According to 700Credit, making a smooth withdrawal of a customer’s credit early in the buying process can improve sales and reduce awkward conversations in the F&I office.
“You’re removing that friction,” 700Credit chief executive Ken Hill said in a webinar on Tuesday.
According to Hill, a traditional “hard” formal credit check appears on a credit report and affects your score. But this is not the case with a “soft pull” and its existence is visible only to the borrower.
Bob Lettis, senior vice president of business development at 700Credit, said last month that dealers reported a 5 to 15 percent increase in sales by switching to softer pull-ups. Car manufacturers have also taken an interest in the concept.
The government has allowed soft draws since 2009, according to Lettis. They are now available to all three credit bureaus and allow a customer to search for an offer, he said.
Lettis told the Ethical F&I Managers conference in September that a common form of soft pull would be pre-approval notices from credit card companies. Soft prints only require a name and address; consumers don’t need to disclose their birthday or social security number, Lettis said.
There are two types of soft pulls: a lender or dealer can unilaterally request a consumer’s credit information with what is called a “pre-screen”; or the consumer may agree to seek “prequalification,” according to Experian. The former is governed by the Fair Credit Reporting Act, according to Experian.
Hill called soft pull a “top of the funnel” process that can help customers and dealers avoid surprises once it’s time to switch to hard pull at the end of the process. (700Credit does not recommend that dealers skip the hard pull, he said, citing reasons such as compliance factors, greater accuracy, and the inability to get soft pull records on some people. ) A customer and a salesperson will not spend time planning the purchase of a vehicle. involving monthly payments of $ 250 only to find out that lenders will need $ 350 per month, according to Hill.
“It’s hard to get over it,” Hill said. Better to adjust at the top of the sale rather than at the end, he said.
A similar problem can arise with online retail channels that promise less payment than the customer ultimately gets, Lettis said. Gentle pull-ups can build precision right off the bat and get things done.
The dealers “have been doing this backwards for all of these years,” Lettis said.