Credit Score and Auto Loan


Before you walk into any car dealership to buy or lease your next vehicle, you should make sure you know what your credit score looks like.

Your credit score is a three-digit number that is used by lenders across the board to assess an individual’s predicted capacity to pay back a loan. The higher your credit score is, the more likely it is that you will be offered a favorable rate of interest on your loan repayments. The same applies to leases; those with better credit scores will find it easier to secure lower auto lease rates.

Businesses such as car dealerships are known to use a selection of different credit scores to work out whether you are a suitable candidate for credit. Here is a bit more about how it works.

 

How Credit Scores Are Calculated

Credit scores are calculated using a number of different metrics. These scores are typically made up of a conglomeration of the following factors:

  • Current unpaid debt
  • Bill-paying history
  • New credit applications
  • Number of existing loan accounts
  • The type of loan accounts and how long they have been open
  • The proportion of available credit which is being used
  • History of foreclosures, debts sent to collection and bankruptcy

The factors above will be weighted differently by the various scoring models preferred by car dealerships.

 

Type of Credit Score Used by Auto Dealerships

The most common scoring system used by car dealerships to assess credit applications is the FICO® Auto Score version 9. This score is generated using the “base” score, which includes scores for each of the criteria stated in the previous section. This base score can be anywhere from 300 to 850. FICO® then synthesizes scores so that they take into account calculations of industry-specific risk behavior. This tailored auto score will then be used to predict an applicant’s probability of meeting loan repayment dates on time.

 

How To Get Your Free Weekly Credit Report

According to this article on Forbes.com , the three major credit bureaus are now offering free weekly online credit reports from now until April 2021. You can get a free credit report every single week from TransUnion, Equifax, and Experian, through AnnualCreditReport.com

Complete the form with your name, Social Security Number, and current address, then make your selection and choose which credit bureaus’ report you want to review. 

You will have to answer a series of questions to confirm your identity. These questions are based on your credit history, previous address, etc… All of these questions are simple and fairly routine. 

Once your identity is confirmed, you will have access to your credit report, You have the option to save it and print it for your personal record. If you leave the page without saving your report, you will need to wait another week to regain access to it. 

 

This free credit report will not include your credit score, but you will have access to all the credit information that is used to calculate the score.

 

Check Your Credit Report

What most people do not realize is that their credit score changes regularly. Depending on your current credit card balance, the number of active credit accounts you have, and the punctuality of your last few repayments, your score may rise and fall from one week to the next. 

Before you set out to buy or lease a car, you should always check your credit report. Be aware of how your recent behavior can affect the decision of a car dealership to either approve or reject your credit application and adapt your finances accordingly to increase your chances of success. 

 

How can I acquire my Free Credit Score? 

So you’ve seen your credit report, checked it thoroughly but are still unsure of what your credit score looks like? don't worry, there is a multitude of websites where you can get access to your Credit Score. 

Possibly the most famous one is CreditKarma.com. Checking your credit score on Credit Karma will not affect your score in any way. They use a technique that is called a “Soft Pull”.  However, we have seen scores from CreditKarma be up to 100 points off, in either direction!!! This has led consumers to believe they couldn’t qualify for the best rates when they did. Conversely, the opposite has happened, as well.
 

A “Hard Pull” on the other hand, will impact your credit score. Any businesses and entities that perform a hard credit inquiry will have the obligation to obtain your authorization beforehand.  A hard pull is usually placed on your credit reports when you apply for a new line of credit, regardless if your application was approved or not. 

 

How to see your FICO score?

If you want to get access to your FICO® score, there are also many ways to obtain it. For example, most major credit card companies will let you check your FICO score on their website. Financial institutions belonging to the FICO Score Open Access Program offer this service. Visit this website for a list of participating banks and Credit unions.

If your institution is not able to let you access your score, You have other options. One of the easiest ways to access your FICO® score is to visit the Discover Credit Scorecard website. It is completely free, and you do not have to be a Discover cardholder to get access to your report and score. 

 

To recap:

When it comes to leasing or buying a car on credit, your credit score & depth of credit history will be the overriding determiners of the success of your application. If you are planning a trip down to our local car dealership in the Twin Falls area, it is a good idea to check your credit score today by using one of the many online credit score calculator services available for free.

 
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Categories: Finance