Auto finance companies primarily use specific credit scores tailored for car loans, most commonly the FICO Auto Score or the VantageScore. These scores help lenders assess your creditworthiness and the likelihood of you repaying an auto loan.
Understanding Auto-Specific Credit Scores
While you might be familiar with general FICO® Scores and VantageScores®, auto loan lenders often check versions of these scores that are specifically designed for the automotive industry. These specialized scores place greater emphasis on past vehicle financing history and other factors relevant to car loans.
FICO Auto Score
The FICO Auto Score is a version of the FICO credit score model that is specifically weighted for auto lending. It provides lenders with a more precise prediction of how likely an applicant is to repay an auto loan.
- Range: The FICO Auto Score ranges from 250 to 900.
- Purpose: This score helps lenders understand the risk associated with lending money for a vehicle purchase, considering factors that are most relevant to auto loan performance.
VantageScore
In addition to FICO Auto Scores, some auto finance companies also utilize the VantageScore model. VantageScore is another widely used credit scoring model developed by the three major credit bureaus.
- Range: The VantageScore ranges from 300 to 800.
- Purpose: While it's a general-purpose credit score, lenders can use it to evaluate an applicant's overall credit risk, including for auto financing.
Why Do Lenders Use Specific Scores?
Lenders use these tailored scores because they offer a more nuanced view of a borrower's potential performance on an auto loan. A good score in these models indicates a lower risk, often leading to better interest rates and loan terms for the borrower. Different lenders may have preferences for one scoring model over another, or they might even pull multiple scores to get a comprehensive view.
Credit Score Ranges for Auto Loans
Here's a quick overview of the credit scores auto finance companies typically check:
| Credit Score Model | Range | Notes |
|---|---|---|
| FICO Auto Score | 250-900 | Industry-specific score tailored for auto lending. |
| VantageScore | 300-800 | General-purpose score also used by some auto lenders. |
How to Improve Your Auto Loan Credit Score
If you're planning to finance a car, understanding and potentially improving your credit score can significantly impact your loan terms. Here are some key steps:
- Pay Bills on Time: Payment history is a major factor in all credit scores.
- Reduce Debt: Lowering your credit utilization (the amount of credit you use versus what's available) can boost your scores.
- Check Your Credit Report: Regularly review your credit report for errors and dispute any inaccuracies.
- Limit New Credit Applications: Each new credit application can temporarily lower your score.
By focusing on these areas, you can work towards a stronger credit profile, which can lead to more favorable auto loan offers.
