Unlocking Auto Loan Refinance Success with Soft Credit Pulls Skip to main content

Smart Moves: Why Auto Loan Refinance Lenders Check Credit Reports

Looking to save time and money prequalifying auto refinance borrowers?

A soft credit pull for auto loan refinancing gives you a good picture of your borrower's creditworthiness and doesn't harm their credit. It also increases your conversion rates without impacting your bottom line.

Auto loans are notoriously risky for lenders, but soft credit pulls can lead your business to success.

In the following article, explore in greater detail why a soft credit check for auto loans is a smart move.

What is An Automotive Refinance Loan?

Auto refinance loans replace an existing loan with a new one, typically with more favorable terms.
They are great for the following individuals:

  • People who have the title on their vehicle but need to trade it for cash
  • Individuals seeking a lower interest rate on their existing loan
  • Individuals who were previously married and need to take their former partner off the loan replacing it with their name only

The Power of The Soft Credit Pull for Auto Loan Refinance Lenders

Soft credit pulls provide the information lenders need to determine eligibility for loans while reducing the damage to a borrower's credit.

But how specifically do they work for lenders, and what benefits can they expect? To answer that question, continue reading.

Understanding Soft Credit Pulls

For auto refinance lenders, soft credit pulls play a vital role in the following areas:

Risk Assessment

One of the key indicators is that a soft credit pull provides lenders with insights into a borrower's credit history. A comprehensive evaluation of creditworthiness is critical to any auto loan refinance process because it indicates whether or not a borrower will likely pay the loan back.

Soft credit pulls will reveal a borrower's repayment history, outstanding debts, past delinquencies, and a clear picture of financial responsibility.

Loan Eligibility

Quickly evaluating a borrower's financial standing helps auto loan lenders make better decisions about loan eligibility.

It's critical to understand whether a borrower and their vehicle meet the minimum requirements for auto refinancing, such as:

  • Time left on the loan
  • Amount left on the loan
  • Mileage and model of car
  • Credit score
  • Debt-to-income ratio

Once lenders have that information, they can move forward with auto refinancing, and a soft credit pull helps gather that information.

Interest Rate Determination

A holistic overview of a borrower's credit score and health helps set the stage for interest rates.

For example, lower qualifying credit scores come with higher interest rates, and higher credit scores come with lower interest rates.

Lenders can assess the appropriate interest rate when armed with a soft credit pull's key insights.

Customized Loan Terms

Once again, the type of refinancing options available is determined by the borrower's credit score.

Customized loan terms include repayment length, how much will be borrowed, what interest rates apply, monthly payments, charges, and whether co-signers will apply.

These details can be determined with help from a soft credit pull.

Verification of Financial Information

The beauty of soft credit pulls is that the only personal information required is as much as an address and driver's license.

A soft credit pull requires no social security number or other personal info.

Borrowers enjoy a certain level of anonymity, and lenders reduce their liability in storing personal data.

Regulatory Compliance

Building off the last point, soft credit pulls help lenders stay in regulatory compliance.

Protecting Borrower's Privacy, demonstrating a commitment to safeguarding their sensitive information, and respecting their rights regarding credit inquiries are the obligations lenders are under.

Since soft credit pulls don't dive too deeply into private information, lenders avoid regulatory compliance risks.

Hard Credit Pull Vs. Soft Credit Pull

Hard credit pulls can harm a borrower's credit score.

However, there will generally be credit score fluctuations during the refinancing process.

Yet, if a borrower cannot qualify for a loan, those credit score changes only damage their financial standing.

Also, the insights a hard credit pull offers lenders do little to nothing to increase awareness about a borrower's financing compared to a soft credit pull.

A hard credit pull should only be utilized to finalize a sale, not prequalify borrowers. But are soft credit pulls enough to close the deal on an auto refinance loan?

How Soft Credit Pulls Help Seal the Deal

So, why should a lender do a soft pull instead of a hard pull?

Hard pulls are absolutely essential in the lender process to approve an applicant and offer financing, so they are inevitable in the lending process. However, before we can get to that point, the lender and borrower have to be on the same page, which means the borrower has to qualify for any loan.

Hard pulls enable lenders to get access to all information required to offer their financing, and are a normal and necessary part of the lending process.

But how do soft pulls help get lenders to that spot? Check out the following benefits below.

Faster Loan Prequalification

Streamlining the prequalification process for borrowers is one of the most significant benefits of using soft credit pulls. Time-consuming credit assessments and extensive documentation go out the window with soft credit pulls, however, lenders still have what they need to assess eligibility. It's a win-win with a faster prequalification process.

Lower Cost and Resource Allocation

Minimizing expenses associated with hard credit pull inquiries is another benefit lenders enjoy with soft credit pulls.

Additionally, instead of casting a wide net with your sales team, you can allocate your resources more efficiently to qualified leads.

Increased Conversion Rates

Increasing conversion rates is one of the main reasons lenders should consider soft credit pulls.

The less invasive approach to credit assessment is that a soft credit pull leads to more borrower applications and more sales.

Lenders are more likely to secure actual customers when prequalified borrowers are ready and willing to take on a new refinanced auto loan.

Improved Lending Decision-Making

Fast and efficient decision-making is critical for lenders. Soft credit pulls and hard credit pulls, for that matter, provide the detailed information required to make the best decisions.

Soft credit pulls are the key to making your customers happy, too.

Reduced Risks

Often, lenders feel confident in jumping straight to financing because refinancing comes with the collateral of the vehicle itself. However, lenders can save themselves lots of time and money by doing a simple soft credit pull.

For example, what if the individual’s vehicle is not worth the financing extension? Or perhaps the borrower’s credit is so poor that refinancing simply isn’t a smart investment?

While the vehicle’s collateral is helpful, it doesn’t save lenders in every situation. The smart move is to do a soft credit pull to see precisely what an investment can produce.

If you want to build customer trust and confidence, a soft credit inquiry is a great place to start. That prequalification process ensures you're both set up for success rather than failure.

Leveraging the power of this simple credit assessment tool is a great first step in bringing in new customers, keeping them happy, and mitigating the risks of offering refinancing options to borrowers.

Easy and Non-Intrusive Soft Credit Pulls

Soft inquiry auto refinance solutions are an easy and non-intrusive way to evaluate customers. The information lenders gather through this assessment includes their FICO score and auto loan history.

When a borrower wants to assess their refinance eligibility, the first step is to speak to a lender. They may shop online to find an auto refinance lender or call their local dealership.

Once on the phone, they communicate their goals, leaving the lender representative on the other side of the call left to figure out the puzzle of their eligibility.

However, using a service like Soft Pull Solutions, they can cut to the chase and determine eligibility in minutes using very little personal information.

This non-intrusive process ensures consumers reduce the impact on their credit while securing a refinanced auto loan with potentially lower interest rates.

Soft Credit Inquires & More!

If you're an auto refinance lender, Soft Pull Solutions can help transform your lending process with soft credit pulls and bank verifications, employment information, bankruptcies, liens, and judgments.

Get the full scope of data about a borrower when you leverage our comprehensive list of services.

Wrapping It Up

Credit reports play a pivotal role in auto loan refinancing. They outline the most important aspects of a borrower's credit score and history, from repayment information to delinquencies.

Borrowers and lenders reap big rewards using soft credit pulls over hard pulls. These include reducing the impact on a borrower's credit score to prequalifying leads without an added investment.

Consider contacting us to help with your soft credit pulls and increase conversions.
Want more insights into our credit pull services or something else? Check out our complete list of Credit Report Services to learn more.

About the author

Soft Pull Solutions

Back to top