Experian, TransUnion and Equifax now offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com.
Lenders can choose which credit score they want to use when evaluating your auto loan application. Different lenders might use different scores, and even the same lender might test several credit scores. Therefore, when you apply for an auto loan, you probably won’t know exactly whose credit score the lender will see.
When embarking on the exciting journey of purchasing a car, understanding the intricate world of credit scores is crucial. But with a myriad of credit scores floating around, the question arises: which credit score do dealerships actually use? Buckle up as we delve into this credit score conundrum and unveil the secrets behind the scenes.
The FICO® Advantage: The Industry Standard for Car Loans
In the automotive arena, FICO® credit scores reign supreme as the industry standard for assessing a potential buyer’s creditworthiness. These scores developed by the Fair Isaac Corporation are widely recognized and trusted by lenders, including car dealerships. FICO® scores range from 300 to 850, with higher scores indicating a lower risk of defaulting on loan payments.
Unveiling the Mystery: Specific FICO® Scores for Auto Loans
While the generic FICO® Score 8 and 9 are commonly used for various loan applications, the auto industry employs a specialized version known as the FICO® Auto Score. This score, ranging from 250 to 900, takes into account factors specifically relevant to auto loan performance, such as an individual’s history with previous car loans.
The VantageScore Alternative: A Growing Competitor
VantageScore, a credit scoring model developed by the three major credit bureaus (Experian, TransUnion, and Equifax), is gaining traction as an alternative to FICO® scores. VantageScore 3.0 and 4.0 are frequently used by auto lenders, particularly for new auto loan and lease decisions.
The Elusive Answer: A Dealer’s Discretion
While FICO® Auto Scores and VantageScore are widely used it’s important to note that dealerships have the discretion to choose which credit score they rely on for loan approvals. This means the specific score used can vary depending on the dealership and their internal policies.
The Credit Score Shuffle: A Glimpse into the Dealer’s Perspective
Dealerships often pull credit reports from all three credit bureaus (Experian, TransUnion, and Equifax) and obtain multiple credit scores from each bureau. This allows them to compare and analyze different scores, potentially using the one that presents the applicant in the most favorable light.
The Takeaway: Focus on Building a Stellar Credit History
While the specific credit score used by dealerships might remain a mystery, the overarching goal remains the same: to establish a strong credit history that reflects your financial responsibility. By consistently making on-time payments, maintaining low credit utilization, and avoiding excessive inquiries, you can build a credit profile that speaks volumes about your creditworthiness, regardless of the specific score a dealership might use.
Additional Tips for a Smooth Car-Buying Experience
- Check Your Credit Reports: Before stepping foot in a dealership, review your credit reports from all three bureaus to identify and address any errors that might negatively impact your scores.
- Pre-Qualify for a Loan: Obtaining pre-approval from a lender can give you an idea of your loan options and strengthen your negotiating position at the dealership.
- Shop Around for the Best Rates: Don’t settle for the first offer. Compare interest rates and terms from multiple lenders to secure the most favorable deal.
- Negotiate with Confidence: Be prepared to negotiate the price of the car and the terms of the loan. Your research and pre-approval will empower you to make informed decisions.
By understanding the role of credit scores in car loans, taking steps to improve your creditworthiness, and following these additional tips, you can navigate the car-buying process with confidence and secure a loan that fits your financial needs. Remember, a strong credit history is your passport to a smooth and successful car-buying experience.
What Credit Scores Do Car Lenders Use?
While the specific credit score that an auto lender will use may not always be known to you, the following credit score types are commonly available:
FICO® Score☉ 8 and 9. These are the latest generic FICO® scoring models. Even though FICO® did not design these models with auto lenders in mind, auto lenders may still use a base FICO® Score when evaluating auto loan applications because credit scores are widely used.
FICO® Auto Scores. There are multiple versions of the industry-specific FICO® Auto Score, which is created specifically for auto lenders. The generic FICO® Score serves as the foundation for the FICO® Auto Scores, which modify the score to more accurately assess an individual’s likelihood of making timely repayments on auto loans. Your history with auto loans could be especially important in determining your FICO® Auto Scores.
VantageScore® 3. 0 and 4. 0. These are the most recent iterations of the VantageScore credit scoring model, which was developed by the three main credit bureaus (Experian, TransUnion, and Equifax). As per a report released in June 2017 by VantageScore Solutions and the financial consulting firm Oliver Wyman, auto lenders utilized the credit score provided by VantageScore for more than 2070 percent of new car loans and lease agreements made between July 2016 and June 2017.
The way that VantageScore and FICO® use the data in your credit report, as well as the various scoring models offered by the same company, differ by a great deal. However, all these scores rely on a similar analysis of one of your credit reports. Therefore, taking steps to raise one score (such as paying bills on time) may raise all of your scores.
What Is the Difference in Credit Scores?
Although the principles of consumer credit scoring models are similar, each model analyzes one of your credit reports using particular criteria in order to produce a credit score.
Sometimes there are small, but potentially important, differences. For instance, although paid collections accounts may be ignored by one credit scoring model, they may still be viewed negatively by another.
The two industry leaders in credit scoring, FICO® and VantageScore, also have certain similarities in the base scoring models they develop.
To calculate your score, each model only examines data from one of your credit reports from TransUnion, Equifax, or Experian. A higher score is best because it indicates you are less likely to miss a loan payment.
The latest base models also have the same scoring range: 300 to 850. However, FICO® also has industry-specific scores, including scores for auto lenders, that range from 250 to 900.
What Credit Score Do Car Dealers Use?
FAQ
Do car dealerships use Equifax or TransUnion?
What FICO Score is used to buy a car?
Which credit score is best TransUnion or Equifax?
Who uses FICO Score 8?
What credit score do car dealers use?
However, many people don’t know what credit score car dealers actually use. Unlike your traditional FICO score, car dealers — more accurately lending institutions that sell auto loans to dealerships — refer to another, less known score, called The FICO® 8 Auto Score, or its competitor CreditVision.
Do auto dealers look at your credit score?
However, you should know that most of these websites offer an estimate of your credit, not necessarily the real number. Most auto dealers look at two credit scores: your FICO score and your VantageScore, each of which uses a slightly different credit scoring model. It gets messier.
Does a dealership look at your FICO score?
Odds are, any dealership with lending partners is going to look at your FICO credit score, but they may look specifically at your FICO Auto score. This differs slightly from your general FICO score. FICO Score vs. VantageScore: What’s the Difference? There are many credit scoring models to choose from when a lender is looking at your credit.
What is a good credit score for a car lender?
The FICO Auto Score uses a 250 to 900 range, which means the auto lender’s credit score could be much higher or lower than the score you check. There are four versions of the FICO Auto Score that a lender may use. The FICO Auto Score 9 is the latest iteration, and the one that’s currently used across all credit bureaus.