Auto Loans Use FICO‘s Auto Enhanced Score
FICO has a separate service for automobile loans. Auto loans use FICO’s Auto Enhanced Score. This will be different from your regular FICO score known as your Classic FICO or Beacon score. If you have no record of some type of installment loan history many auto dealers will tell you that a good FICO score is not enough. Most banks and credit unions offer credit builder loans. These are installment loans secured by your own CD that will help you to raise your credit score with a new type of credit at a very low cost because there is no risk to the bank.
This optional loan rating service is available only to automobile dealers or finance companies. Consumers can’t purchase it on their own. The extra components entail specific information on how you have previously managed your credit for automobiles. If you have been particularly scrupulous about your auto loans you can expect when auto loans use FICO’s Auto Enhanced Score it be higher than your normal FICO. Of course it is also true that if you have mismanaged auto credit in the past it will be lower. If you’ve ever had a repossession it will be a lot lower.
It is a good idea to start your auto buying negotiations by inquiring about what the dealer’s minimum score is. What kind of score you will need to get the best rate?
Ask about Other Factors
You can also ask if there are other factors you should know about that are considered in the loan application process. Now go to myfico.com and get your scores. There is no reduction in your score when you do a soft pull on your own. You don’t want unnecessary pulls on your score by third parties because you are penalized somewhat for that. If your score turns out to be in the ballpark you can then have the dealer pull his Auto Enhanced Score. If it’s higher than what you have, don’t say anything. If it’s lower you can show him what you have and see if he has the freedom to go ahead and use the classic FICO as an option. This will also protect you from any underhanded tactics such as classifying you for higher interest rates than you really deserve. Unfortunately there are unscrupulous auto dealers who will take advantage of the “spread” between higher and lower interest rates to enrich themselves.
Best Practice of All…
Get your financing pre-approved by your bank or credit union before you go auto shopping.
Now you can focus on choosing the right car for you instead of worrying about the loan’s approval and interest on the financing.
- FICO Scoring Policies: A Deep Dive (onhomebuyingandcreditrepair.com)
- Bucks: Why You Have 49 Different FICO Scores (bucks.blogs.nytimes.com)
- Debt Consolidation (onhomebuyingandcreditrepair.com)