01-28-2013 08:55 AM - edited 01-28-2013 09:25 AM
I am in the process of trying to buy a used car. When the dealer ran my auto enhanced score, I found that it was 40 points lower than MyFICO score! Why would that be? I've had plenty of car loans in my lifetime. Would NOT having a car loan for almost 2 years lower my Beacon score? I had a couple of slow payments back in 2010, just before I paid off the loan 4 months early. Other than that, I've had pretty good luck with my auto loans.
My Beacon score is 628, my FICO score is 664. I have high utilization on my CCs right now due to an emergency, but paying more than the minimum each month and never late. I had a couple lates on my mortgage a few years back, and they're still in the range where lenders would look, but never late since.
Should I insist the dealer use my higher FICO score? Any advice?
Just added: I forgot to mention that the vehicle that I'm looking at is a 2005 pickup for 13k. My DTI is 13/18. It's mostly the utilization % that is holding back my FICO, as far as I can tell.
01-28-2013 09:51 AM - edited 01-28-2013 09:53 AM
What do you mean that your DTI is 13/18?
Do you mean you are isolating the potential new car loan debt against the purchase price? The amount of down payment for your new vehicle is definitely important, but it is not the only thing the lender looks at to determine ability to repay. They look at your total debt and the monthly payments associated with it.
DTI refers to your total debt to income. Right now, if your utilization is high and you have no car payment it looks like you will have a tough time making all of your payments when you add in a new car payment. That's how a lender would look at it. It looks like you are having a rough time financially and the last thing you need is to add to your debt. What is your actual DTI?
If you reduced your utilization on your cc's then it doesn't look like your back is against the wall when you make application with the lender for a car loan.
Do you have some smaller limit cc's you can pay down or off to reflect a zero balance? That will help you too.
01-28-2013 09:51 AM
01-28-2013 09:54 AM
01-28-2013 09:56 AM - edited 01-28-2013 09:57 AM
An auto-enhanced FICO will weight auto loans (and possibly other installment loans such as your mortgage) heavier than revolving history.
If all (or possibly even a bulk of your negatives) are on your installment tradelines, your auto-enhanced score is going to almost assuredly be lower than the classic version found here. There's not much you can do about it except perhaps talk to a different lender and hope they use a different scoring algorithm.
(sigh, I type so slowly this morning)
01-28-2013 10:16 AM
01-28-2013 10:24 AM - edited 01-28-2013 10:26 AM
@StartingOver; My current actual DTI is 18, (13 including only my mortgage and no other debt); nothing to do with an added car loan yet. This does include my CC payments.
01-28-2013 10:59 AM
Then you are in perfect shape to pay down your cc's to zero balance except for one to report a balance of less than 9% to maximize your score on the revolving accounts.
At that point you would be able to explain that the missed installment payments were due to X (whatever it was) and that X was a one time event and won't happen in the future. You should then be able to get a decent interest rate.
It's a matter of going in to buy when you have the best credit profile when possible. Even if the auto enhanced score is lower, you can show you have moved past that negative event.
01-28-2013 11:07 AM
Well, I got approved. The rate's a little higher at 10%. I did expect that with a lower score. I accepted the rate because I really need the vehicle RIGHT now. I will probably pay down my CCs and refi the car into a lower rate at a later date.
Thanks for the info on the Beacon score!
01-28-2013 11:14 AM
FYI, If you haven't signed the loan yet, negotiate the interest rate a little more especially if you went through a dealership. They usually add 2% or more to what the lender will actually do.
myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.>> About myFICO