What is the FICO Auto Score?
The FICO Auto Score is a credit score specifically designed for auto lenders to evaluate your likelihood of repaying an auto loan. While similar to the general FICO credit score, this specialized version gives more weight to your history with car-related loans, such as auto loans, leases, or financing. This score can range from 250 to 900, making it different from the traditional FICO score that ranges from 300 to 850.
Auto lenders rely on this score because it helps them make a more accurate assessment of your risk in terms of repaying a car loan. The FICO Auto Score plays a critical role in determining the interest rate and terms you will receive when you apply for financing to purchase a vehicle.
Understanding this score can make a big difference in your ability to secure an auto loan at favorable rates. In fact, data shows that 90% of top U.S. lenders use FICO scores, including the FICO Auto Score, when making credit-related decisions.
How the FICO Auto Score Differs from Other Credit Scores
The FICO Auto Score isn’t the same as your traditional FICO Score or VantageScore. While both the FICO and VantageScore models evaluate your overall creditworthiness, the FICO Auto Score zeroes in on your history with auto loans. This means it gives more importance to your car-related payments, such as how you’ve managed previous car loans or leases.
For example, if you’ve consistently paid your auto loans on time but have struggled with other types of credit (like credit cards), your FICO Auto Score might still be higher than your general FICO score. This helps lenders better predict how you’ll manage an auto loan in the future, which is why they prefer using it when reviewing car loan applications.
This targeted approach is crucial because defaulting on a credit card doesn’t necessarily predict your ability to repay a car loan. On the other hand, missed car payments could be more indicative of future auto loan defaults. Knowing this distinction is critical when applying for car financing. If you're confident your auto loan history is strong, be sure to check out our How to Apply for an Auto Loan: Step-by-Step Guide to ensure you're fully prepared before applying and know the best strategies for success.
Key Factors That Influence Your FICO Auto Score
Just like with any credit score, several factors affect your FICO Auto Score. Here’s a closer look at some of the most important ones:
Payment History on Auto Loans: Your past performance with car loans holds significant weight in the FICO Auto Score model. If you’ve made timely payments on your previous auto loans, it can boost your score. In contrast, late payments or defaults on auto loans will severely harm your score. This is why keeping up with car-related payments is crucial if you want to maintain or improve your score. Check out our blog on How To Improve Your Credit Score Before Applying for An Auto Loan
Credit Mix and Auto-Related Accounts: Your credit mix, or the types of credit accounts you have, is another factor. Having experience managing multiple types of credit, including auto loans, credit cards, and mortgages, shows that you can handle various credit responsibilities. Auto-related accounts, in particular, carry extra weight in the FICO Auto Score.
Debt Levels: The amount of debt you currently owe, especially on auto loans, affects your FICO Auto Score. A high balance on an existing auto loan could negatively impact your score, as it suggests you may already have a significant financial obligation.
Length of Credit History: The longer your credit history, particularly with auto loans, the better. Lenders want to see that you have a long track record of successfully managing loans over time. Having a lengthy history of on-time car loan payments will improve your score.
Recent Auto Loan Inquiries: When you apply for multiple auto loans within a short period, it can trigger hard inquiries on your credit report, which may lower your FICO Auto Score. However, FICO's rate-shopping window allows multiple inquiries for auto loans within a 30-day period to be treated as a single inquiry, so be mindful of the timing.
How Lenders Use the FICO Auto Score in Auto Loan Applications
Lenders use the FICO Auto Score to assess your creditworthiness for car financing. For example, if you have a score of 700 under the FICO Auto model, a lender might offer you a lower interest rate than someone with a score of 600.
A higher FICO Auto Score often results in lower interest rates and more favorable loan terms. According to Experian's State of the Automotive Finance Market Report, the average interest rate for a new car loan in 2023 for someone with excellent credit (750 and above) was 3.69%, while for those with subprime credit (580-619), it was as high as 14.39%. This shows just how much impact your score can have on your auto loan terms.
Lenders use a scorecard to determine what interest rate to offer based on your FICO Auto Score. For example:
Score above 700: You’re likely to receive the best interest rates and loan terms.
Score between 600 and 700: You’ll qualify for a loan, but rates may be higher.
Score below 600: You may be offered a loan with a higher interest rate, or you may struggle to qualify for financing at all.
If you're struggling getting a loan because your score is low you should consider consulting with a credit expert. We are currently offering FREE consults for anyone as of now. Get yours now
FICO Auto Score Range: What Is a Good Score for an Auto Loan?
The FICO Auto Score has a range from 250 to 900, making it different from the standard FICO Score that ranges from 300 to 850. Here’s a breakdown of what constitutes a "good" score:
Very Good to Excellent (720-900): Lenders will likely offer you the most favorable interest rates and terms.
Good (660-719): You should still qualify for competitive rates, though they may not be the best available.
Fair (620-659): You can expect to pay higher interest rates, but you'll still be able to qualify for a loan.
Poor (Below 620): You may face difficulty securing an auto loan, and if approved, you’ll receive very high-interest rates.
Having a FICO Auto Score above 700 can save you thousands over the life of your loan, especially when you consider the typical auto loan is now about 72 months long, according to the Consumer Financial Protection Bureau.
How to Improve Your FICO Auto Score Before Applying for an Auto Loan
Improving your FICO Auto Score is key to securing the best possible loan terms. Here’s what you can do to boost your score before applying for an auto loan:
Pay Down Debt: Reducing your outstanding debt will not only improve your general credit score but also your FICO Auto Score. Focus on paying off any high-interest credit card debt or auto loan balances.
Avoid New Credit Inquiries: Try to limit new credit applications in the months leading up to applying for a car loan. Hard inquiries can lower your score, especially if you’re applying for multiple forms of credit at once.
Pay Bills on Time: Payment history is the most significant factor in both your FICO Auto and general FICO scores. Ensuring all bills are paid on time—especially any car-related ones—will help improve your score.
Build a Positive Auto Loan History: If possible, start building a history of on-time payments with a smaller car loan or even a secured auto loan, if your credit is poor. Lenders will look at your previous auto loan history as a strong indicator of future reliability.
Consult a Credit Expert: The best option is to consult a credit expert to review your report, more than likely you have collections, charge-offs, inquiries, late payments and more holding you back from getting that loan you want! Considering getting your FREE consult with us today. Interested? Get yours now
FICO Auto Score vs. Traditional FICO Score: Which One Matters More?
Although both scores matter, the FICO Auto Score is the one that’s most relevant to auto loan lenders. However, it’s not uncommon for lenders to look at both when reviewing your overall credit profile.
For example, your traditional FICO Score might come into play if you’re applying for other forms of credit at the same time, such as a personal loan. However, when it comes to auto loans, the FICO Auto Score is the primary focus.
Why Understanding Your FICO Auto Score is Key to Getting a Good Auto Loan
Understanding your FICO Auto Score and how it affects your auto loan options can make the difference between paying hundreds or even thousands of dollars more in interest over the life of the loan. If you’re planning to finance a car, it’s essential to check both your FICO Auto Score and your general credit score in advance to ensure you’re in the best possible position to get favorable rates.
Get Expert Help with Your Credit from New Beginnings Credit Solutions
If you’re concerned about your credit or need help improving your FICO Auto Score, New Beginnings Credit Solutions can help. Our team of credit experts specializes in helping clients improve their credit to qualify for better auto loan rates. Book your free consult with us today to start on the road to better credit.
Comments