Auto Loans and FICO Credit Scores – Episode #59

awjolls — Tue, 07 Oct 2008 21:21:30 +0000

This question is… how do credit scores really work when it comes to auto loans? It’s pretty interesting because first off most auto dealers only use one credit score and they’re usually just using one score from one bureau. Why are they using just one? It’s expensive to use multiple credit scores and for something like an auto loan and they must feel like, for the risk, that one score works pretty well in their modeling whereas with mortgages the amount is so large that they really want to look at all three scores from all three bureaus and get a really good composite.

So they’re using just one credit score. Well, here’s the thing – you don’t know which one score they are using and even if you do you know which one they are using you probably want to get all three scores from all three bureaus and that’s because you can use the other two scores as leverage and say “I’m going to go to the other dealer down the street as I know he uses the Bureau X’s score when you use Bureau Y’s score. Next, most of these auto lenders are using the FICO score system but they may not be using a classic FICO score. They may be using what’s called a FICO auto industry score and this score is a scoring model that’s tweaked for the auto industry and goes from 250-900. So, as you might suspect it takes into account your credit history around the auto behavior and gives that a little bit more weight and because of that it’s a little bit different than the FICO scores you’re going see when you pull them on myFICO.com.

Because of this you may be in a situation where your score is different from the FICO auto industry score and this can create some tricky scenarios because someone who is unscrupulous might know that your FICO score you bring in might be lower and they will base the loan on the score that you provide. Here’s a winning strategy, you want go into the dealer and make them reveal what their scores are to you but you want to pull your score ahead of time but make sure they say what their scores are first. Now, if their score is higher then just be quiet and use their score. If your scores are higher, you want to pull your scores out and say “hey I know you’re saying that the FICO score you have is this, but here’s the score that I have” and again you can use this as negotiating leverage to either make them try to use the scores that you have or you can actually go down the street to another dealer and try to to negotiate again. This is the classic situation where more information is more power.

I recommend Score Watch for trying to find out and monitor your FICO score.

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Auto Loans and FICO Credit Scores – Episode #59

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Auto Loans and FICO Credit Scores – Episode #59