@Anonymous wrote:
My wife and I have little knowledge when it comes to joint auto financing and scores. Her parents paid cash for her vehicle as wedding gift 4 years ago and I had my car paid off 3 years ago. September of last year my car was on its death bed and we had no choice but to finance a car payment. (Side note: this is when we started our credit awareness journey) We thought we had "good credit" because we always paid our loans on time in the past, we didn't have any credit cards or owe any money.... HA! WE WERE WRONG... My wife didn't have a credit score (even though her file was 10 years old) and I had a fico 08 Ex 545. We were able to finance a car by putting a large chunk down and with 19.0 interest with GM financial. Fast forward 6 months and now we have cleaned up my inaccurate student loan payment and opened credit cards, and now my score has improved 70-100 points across the board. Both of us have much higher auto enhanced scores than fico 08....
Now my question: if we trade in our vehicle we bought in September and finance different car...
1. Do auto loans use the higher or lower of the our fico scores?
2. What is "tier 1/2/3" I see in the fine print in regards to financing interest?
Usually lenders use the lower score.
Tiers are how the lender breaks down customers into groups based on risk. Tier 1 is people with the lowest risk, tier 2 is above that, etc. Auto lenders make risk decision based on factors other than score. A low DTI ratio helps reduce perceived risk, as do big down payments.
