Auto Fico Credit Score: What It Is and How to Build It
What is an Auto FICO Credit Score? Some of you out there may have heard or read about a FICO Score before, and may have heard about the Fair Isaac Corporation (FICO). However, not many of us know there’s more than one score. In fact, there are many types of credit scores, including an auto-specific FICO score.
But first, a crash course on credit scores.
FICO Credit Score
A credit score, or FICO credit score is a single number between 300 and 850. Depending on where it falls on that number range, lenders will know how much of a risk it is to lend money to someone. The higher the number, the better the credit score. And, the higher the number, the lower to risk.
The reason for mentioning FICO is because FICO is the most trusted and popular organization for calculating one’s credit score. FICO credit scores have been split up and devised for specific industries. So if you’re looking to buy or lease a car, then your FICO Auto Score 8 will most-likely be used. FICO Score 8 is the most widely used score by lenders, banks, and credit unions when evaluating someone who has applied for a car loan.
Before we get into that though, let’s discuss some of the factors that can affect one’s credit score.
- Paying bills on time
- Past loans; whether they were paid on time, how many, if they were defaulted
- Open accounts; how many credit card and/or loan accounts currently active
These are the top factors to think about when applying for a loan. How efficient are you with paying your bills and whether or not you’re employed are the big ones, because those are the most common for people between 18-35. Not everyone gets a credit card after high school and loans are too tricky to get into even with a steady income.
If unsure about your credit score, you can always contact Equifax, TransUnion, or Experian. Americans are entitled to a free credit report every year. So that’s three in total, one from each organization.
FICO Auto Score and a Car Loan
Now that we’ve covered credit scores, here’s a little need-to-know information for a FICO Auto Score 8.
- The score ranges from 250-900
- This score is not publicly available, so it’s up to you to keep track of it
- The same factors that apply to a regular credit score will apply here, but with a heavier focus on automotive related items such as past auto loans, if they were paid on time, if they were ever sent to a collections agency, etc
Now, how does this affect one’s ability to apply for a car loan? Well, considering the above factors, an applicant may or may not be accepted. If their score is high, there is no issue. If their score is low, they may be rejected. Many younger buyers run into the situation where they just don’t have enough established credit, making it difficult for them to buy a car on their own.
If rejected, there are choices. The applicant can wait a year, during which time they build their credit by paying bills on time, having a steady job, and closing open accounts once they’re paid off.
Or, in some cases, the lender will offer a smaller loan contingent on a large down-payment and a high interest rate. This is to insure that the majority of the car is paid off.
So all-in-all, the best way to have a good credit score and apply for an auto loan is to take your time and be responsible with your money. Then, you should have no problem applying for an auto loan.