lender affect your credit score?

 

[DigitalFusion]

Typically it only knocks a few points off. You can rate shop where they take into consideration several hard pulls for the same type in a short period as rate shopping. If you have a few hard pulls within a few months it can make a larger impact. Im not sure why really. Honestly I find credit scoring procedures to be black magic. I had a bogus collection hit one of the bureaus kicking one of my scores down over 60 points. I got it corrected, and the score only went back up 40-some points with no other changes other than some balances going down on other accounts.

CreditKarma is a good free report/score monitoring site. Unfortunately they use the VantageScore model, which no lenders really use. I find that my VantageScore numbers are much higher than my Fico score numbers. Having said that, for free, its a good tool to monitor your credit over time if your interested in that kinda thing. If you really want to know your actual Fico score (which is what most lenders use), I find MyFico (25/month) to be pretty nice. You have to fork out extra to get credit report updates, but the score updates are included in the 25/month.

 

[Hass]

So a "hard pull" is just a formal credit check by a lender on someone who has applied for a loan?
Why would a check by a bank or other lender affect your credit score?

Almost everything you need to know about credit score.

http://en.m.wikipedia.org/wiki/Credit_score_in_the_United_States