A FICO auto score is a credit score specifically used by lenders when you apply for an auto loan. Credit scores are between 300 and 850 with the higher score meaning that you are less risky to the credit providers. But what is more important, what is a ‘good’ FICO auto credit score? In general, even a FICO auto score of 660 or higher means that you belong to the ‘prime’ category and should expect good auto financing rates. On the other hand, scores that fall within the 740-850 range are particularly favorable in the eyes of lenders.
Why Your FICO Auto Score Matters When you apply for auto financing, lenders use the FICO auto score to estimate the probability of timely car payments. In general, the higher the score, the improved interest rates and the favorable repayment terms that one is likely to be offered. The best credit scores get access to 0 percent or extremely low APR financing while those with poor credit scores attract interest rates of 10 percent and above. This difference can easily translate into thousands of dollars when it comes to repaying an auto loan.
A good credit score also enables one to borrow more money regarding the auto loan, purchase a more extensive warranty from the auto company, and even get the auto insured at a cheaper rate. After you’ve become a car owner, your FICO auto score determines whether you are going to be subjected to deposit requirements or limitations when leasing or renting a car in the future.
What Constitutes Your FICO Auto Score Like your general FICO credit scores, your auto score is derived from the data in your credit report with the three credit bureaus: Experian, Trans Union, and Equifax. Data that influences your score includes:
- Your payment history: Whether you pay off your credit accounts on time. Your payment history affects the scores most, as they are an approximate reflection of your account's activity.
- Amounts owed: The total amount of credit currently owed divided by the total credit available to the credit reporting agency. Minimizing balances has a positive effect on this factor.
- Length of credit history: How long you have had credit. It means that if you have a longer history of credit utilization, your scores will be better.
- Types of credit used: Whether you did have years managing other types of credit like credit cards and installment loans. Using both installments and credit cards appropriately will be beneficial to your rating.
- New credit applications: Applying for credit in a short time frame is indicative of higher risk, hence the scores will be affected by opening many new accounts.
Auto lending decisions depend mainly on auto FICO scores that focus on your record of managing auto loans and other installment debt. The payment history on revolving accounts such as credit cards is less sensitive to auto scores than to mortgage scores or general-purpose FICO scores.
Facts About FICO Auto Credit Score, What Makes It Good Typically, FICO deems auto scores of 640 or higher prime, meaning it is possible to secure favorable interest rates and terms on an auto loan. On the other hand, results of 660 points or more are considered good or better. However, the auto score that you will require to access specific offers is unique to the lending company. Here’s an overview of broad FICO auto score ranges: Here’s an overview of broad FICO auto score ranges:
- 800-850 – Exceptional. Those, who have such scores, will be able to get the best financing conditions from the lenders. 750-799 – Very Good. Look for low interest rates and a high level of flexibility about further loans.
- 700-749 – Good. This will enable you to borrow most loans with reasonable interest rates.
- 650-699 – Fair. Financing for average used cars is available, however it is lower than optimal.
- 600-649 – Poor. It may be possible to get a loan with subprime terms only, high interest rates, and certain restrictions.
- 300-399 – Poor; 400-499 – Fair; 500-599 – Very Poor. It will be difficult for individuals to secure approval for an auto loan. A short-term repayment, a small amount of borrowed money, and a very high interest rate should be expected.
- 300-499 – Extremely Poor. This means that auto financing will be either unavailable or available with significant strings attached.
Some creditors have approximate figures for credit ranges, for example, 740 for the best-quoted rates. It is advisable to compare the terms offered by different financial institutions since they may differ. The options will also depend on the condition, age, and type of the used vehicle, down payment, income, and other liabilities.
An increase of a marginal auto credit score might reveal the possibility of lowering the interest rates. Let’s say that a lender is willing to extend credit at a rate of 3. 5 percent Annual Percentage Rate to borrowers with credit scores of 700 and above, but 6 percent APR to those with scores between 650 and 699. It is seen that getting a hundred points added to pass from 690 to 700 could prove lucrative in terms of financing over a 5-year loan period.
Important Things to Note When Applying for an Auto Loan If your current credit profile results in lackluster auto financing terms, take steps to boost your auto loan eligibility before applying: If your current credit profile results in lackluster auto financing terms, take steps to boost your auto loan eligibility before applying:
- Check your credit reports and challenge any factors that may be lowering your FICO scores. One cannot afford to make mistakes and they must be erased once found to be fake.
- Keep credit card balances at or below 30 percent of limits on all revolving credit. Paying less relative to the limits benefits this important credit scoring aspect.
- Do not apply for other credit in the months leading up to applying for an auto loan. A caution flag when too many recent inquiries.
- From the above analysis, the following should be observed in the future: Pay all bills early or on time. Late payments cause a significant drop in FICO scores and can take a long time to recover while on-time payments have a positive impact on the FICO score in the long run.
- If possible, keep long-term instalment accounts and some amount of credit utilised in a revolving form.
By implementing concerted efforts, many of the consumers observe their scores improving to an extent that they can qualify for a higher auto loan tier within the next six months. Another important factor is that patience, accompanied by further proper handling of credit, is needed to establish and maintain strong credit in general.
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