Credit checks are an essential part of the financing process. But if done wrong, they can be a major hassle.
When it comes to credit checks, most people think of hard pulls. These are the types of credit checks that leave a mark on your credit report. They also require sensitive financial information.
That's why many dealerships are turning to soft credit pulls. Soft pulls never leave a mark on a customer’s credit, and they can be run using information from a driver's license. Yet they still 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 a powerful tool for your sales team. Here’s everything you need to know to get started.
Hard vs. Soft Credit Pulls
What’s the difference between a hard credit pull and a soft pull?
Hard credit 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. Hard credit pulls are required for every financing deal, but they should only be used when completing the transaction.
Soft credit pulls don’t 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 driver’s license. Soft credit pulls can be run early in the sales process.
Benefits of Soft Credit Pulls
Have you ever spent a ton of time with a customer, only to find out their credit score disqualified them for financing? The customer is upset, and you wasted precious hours chasing the wrong deal.
But these scenarios can be avoided. If you know a customer’s credit score early on, you can put them in the right vehicle immediately. The problem is that customers don’t want to leave a mark on their credit with a hard credit pull. That’s where soft credit pulls come in.
Soft credit pulls allow dealers to pre-qualify customers without leaving a mark on their credit. Additionally, soft credit pulls come with several other advantages:
Fast, Easy, and Non-Intrusive
Hard pulls require customers to share their most sensitive financial information. This information is hard to draw out early on in the sales process.
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, which speeds up the sales process.
Soft credit pulls provide crucial information for evaluating customers, including their FICO score and auto loan history. This tells you the type of customer you’re dealing with. 700Credit, a credit solutions company for dealerships, summarized the most common customer personas:
- 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 invaluable. It also creates a better buying experience for the customer.
Identify Upselling Opportunities
Service visits are an excellent time to get customers into new vehicles. Dealers can run soft pulls on service customers by simply scanning their driver’s license, then upsell the customer on qualified deals. Upselling is even easier when you have a detailed picture of a person’s credit history.
Generate and Prioritize Inbound Leads
Used car dealers can generate more inbound leads by offering pre-approval (i.e. soft credit pulls) on their website. 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 Credit Pull Compliance
Soft credit pulls may not be official credit checks, but they still come with compliance requirements. 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 key difference is that dealers do not need permission to run soft credit pulls. That means soft pulls 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 credit pulls are a major part of any success sales program. Some credit solutions integrate with your automotive CRM 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 credit solutions, any dealer can implement soft pulls and enjoy their enormous benefits.