Why Auto Dealers Should Run Soft Credit Pulls

June 11, 2019| Zachary Klempf

Credit checks are an essential part of the financing process, but also a major hassle for salespeople and customers alike. Hard credit pulls leave a mark on a customer's credit report and require sensitive financial information.

That's why many dealerships are turning to soft credit pulls, especially early on in the sales process. Soft pulls give salespeople valuable information about the customer and speed up the buying process. They’re a win-win for customers and dealerships.

Soft credit pulls are easy to implement and have the potential to improve your entire sales process. Here’s everything you need to know to get started.

Hard Pull vs. Soft Pull

First, a quick refresher on the difference between a soft pull and hard pull.

Hard pulls are official credit requests to one of the big three credit bureaus. Only certified lenders, including dealerships, can make hard pulls on someone’s credit. They require sensitive customer information, including a social security number, and leave a mark on the customer’s credit. However, hard credit pulls are required for every financing deal. 

Soft pulls, on the other hand, do not leave a mark on a customer’s credit report. They are not official credit pulls, but still give dealers valuable information about the customer. Dealers only need a customer’s name and address to run a soft pull. They can even do so by scanning a customer’s drivers license.

Benefits of Soft Credit Pulls

Have you ever spent a considerable amount of time with a customer, only to find out their credit score disqualified them for financing? Not only is the customer upset, but you wasted valuable time that could have been spent with a qualified prospect.

Salespeople should avoid this scenario at all costs. The challenge is that many customers are unwilling to authorize a hard credit pull early in the sales process. That’s where soft credit pulls come in.

Soft credit pulls allow dealers to pre-qualify customers and get them into the right vehicle, the first time. There are several advantages for soft pulls over hard credit pulls:

Fast, Easy, and Non-Intrusive

Hard pulls require customers to share their most sensitive financial information with a dealer. Many customers are unwilling to share that information early on in the process, especially if they haven’t built rapport with the salesperson.

Soft pulls only require a customer’s basic information, and they don’t leave a mark on a person’s credit report. Most customers are willing to run a soft pull early in the sales process, giving salespeople valuable information about the person’s credit history.

Evaluate Customers

Soft credit pulls provide crucial information for evaluating customers, including their FICO score and auto loan history. 700Credit, a credit solutions company for dealerships, recently wrote about all the customers that can be identified with a soft pull:

  • The subprime customer so you can work them the right way from the start.
  • The equity customer with a high-interest rate and good credit score.
  • The prime customer who can take delivery immediately.
  • The service customer who did not buy a car from you, but is in a good equity position.
  • The pre-approved customer: eliminating the intimidating process of waiting to hear if they are approved.
  • The motivated customer who has been recently shopping for a vehicle.
  • The credit history of your Internet leads before they even walk into the store.

 

Knowing the type of customer you’re working with is essential to getting them in the right vehicle quickly. It also creates a better buying experience for the customer.

Identify Upselling Opportunities

Service visits are an excellent time to upsell customers into new vehicles. Upselling is even easier when you have a detailed picture of a person’s credit history. Dealers can run soft pulls on service customers by simply scanning their driver’s license, then upsell the customer on qualified deals.

Generate and Prioritize Inbound Leads

Not only do soft pulls help you close more deals, but they also bring more customers into the dealership.

Whenever you see a, “Get Pre-Approved!” form on a dealership’s website, they are running soft pulls. The form gives dealers valuable financial information about a customer before they come to the dealership. Pre-approved leads are also more likely to convert to customers.

However, inbound leads are just the first step. With a soft pull credit report attached to each lead, salespeople can identify and prioritize the most qualified customers.

Soft Pull Compliance Considerations

Even though soft pulls are not official credit checks, there are still compliance concerns. Many of the same regulations apply to hard pulls and soft pulls, including:

  • Sending a letter to customers to inform them they were pre-qualified for a loan
  • Sending an adverse action letter if a customer is denied credit due to their credit history

One major difference between hard and soft pull regulations is that dealers do not need permission to run soft pulls. That means a soft pull can be run every time a customer provides their driver’s license or contact information.

Compliance violations are not something dealers want to mess with. Any mistake could cost hundreds, even thousands of dollars, and they add up quickly. Be sure to use a credit solutions provider to stay compliant.

Running Soft Pulls from Your CRM

Soft pulls are quickly becoming a critical component of the sales process. Some credit solutions integrate with automotive CRMs to provide a seamless sales experience.

Running soft pulls from your CRM has several benefits:
  • Salespeople can run soft pulls directly from the CRM. When a salesperson scans a driver’s license, they can immediately run a soft pull on a customer to evaluate their credit worthiness.
  • Automatically update CRM records with credit information. Keep all customer information in one place so that any salesperson can access it at any time.
  • Streamline the buying process. In the past, dealers had to use multiple tools for soft pulls, hard pulls, and other sales processes. Today, dealers can run their entire sales program from their CRM, streamlining and speeding up the buying process.

Soft credit pulls were once reserved for only the biggest dealerships. Today, thanks to new technology, any dealer can implement soft pulls and enjoy their enormous benefits.

The car buying experience has changed. Customers expect numerous options and a speedy buying process, yet they hate to give up personal information too quickly. Soft credit pulls allow dealers to deliver the experience customers want while improving sales numbers at the same time.

Tags: dealer center dealersocket compliance soft pull bhph dealer credit bureau promax credit 700 credit independent dealer

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