The Scores That Matter in Auto Lending
, by Tom Quinn
Thinking about getting a new car? Based on all the car company advertising, it would appear it's a great time to be in the market to buy a new vehicle. All of the big car companies have promotions for auto lending such as cash back incentives, 0% financing and other incentives to move the 2015 inventory off the lot.
However, have you also noticed the fine print in the advertisements? It often points out that these more favorable financing terms are only available to qualified applicants. And, having a higher FICO® Score is often quoted as one of the key requirements.
So if you are serious about this purchase opportunity, it's in your best interest to be prepared and to know where you stand __ before __ you step foot on the lot to test drive that car of your dreams. In addition to researching the pricing of the models you are interested in and understanding your current vehicle's value (in the event you will be doing a trade in), you'll also want to review your credit rating.
It's no secret that the overwhelming majority of auto lending decisions are based on FICO Scores. However, not as well understood is that most auto lenders actually pull FICO® Auto Scores - an industry-specific version of the FICO Score tailored to be a better predictor of paying your auto loan on time. Similar to the broad-based FICO Scores, a history of paying as agreed, using available credit wisely and only applying for credit when needed will typically result in a higher FICO Auto Score.
How can you find out your FICO Auto Score that is likely being pulled by the auto lender?
We've got you covered at myFICO where, in addition to FICO® Score 8, FICO Auto Score versions are a standard output with any FICO Score product you order. For each of the three credit bureaus, we give you access to your FICO® Auto Score 8 as well as your FICO Auto Score from an older version of the FICO Score (as some auto lenders have not converted over to the newer FICO Score 8 version). In addition to the scores, information on why the scores are not higher is also shared so you can better understand what actions you can take that may help increase your scores and secure you those great loan terms being advertised.
Armed with this information, you can approach the financing interactions with more insights and "credit swagger" as our friends at Experian like to say. Talk to your peers about Auto Loans on our FICO Forums.
Tom Quinn is the Vice President of Business Development for myFICO and has over 25 years of experience working with consumers, regulators, and lenders regarding credit related questions and initiatives.