topic Re: Auto Credit and Scoring in Understanding FICO® Scoring

Auto Credit and Scoring

Tuscani — Sat, 02 Jun 2007 01:10:46 GMT

What is an Auto Enhanced score and how do I leverage it?

Most people do not realize there is a difference between your normal FICO score, and the score you are graded on when you apply for auto credit. Your normal credit score is simply referred to as "Classic FICO Score (also referred to as your BEACON score)". The auto score is usually referred to as your "FICO Auto Industry Option". This score it not available for you to purchase and only dealers\finance companies are able to pull it. Here are the major differences between Auto and Classic scores:

-The major difference between FICO scores and FICO auto scores is that the auto scores rate you more on how you've managed your previous auto credit. Most car lenders primarily care about how you’ve paid your auto loans. The auto score gives them this information.

-Have you made late payments on a current or previous auto loan or lease?

-Have you ever settled an auto loan or lease for less than you owed?

-Have you had a car repossessed?

-Have you had an auto account sent to collections?

-Did you include your car loan or lease in your bankruptcy?

How some car dealers "play the spread" to get you to pay more (and increase their commissions)

It's possible that a car dealer has the ability to pull your traditional FICO scores AND your FICO auto scores. That means they'll have six scores on you. It's a guarantee that some of those scores are going to be higher than the others. So which ones will they use when trying to get you financed?

It depends.

Are you familiar with the term "spread"? It's how car dealers make money when they finance you. If they can quote you a higher interest rate than you deserve—then they stand to make a nice chunk of change from the bank that finances you.

The only way to make a killer "spread" is to make you think that you have lower scores.

How to use your FICO scores to your advantage when buying a car?

Fortunately, you don't have to fall for their dirty tricks. Now that you know all about FICO Auto Industry Option scores, you can protect yourself. Here's what I suggest...

When you first walk into the finance director's office, don't tell him what your FICO scores are. Wait until he reviews the scores himself. Then ask him what your scores are. If the scores he reviewed are higher than the ones you have, don't say anything and just go by his scores. However, if your scores are higher, then pull them out and show him. If he has a choice in the type of scores he can use, there's a possibility that he'll be able to use your highest score. And, it will let him know that he doesn't have a fool sitting in front of him. He can't take advantage of you!

How do you find out what your FICO Auto Industry Option scores are before you walk into a car dealership?

You can't. Sorry. They're not for sale—at any price. Only lenders\dealers have access to them.
I mean seriously, up until you read this, had you ever heard of the FICO Auto Industry Option score?

Exactly.

Only a very small percentage of the population even knows they have three FICO credit scores...let alone three Auto Industry Option scores.

So how can you use this information to help you get your next new car financed at the best interest rate?

First, get your three credit reports\scores from myfico.com. Remember, myfico.com is the ONLY place you can get all three of your actual FICO scores. The three major buraeus sell credit scores. There are commonly referred to as FAKO scores and are worthless to you. If you handled your previous auto credit well—your FICO Auto Industry Option scores will be higher than your traditional FICO scores. So expect more from the lender. You can also ask the lender to show you their tier levels. Tiers are basically charts lenders use that have different interest rates based on your scores. You want to see which tier your fall in.

If they won't show you...at least have them break it down verbally for you. (Personally, I like to see it with my own eyes, as I never believe a word that comes out of most car dealers' mouths.)

If you've handled your auto credit poorly...then you should simply try to find an auto lender that uses just the traditional FICO credit scores. When you find a lender that uses a traditional FICO credit score, you'll have your best chance to get the lowest interest rate.

Start by calling dealerships and ask the finance person the following:

-What credit reporting agency do your lenders use?

-Do your lenders use FICO Auto Industry Option scores (or you can say, “FICO auto enhanced scores”) or regular FICO credit scores?

-What’s the minimum score that I need to get approved through your captive lender?
-What’s the minimum score that I need to get approved at the best rate by your captive lender?
-How does a discharged bankruptcy (or other major negative item) affect your loan decision?
-When was the last time you got someone with a [mention whatever concerns you about your credit reports here] on their credit reports approved? Tell me about that deal.
-What factors other than my scores go into your decision-making process?
-Can you dictate which score or which credit reporting agency the lenders you work with use to make a loan decision

Message Edited by Tuscani on 06-01-2007 08:10 PM

Re: Auto Credit and Scoring

smallfry — Tue, 24 Apr 2007 20:15:27 GMT

Great post Tuscani. IF one had included a car loan , ultimate repo, on a bankruptcy would this info still be available to the car dealer once the bankruptcy dropped off your regular credit reports? Chapter 7 is 10 year drop off so would the repo still show after that if the dealer ran all his reports? Thanks.

Re: Auto Credit and Scoring

Tuscani — Tue, 24 Apr 2007 20:34:57 GMT

smallfry wrote:
Great post Tuscani. IF one had included a car loan , ultimate repo, on a bankruptcy would this info still be available to the car dealer once the bankruptcy dropped off your regular credit reports? Chapter 7 is 10 year drop off so would the repo still show after that if the dealer ran all his reports? Thanks.

Fantastic question! And the answer is no. Auto scores calculate against the same credit file.

Re: Auto Credit and Scoring

Tuscani — Sun, 29 Apr 2007 15:00:19 GMT

BUMP!

Re: Auto Credit and Scoring

Neblett — Sun, 29 Apr 2007 15:27:11 GMT

Ford has agreed to take my Repo off my credit report and replace it with a Charge-Off.

Even if it is taken off my consumer credit report, will the car dealers have access to that info, meaning will they see the repo even if it is taken off my report?

Re: Auto Credit and Scoring

Drew — Sun, 29 Apr 2007 15:33:26 GMT

Good stuff. I actually paid a hefty auto loan in 3 months, so does that help my Auto FICO?

Re: Auto Credit and Scoring

Tuscani — Sun, 29 Apr 2007 16:22:07 GMT

Drew wrote:
Good stuff. I actually paid a hefty auto loan in 3 months, so does that help my Auto FICO?

I would think so. I personally would have made the payments over a longer period of time (six months at least). History is key for any TL.. but I feel Installment credit flects more against age.. and revolving against util.

Re: Auto Credit and Scoring

Tuscani — Sun, 29 Apr 2007 16:22:51 GMT

Neblett wrote:
Ford has agreed to take my Repo off my credit report and replace it with a Charge-Off.

Even if it is taken off my consumer credit report, will the car dealers have access to that info, meaning will they see the repo even if it is taken off my report?

Good deal. That should help your auto score. But doesn't do much for you in terms of a manual review.

Re: Auto Credit and Scoring

Drew — Tue, 01 May 2007 02:51:55 GMT

Tuscani wrote:

Drew wrote:
Good stuff. I actually paid a hefty auto loan in 3 months, so does that help my Auto FICO?

I would think so. I personally would have made the payments over a longer period of time (six months at least). History is key for any TL.. but I feel Installment credit flects more against age.. and revolving against util.

Good point, but it just wasn't an option at the time.

Re: Auto Credit and Scoring

Tuscani — Tue, 01 May 2007 10:37:56 GMT

Drew wrote:

Tuscani wrote:

Drew wrote:
Good stuff. I actually paid a hefty auto loan in 3 months, so does that help my Auto FICO?

I would think so. I personally would have made the payments over a longer period of time (six months at least). History is key for any TL.. but I feel Installment credit flects more against age.. and revolving against util.

Good point, but it just wasn't an option at the time.

I understand. The important thing is you that have some positive auto history now!

Re: Auto Credit and Scoring

smallfry — Tue, 01 May 2007 21:28:04 GMT

I read over at CB that prepaying an auto loan would not help your record and to just pay off the loan on time. At first blush I would tend to agree with you.

Re: Auto Credit and Scoring

smallfry — Tue, 01 May 2007 21:30:40 GMT

I imagine my repo put a real dent in my Auto enhanced score. The financial person told me they could show me my report but did say my score was 640. I don't know what that means. I have three paid off cars on my reports as of now obviously many more that didn't show. BK and car repos are a killer. I don't advise either one.

Re: Auto Credit and Scoring

Anonymous — Sun, 06 May 2007 21:58:58 GMT

Great information. I've been looking at a particular car for the last few months, doing my homework, and have been worried about my score. I went to a dealer yesterday and found that they had my Exp. score at 571 while I last pulled my score from myFico and it was 613 with them about three months ago (all I have is a secured card for a year and no other credit for the last 5). Needless to say I was upset and shocked by that. My question is, would a charge off on an RV loan that was refinanced to include a vehicle be throwing off my score so much? I haven't had either vehicle in the last 5 & 4 years respectfully. Am I now doomed with this larger spread or does these 'go away' after so many years? Thanks btc

Re: Auto Credit and Scoring

smallfry — Sun, 06 May 2007 23:14:04 GMT

I think the RV is hurting to be sure.

Re: Auto Credit and Scoring

Tuscani — Mon, 07 May 2007 00:10:04 GMT

breakingthecode wrote:
Great information. I've been looking at a particular car for the last few months, doing my homework, and have been worried about my score. I went to a dealer yesterday and found that they had my Exp. score at 571 while I last pulled my score from myFico and it was 613 with them about three months ago (all I have is a secured card for a year and no other credit for the last 5). Needless to say I was upset and shocked by that. My question is, would a charge off on an RV loan that was refinanced to include a vehicle be throwing off my score so much? I haven't had either vehicle in the last 5 & 4 years respectfully. Am I now doomed with this larger spread or does these 'go away' after so many years? Thanks btc

YES! That charge off is hurting you!

Re: Auto Credit and Scoring

Anonymous — Mon, 07 May 2007 04:34:54 GMT

What, if anything, can I do to lesson this? Do I need to wait so many years or just take on loans at these higher APR's (the dealership said they would do it for a jaw dropping 18%) for smaller loan amounts?

Re: Auto Credit and Scoring

MercyMe — Mon, 07 May 2007 09:02:36 GMT

Good morning, Tuscani! This is great info, and of course I have a question, or two. Over the course of the past 7 years, my husband has had three auto loans. All were paid on time/never late, and all are paid off. His regular credit scores are inching up -- high 500s right now, one's a few from 600. He was recently approved for a WaMu, 2000 limit, and an AmEx gold, on the business. When I pulled his business credit snapshot from Ex, it deems the business a low to medium risk, but didn't give a score. There isn't anything on the company credit other than a gas card. Everything's fallen off, over the years. He is always receiving pre-qualified advertisements from car dealerships.

Does he stand a good chance of getting a new truck at a reputable dealer, and how might he go about negotiating that? The last auto loan he took out was with our daughter, who needed a car to get back and forth to the university, 30 something miles away. He ended up paying over 25 percent interest on it, through Anything On you probably know what, which is highway robbery to be sure! But the car established her credit and improved his. He needs a truck as his has near 300,000 miles on it now, and is costing in repairs. (Luckilly, two of our sons are auto mechanics, and one owns his own shop). He doesn't want to be embarassed by going in to apply, only to be turned down for an autoloan, you know?

Also, what if one has never had an auto loan but their scores are in the mid 600 range? Would that factor as a positive or a negative in auto financing. Thanks for your input.

Re: Auto Credit and Scoring

Tuscani — Mon, 07 May 2007 11:01:58 GMT

breakingthecode wrote:
What, if anything, can I do to lesson this? Do I need to wait so many years or just take on loans at these higher APR's (the dealership said they would do it for a jaw dropping 18%) for smaller loan amounts?

Aside from trying to dispute any inaccuracies, you just have to wait it out. When did the account first go delinquent?

Re: Auto Credit and Scoring

Tuscani — Mon, 07 May 2007 11:08:53 GMT

MercyMe wrote:
Good morning, Tuscani! This is great info, and of course I have a question, or two. Over the course of the past 7 years, my husband has had three auto loans. All were paid on time/never late, and all are paid off. His regular credit scores are inching up -- high 500s right now, one's a few from 600. He was recently approved for a WaMu, 2000 limit, and an AmEx gold, on the business. When I pulled his business credit snapshot from Ex, it deems the business a low to medium risk, but didn't give a score. There isn't anything on the company credit other than a gas card. Everything's fallen off, over the years. He is always receiving pre-qualified advertisements from car dealerships.

Does he stand a good chance of getting a new truck at a reputable dealer, and how might he go about negotiating that? The last auto loan he took out was with our daughter, who needed a car to get back and forth to the university, 30 something miles away. He ended up paying over 25 percent interest on it, through Anything On you probably know what, which is highway robbery to be sure! But the car established her credit and improved his. He needs a truck as his has near 300,000 miles on it now, and is costing in repairs. (Luckilly, two of our sons are auto mechanics, and one owns his own shop). He doesn't want to be embarassed by going in to apply, only to be turned down for an autoloan, you know?

Also, what if one has never had an auto loan but their scores are in the mid 600 range? Would that factor as a positive or a negative in auto financing. Thanks for your input.

So you are trying to finance a truck under business credit?

Your score is not everything. A 650 score may get you an approval, but IMO, previous auto history does more for you than a higher score (in terms of approval not rate). It really depends what else is on your file.

Re: Auto Credit and Scoring

MercyMe — Mon, 07 May 2007 17:46:50 GMT

Thanks, Tuscani, for getting back to me. Yes, he will be trying to finance through the Co. credit; but because he's a sole propietor, they often check his personal credit as well, and then give him the business about his low (personal) scores. There are no auto loans remaining on the company account, they all fell off. There are four auto loan histories, in his personal reports. All paid on time/never late, and paid off.

And this really is a super post! See ya on CB, maybe, Tuscani!