Auto Loan Credit Scores
There’s a difference between your normal/classic FICO Score, and the score car dealers graded you when you apply for car loan.Auto Loan Credit Scores were developed by Fair Isaac (the same company that developed the classic FICO) especially for the auto industry, to better predict the risks involved in lending you money for a car. They are sometimes refered to as ‘FICO Auto Industry Option Score’, ‘Beacon 09’ or ‘FICO Auto-Enhanced Score’
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Auto Loan Credit Scores vs. Classic FICO
Consumers often pay loan obligations differently. Because of this, FICO Auto Industry Option Score puts more emphasis on how you’ve handled prior car loans. This includes:
- Late car loan payments
- Car repossessions
- Auto loans sent to collection
- Settled car loans or lease contracts for a smaller amount
If you have any car-loan related derogatory information, it will affect your Auto-Enhanced Fico score much more than it would your classic FICO score. On the other hand, derogatory information that is not auto-loan related (e.g. late credit card payments, liens, collections etc.) will have lesser negative effect on your Auto-Enhanced Fico Score.
So basically, if you handled prior car loans good – you will have a good FICO Auto Industry Option Score, and can expect to get favorable terms. Similarly, if you didn’t handle your prior car loans good or simply didn’t had an auto loan yet – your FICO Auto Industry Option Score will be low. You will be processed as a credit risk, and will be charged high interest rates or get declined altogether.
How to use this information to your advantage
Most auto dealers not only get to choose the credit bureau they receive your credit information from, but they also get to decide what score to use. Some use Classic Fico for their lending decisions. Others use FICO Auto Industry Option Score, and there are those that use both.
You can use this information to your advantage when you shop for a car loan.You can get better rates & terms simply by choosing the right car dealer for your credit standing. Here’s how to select the best car dealer for you!
As of April 2015, myFICO.com sell consumers their more then 19 versions of their FICO scores.
Until now, the only score consumers could buy was a generic version of FICO, which was different from what car dealers see. Starting this year – consumers can get the exact same score car dealers, mortgage officers, Credit Card companies etc get, bringing more power into the hands of consumers. For more information, see this post from myFico.com
Also, please make sure not to miss our Obtaining Auto Loan article!