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When you are on vacation, you may choose to rent a car with your debit card to stay within your travel budget or to avoid maxing out your credit card—or you may do so simply because you’re used to paying this way.
You probably know that using a credit card may impact your credit score, but there’s a little-known warning you should heed: In some situations, using your debit card may also impact your credit score or credit report.
This may sound somewhat contradictory because using your debit card is basically the same as paying in cash, but it’s becoming a mainstream policy for car rental companies to pull your credit report when you pay with a debit card, says Lynette Khalfani-Cox, a personal finance blogger known as “The Money Coach.” That’s because the company may want to confirm that you are a trustworthy customer who will be capable of paying for any damages or loss.
When can using your debit card potentially impact your credit score?
When Khalfani-Cox, who is vigilant about monitoring her credit report, called her rental car company to find out why it had pulled her credit report, a representative pointed her to a disclosure that she had signed.
“It was this long list of exclusions and company policies that included pulling your credit report if you use a debit card,” Khalfani-Cox says.
The rental company must include a notification of this policy prior to pulling your credit report, which is another reason that you should always read the fine print whenever you sign a document, Khalfani-Cox says. In addition, consumers can always ask the car rental company if they pull credit reports when using a debit card. This can help make a decision about the most appropriate payment option and car rental company.
“While it may not happen at every car rental company, it seems to be the norm for the major organizations,” Khalfani-Cox says.
If your credit does not meet the car rental company’s required criteria, you may not be able to rent a vehicle from them. Consider looking into the company’s minimum requirements for paying with a debit card.
How inquiries may impact your credit report
When you use a debit card to rent a car and the company pulls your credit report to make sure you are a responsible borrower, it may show up on your credit report as an inquiry. If you are concerned about this type of inquiry, you may want to consider using a credit card instead. If that’s not an option, consider shopping around for a car rental company that has a different policy.
Diane Moogalian is vice president of operations for Equifax Personal Information Solutions. Prior to joining Equifax in 2007, Diane held several strategic roles with leading financial services companies.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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