The Impact of FICO Scores on Auto Loans

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - October 25, 2017

Knowing what’s in your credit reports is important when it comes to auto financing. Preparing before heading to the dealership can give borrowers an edge, especially if they have credit challenges.

Know Your Credit

A good first step is to “pull” a credit score and credit reports. This is important because these are the tools lenders use to determine whether or not a borrower gets approved, as well as the interest rate they’ll qualify for. Reviewing this information beforehand will help car buyers know where they stand and what to expect. Also, consumer-initiated credit checks don’t affect credit scores.

Why FICO Scores Matters

There are several credit scoring models. Typically, lenders use FICO scores, which range from 300 to 850 and rate a borrower’s credit as bad, poor, fair, good, or excellent. It determines if a borrower will qualify and on what terms. People with less than “fair” credit typically need subprime financing.

What Lenders Are Looking For

The credit score that lenders see reflects the information in a borrower’s credit report. Some things lenders are looking for include types of credit, payment history, and length of credit history. Each factor weighs differently when it comes to making up a FICO score.

  • Payment History – 35% The most important piece of the credit score puzzle. The key to maintaining this is to pay all bills on time and in full.
  • Amounts Owed – 30% A large part of this component is a person’s credit utilization ratio – credit balances compared to credit limits. Keeping balances at 30 percent or less of credit limits will have a positive impact.
  • Length of Credit History – 15% How long a borrower has been using credit.
  • Credit Mix – 10% Shows how a borrower handles different types of credit accounts. Maintaining a healthy mix of installment credit and revolving credit will bolster one’s score.
  • New Credit – 10% Shows recently opened accounts. Opening several credit accounts in a short amount of time may be a red flag.

What’s Not Included

Even though a credit score is highly personal, there are a number of details that aren’t part of a FICO score, including:

  • Age
  • Address
  • Marital Status
  • Employment
  • Religion, Sex, National Origin
  • Interest on Current Accounts
  • Credit Counseling
  • Consumer-Initiated “Soft Pulls”

Knowing what’s not included in FICO scoring should help borrowers focus on the five key elements that are. A good tip to enhancing credit scores is to keep spending in line with income. Moderation can lead to financial success.

The Bottom Line

It’s important to keep your credit in mind so you can prepare for an auto loan. Another thing you’ll want to know is which dealer is right for you. If you’re having trouble finding one that can work with you, CarsDirect wants to help.

We take pride in connecting people with damaged credit to local special finance dealers that have the lending resources available to help. Get started today by filling out our no-obligation online auto loan request form now!

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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