What is a FICO Score?
One of the most important things you can do before applying for an auto finance loan is get your credit report and review your credit scores.
Your personal credit score is one of the most important factors in determining what annual percentage rate (APR) you will be charged when financing a car. You should know what information the lenders have on you.
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A Consumer Credit Report is a file based on your personal credit history and is kept and managed by a credit bureau. This report acts basically like your own personal financial report card for banks and lenders to determine your past history for paying back loans.
Don’t let the guy you’re applying for your loan with know more about your credit history than you do!
The three well known credit bureaus are TransUnion, Equifax and Experian. Your credit file will contain personal information like your name, address, social security number, birth date, public records, credit and loan payment history.
Credit grantors such as banks and lenders will report negative and positive payment information to these credit bureaus. Utilities like electric and phone companies, medical and student loans may also report your payment history to the credit bureaus.
Anytime you apply for credit, including a credit card or car loan, credit grantors may inquire and review your past credit history by using your credit reports to get this information. You do not want to be at a disadvantage by not knowing what’s been reported to your credit bureaus.
Companies that pull your credit report do not have to give you a copy of your personal credit file, even if you request it. They must pay for the privilege to obtain this information about you and believe it or not your information becomes their property.
The FICO® (Fair Isaac Corp.) score is like a grade in school, most car dealers call it a “beacon score.” It ranges from around 300 to 850. Most people fall in between the 500 to 800 range. Financial institutions base their risk assessment of you based on your credit history. The higher your number is, the lower risk you are in paying back a loan.
The higher your score will also help you qualify for the lowest interest rates and be able to take part in special low interest rate finance incentives and programs. The lower your credit score, the higher risk you are to the lender. You’ll have to pay higher interest rates and may be subject to larger down payments, additional fees or not be able to get an auto loan at all.
Car dealers obtain credit bureaus through 3 major companies TransUnion, Equifax and Experian. Some dealers will just pull your credit report from one company and some dealers may pull a combination of all three.
When car dealers “pull your credit,” the system they use sometimes has an auto enhanced scoring system. The system looks at your automotive and installment history on your credit bureau and gives you a little boost in your credit score. You’ll know if the dealer is using an enhanced system if your credit score is higher on the report they pull on you than the credit score on the credit report you obtained personally.
FICO 9 is the latest version of the credit scoring model which was first introduced in 1989. Using the FICO Score 9 model, your score is a 3 digit number mathematically calculated from five different areas of your credit bureau. These areas include:
Quick facts about credit scores.
Inquiring on your own personal credit reports will not hurt or lower your credit score. When you request your own credit report, it’s considered a “soft inquiry” or “soft pull.” A soft pull will not lower your credit score and will not show up on your credit reports when a bank or lender views it.
A “hard inquiry” or “hard pull” is when a company requests your credit report as when applying for credit or a loan. By having too many hard pulls on your credit will make a lender believe you’re trying to over-extend yourself and potentially lower your credit score.
The three major credit bureaus are Experian, TransUnion, and Equifax. Each company will allow you to get your credit report and score online through their secure web sites.
By law, in the United States. You have the right to receive a free copy of your credit report annually. However, your FICO Score will not be included with these free reports.
There are some Internet sites out there that will provide you with a free credit report. After you receive your free report, you will be asked if you’re interested in purchasing your credit score. If yes, you will be directed to one of the three major credit bureaus.
I’ve included a direct link so you may get all three of your credit reports, credit scores, and credit history below. My Free Score Now also offers credit monitoring products. They have great products for you to pick from so pick the one that best fits your individual needs. As rampant as identity theft is today in our electronic world, I would personally select a product that monitors your credit report and provides you with email alerts with any changes to protect your identity.
My Free Score Now takes your personal privacy very serious; before clicking the submit button, double check all the information you provide for accuracy.
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MyFreeScoreNow will allow you to receive all of your personal credit reports and scores from all three bureaus (Experian, Equifax, and Transunion) by signing up for their free trial. When it comes to credit score monitoring, identity protection, and credit report information, MyFreeScoreNow is by far the best value for the money They offer several products for you to choose from and their customer service is second to none.
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The MyFreeScoreNow monitoring product offers a 7-day trial that provides you with the ability to get all three of your credit scores, review what’s been reported to your credit report, receive credit alerts, and gain access to colorful charts and graphs on changes in your debt, income, available credit, and more.
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