FICO Credit Score & Auto Loans
If you are considering buying or leasing a new vehicle, you may be paying close attention to your credit score. This number determines what your car loan interest rate will be, and will also determine your eligibility for loans. So what what exactly is a credit score and how does it impact the car buying process?
The three major credit bureaus are Experian, TransUnion and Equifax. The two big credit scoring models used by auto lenders are FICO® Auto Score and Vantage. We’re going to take at look at FICO® since it has long been the auto industry standard.
FICO is an acronym that stands for: Fair Isaac Corporation, the company that developed the FICO® credit scoring.
FICO® credit scores are the auto industry standard for determining a potential buyer’s creditworthiness. Using a variety of factors, the company will give you a three digit score ranging from 300 (lowest possible) to 850 (highest possible).
Though FICO keeps the specifics of their credit scoring algorithm a secret, there are certain known factors that weigh into determining a person’s credit score.
Many people are surprised when they arrive at the dealership, and find that their FICO credit score is not the same three-digit number they saw on the credit monitoring service(s) that they have used.
Since FICO uses a unique and confidential algorithm to determine credit score, it may not yield the exact same number as other credit monitoring services. The differences are usually very minor, and monitoring your credit is still an excellent idea to be proactive in improving your score and to remain vigilant against identity theft attempts.
If you want to know your exact score before you begin car shopping, simply visit myfico.com
Generally speaking, banks require a minimum credit score of 600 to give an auto loan without any down payment.
However, you CAN buy a car with a score of 400 or a score of 850. There are a lot of variables that weigh into determining your loan eligibility and interest rates available. These factors include:
Many people have heard that checking your credit too often can negatively impact your score. Is this true?
When shopping for cars, it is a great idea to get quotes from multiple lenders to ensure that you get the best interest rate possible. However, it is always best to ask for quotes in as short of a time period as possible, because the law states that all credit checks within 14 days must be combined into a single credit pull so that it does not lower your credit score based on each individual credit check.Starting April 20, 2020, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports for the next year through AnnualCreditReport.com to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.