Why Your FICO Score Matters in Auto Financing

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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.


, - March 27, 2018

It takes some preparation and forethought to apply for a bad credit car loan. Without knowing the elements that make up your FICO score, and how it impacts your chances for auto financing, you might be in for a real surprise.

Why FICO Matters

The type of auto loan a borrower is able to qualify for depends on their credit rating. In auto lending, the FICO credit score is used the most. If a borrower has a good score (700 or higher), they’ll have more opportunities to get a loan from a direct lender or a prime loan from a dealer’s captive lenders.

But if a borrower has bad credit they’ll need to find a special finance dealer that works with subprime lenders. These lenders can look beyond credit scores, but the factors that make up a FICO score will influence whether a lender is willing to take a risk on that consumer.

What Goes into a FICO Score?

There are five factors that make up FICO credit scores, which influence a borrower’s ability to qualify for a bad credit car loan:

  • Payment History – 35 percent: This shows a lender how responsible a borrower has been with credit in the past.
  • Amounts Owed – 30 percent: This shows how a borrower is currently utilizing their credit.
  • Length of credit history – 15 percent:Typically, lenders want to see a longer credit history, but this can impact scores differently depending on other factors.
  • Credit mix – 10 percent: This takes into account the mix of credit accounts a borrower has such as credit cards, retail accounts, and installment loans.
  • New Credit – 10 percent: This shows how many credit accounts a borrower is opening at a time. When a borrower opens a lot of new lines of credit all at once, it can be a red flag for lenders.

Knowing Your Credit

To stay up-to-date on credit, a consumer can pull their credit reports for free from www.annualcreditreport.com. On this site, people are entitled to one free credit report from each of the national bureaus – Experian, TransUnion, and Equifax – every 12 months.

It’s important borrowers know their credit score as well, because it helps determine things like interest rate. Credit scores can be obtained from this site for a small fee, or from any number of trusted sources online such as Credit Karma and Discover Card’s Credit Scorecard.

When a borrower knows what a lender sees in their credit report and what their credit score is, they can better prepare for the process of getting a bad credit car loan. It also gives them the power to use online tools to estimate loan amounts, monthly payments, and approximate interest rates based on their credit scores. Keep in mind that only a lender can say for sure what kind of loan a borrower will qualify for. Additionally, an auto loan is a great tool for improving credit, as making payments on time and in full will help build positive payment history.

Know Where to Go

Once you’re prepared to take on auto financing, you’ll need to make sure to go to a dealer that has the right lenders for the job. Not all dealerships work with lenders that can help people in challenging credit situations like bad credit, no credit, and bankruptcy. Rather than running around looking for someone who might help, start your search here with CarsDirect instead.

We work with a nationwide network of special finance dealers that have the lending resources available to help people right in their local area. Simply fill out our online auto loan request form and we’ll work to match you with a dealer that’s right for you. There’s never any cost or obligation, so don’t delay – get started right 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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