The Credit Score Car Dealers Really Use

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If you're a savvy auto loan shopper, you know to check your credit score before walking into the dealership. Knowing your credit score gives you a better idea of whether you'll get approved for an auto loan and the rate you'll likely qualify for. There's only one thing that could go wrong with that strategy. Your car salesman might be using a different credit score to approve your auto loan, one that you don't have access to.

Why Your Score is Different From the Auto Lender's

Most consumers don't realize other versions of credit scores exist, particularly because credit score companies don't make it clear. In 2017, the Consumer Financial Protection Bureau ordered TransUnion and Equifax to pay more than $17.6 million in restitution to consumers for deceiving consumers about the credit scores they purchases. These credit scores were marketed as the scores that lenders use to make decisions, even though they actually weren't. The two credit bureaus also had to pay $5.5 million in fines to the CFPB.

The credit score you access through providers like CreditKarma.com and CreditSesame.com is a generic educational credit score, meant to give you an idea of where your credit score stands.

These credit scores are based on five major factors:

  • Payment history - 35%
  • Amount of debt - 30%
  • Length of credit history - 15%
  • Mix of credit - 10%
  • Recent inquiries - 10%

When you apply for an auto loan, the lender will typically use a credit score that's tailored to predict the likelihood that you'll default on your auto loan. Consumers don't treat their financial obligations the same. Think about it, if you're in a financial pinch, you'll likely prioritize some bills over others. Auto lenders use credit scores that can analyze your past payment habits and predict what they mean for your auto loan payments.

Unfortunately, none of the credit scoring models have a breakdown of the auto lending factors, but we do know know these scores place more weight on factors that could signal potential auto loan default.

For example, auto scores look for:

  • recent bankruptcy (especially including a car loan or lease)
  • signs that you may file bankruptcy soon
  • short credit history
  • signs of having gone through credit repair
  • previous late payments on an auto loan
  • previous repossession or collections from an auto loan

Different versions of the FICO Auto Score

FICO offers a FICO Auto Score that's specific to auto lenders and not sold directly to consumers. The FICO Auto Score uses a 250 to 900 range which means the auto lenders credit score could be much higher or lower than the score you check. Industry scores - like the FICO Auto Score - are altered a little to account for the risk behaviors for that industry.

What's more is that there are 4 versions of the FICO Auto Score and the lender may use any of them. The FICO Auto Score 8 is the most recent version and is used across all credit bureaus. Some dealerships or finance companies may use one of the older versions: FICO Auto Score 2 (Experian), FICO Auto Score 5 (Equifax), or FICO Auto Score 4 (TransUnion).

If you purchase the FICO Score 1B Report through myFICO.com, you'll get access to 28 variations of your FICO score, including the Auto Score.

Credit Bureau Auto Scores

TransUnion offers the CreditVision Auto Score which is tailored for auto lenders, financing companies and dealers. The score ranges from 300 to 850 and helps predict the likelihood of a 60 day delinquency within the first 24 months of a new auto loan.

Changes in Your Credit Report Information

The information in your credit report changes often, which means your credit score can fluctuate from one day to the next. If there are a few days between the time you check your score and the lender checks your score, your credit score could be very different depending on how your credit report has changed.

Even though the score might be different, it's still based on the underlying information in your credit report. If your credit history is good, your credit score will reflect that, no matter which credit scoring model the lender uses to approve your loan application.

Other Industry Credit Scores

The auto score isn't the only industry-specific score FICO sells to businesses. The company also sells a mortgage score, a medication adherence score, insurance risk score, a bankruptcy score, and even as score that tells how much revenue your account would generate. Lenders may use any of these scores to help decide whether to approve your loan application.

Should You Check Your Credit Anyway?

For ongoing credit monitoring, free scores like those from Credit Karma, Credit Sesame, Quizzle, and WalletHub are useful for seeing where your credit stands. Your credit card issuer may also provide a free copy of your FICO score with your monthly billing statement. This score will be one of the FICO Bankcard Scores which are used in credit card decisions. These credit scores will give you a good idea of whether you have good or bad credit and how much you need to improve your credit score.

If you're getting ready to apply for an auto loan in the next several months, it's worth it to invest in the FICO Score 1B Report or the ongoing monitoring product. A one-time three-bureau report is currently priced at $59.95 or you can pay for monthly monthly three-bureau updates for $39.95 per month to keep up with changes to your credit in the months leading up to your application. Purchasing directly from FICO will give you a better look at the scores your auto lender is most likely to receive.

You should also check your credit report in addition to your credit score, especially if your credit score is lower than what you expected it to be. You can verify the information in your credit report is accurate and dispute any errors you find. Doing this before you go car shopping will help you get your credit in the best shape possible before you apply for an auto loan. Work on making sure the information in your credit report is positive so that no matter what credit score your auto lender uses, it will show that you have excellent credit.