Are soft credit pulls the new trend in heavy equipment pre-qualification?

Two people going over paperwork

With equipment inquiries on new and used tucks and trailers at some of the highest levels in recent years, it is now more important than ever that your sales and finance team efficiently prioritize leads not only by who is ready to buy, but also by who has the ability to buy. If a customer is not paying cash or has not secured his own financing, it is wise to do some level of finance pre-qualification.

Asking pre-qualifying questions can help, but you still are relying on the customer to provide the information. Unfortunately, this information might not be accurate. How many times has it happened that a potential customer, when asked about his credit score, gives an estimate of “750 or so” but when credit is actually pulled, it’s closer to 550? By this time, the salesperson has spent a few days with the customer only to find out he is not qualified to make a purchase.

Having every non-cash customer fill out a credit application would be ideal, but it’s not realistic. Very few customers want to complete an arduous credit application and have a hard inquiry on their credit report when simply calling about a piece of equipment. This is understandable. However, from the dealer’s side, you need to spend your time with qualified prospects who can be verified.

What’s the solution? Use the new consumer consented soft credit pull technology offered by all three credit bureaus to prequalify your customers. Most applications are simple, take only a few minutes to fill out and usually do not require a social security number. Experian, Transunion and Equifax all offer a product for soft credit pulls.

What is the difference between a hard and soft credit pull? A hard inquiry occurs when you apply for any type of financing and your personal credit report is used in the decision process by a lender. A soft inquiry is typically done when you receive a “Pre-approved” finance offer for a credit card, auto loan or mortgage — or customers can check their own credit score on sites like Credit Karma.

The information (tradelines, inquiries, collections) on a consumer consented credit report are identical to a regular hard pull but there is no impact on customers’ credit scores. A hard credit inquiry will temporarily drop a person’s credit score 5 to 7 points. A soft inquiry has no impact.

How can a soft credit report be incorporated into your pre-qualification process?

  1. In person — Your sales staff can enter the application manually as he sits with the customer.
  2. Website — In addition to gathering information about a potential customer, offering an application that incorporates a soft credit report on your website has shown to be a great lead generator. Customers who might be browsing various online listings will stop and take a few minutes to fill out an online credit application if they know it will not impact their credit score.  
  3. Lead follow-up — Sending a customer an application with a soft credit pull is a great follow up to an email or phone inquiry. Most credit applications have a link that can be sent directly to your customer, which can be filled out on a computer or smartphone. A completed application will return the credit report information and more. Not impacting a customer’s credit score overcomes most objections and gives you an idea of what credit profile you are dealing with. If they are reluctant to fill out the short application, it may be a sign of their urgency.

As a dealer, if you’re using hard credit pulls to pre-qualify your customers prior to sending the application to a lender for financing, you might actually be hurting their chances of getting financed and your chances of making a sale. And if you’re waiting to get a full credit application that utilizes a hard credit pull, you may be chasing off qualified leads.

David Strand founded Equipment Funding Solutions LLC in 2016 to automate the commercial finance process for heavy equipment dealers. EFS is the only dealer-facing SAAS platform incorporating soft pull credit reports in a pre-qualification module and a powerful decision engine, which holds the lending criteria of more than 200 finance companies. The EFS platform is used by finance managers at some of the largest dealer groups in the country. He can be reached at dave@efundsolutions.com or efundsolutions.com.

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