FICO Score 8 and Dealerships: What You Should Know
Your credit score will decide if you qualify for the loan and the interest rate charged whether you are out shopping for a used or new automobile. Most car lenders now evaluate the prospective borrower using FICO Score 8 specifically. Let us now examine closely what FICO 8 is, why dealers rely on it, and how to get your score before visiting a dealership lot.
What is the FICO Score 8?
FICO Score 8 is a credit scoring system that entails rating of credits as per the execution of the Fair Isaac Corporation. It measures between 300 to 850 and a higher AHI implies that one has a severe sleep apnoea case. This particular scoring model started in the year 2009 and has been adopted by lenders as one of the credit scores to take into consideration while approving credit.
FICO fine-tunes its formulas slightly from time to time in a bid to enhance the capability of measuring the credit risk of consumers. It shows that FICO 8 or other editions are in use by more than ninety percent of the top lenders including credit cards, auto loans, mortgages, etc. Hence your FICO 8 score offers the financier a bird's eye view of your worthiness as a borrower.
Why do auto dealers rely on FICO scores?
In most cases when you seek financing from a car dealership, the dealer will pull your credit report and check your scores. Some of the scores they use include the FICO 8. Your FICO score gives the dealership loan officer an indication of how high risk it is to provide you with a loan.
Specifically, your FICO 8 score helps the dealer predict:
- Your chances of being 90 days past due on payments
- Your likelihood of defaulting on the loan in its entirety
The closer to 900 your FICO 8 score is, the less of a credit risk you appear to be. If your score is low, the dealer considers you a high-risk customer, and they will charge you a higher interest rate if they agree to offer you a loan. Some dealers eliminate applicants outright if they score below a certain level.
On the other hand, good credit means that you are qualified to pay lower interest on the car and from the dealers and other auto finance companies. The lower rate enables you to save a lot of money over the years of the car loan.
What is a Good FICO 8 Credit Score for Car Financing?
But what do most dealers consider a good or bad FICO 8 score? Here’s a quick breakdown:
800-850 – Exceptional Credit When your FICO 8 score is 800 or above, you will get the best deals from most dealers and other lenders. The same goes for nationally advertised 0% financing specials, which are also aimed at consumers with such scores.
740 through 799 – Very good credit A score in the very good category will still allow you to get most of the best auto financing deals. The interest rates of such loans could be between 5 percent points more as compared to a person with excellent credit.
670-739 – Good Credit These borrowers are considered acceptable risk by the lenders to those who have good credit scores. Interest rates and financing terms will not be the lowest compared to the other parts of the world but will be acceptable in the global market.
580-669 – Poor Credit However, when you drop below a FICO 8 score of 670, it becomes more challenging to secure financing. You may have to get a larger down payment or the interest rates go up exponentially. Most of the mainstream lenders completely exclude scores below 600 from their consideration.
300-579 – Very Poor Credit The chances of getting financing at the conventional new car dealer will be quite hard if you have a credit score of less than 580. Even the buy here pay here car dealers, who primarily deal with people who have bad credit car buyers, expect a minimum of 500-550 FICO scores.
How to Check Your FICO 8 Score
It is now clear that auto lenders rely on the FICO Score 8 when making their decisions and therefore go to the dealers armed with your score from the three bureaus. Here are some possible ways to obtain your most recent FICO 8 score:
- You can obtain Your MBO reports directly from myFICO. com
- For free check through your banking institution or credit card issuer if provided
- Check credit monitoring services such as Identity IQ, Credit Karma, and other third-party services.
While the FICO score that you can get at the free site employs a different formula, you can at least get an approximate idea of what your actual FICO score is.
Tips to Boost FICO 8 Score Which Is Low
If your credit score requires fixing, then getting your FICO 8 in shape before applying for the auto loan can be of great help. This is because it helps you to cut down on interest expenses in the years to come.
Here are quick tips to boost a low number:
- It involves timely payment of all the bills for that month.
- Reduce balances on credit cards and other types of revolving credit
- One should avoid applying for credit until after they have purchased their car.
- Dispute any inaccuracies on credit reports
- If credit counseling is required then it should be considered.
As little as five points of score difference can place you at a better financing level when approaching the dealers. Make sure to check out your latest FICO score and get into good credit practices to lock in the best rates when your new rides are here!
Call now for expert credit repair services: (888) 803-7889
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