Car Loans Tied to FICO Score


Car Loans tied to Credit Score

Car loans tied to credit score

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

Car loans are a recurring monthly headache for tens of millions of people.  In an attempt to simplify the situation for many people let’s review this matter with a brief tutorial and a down to earth chart showing how car loans tied to credit score.  Before we go further you should bear in mind that it is much to your advantage if the car loan lender reports your loans payments to all 3 major credit reporting agencies.  This gives you credit everywhere for an installment loan.  This adds to your mix of different types of credit.  Your mix of credit types accounts for 10 percent of your FICO credit score.

Car Loans Tied to Credit Score Known as “Auto Enhanced”

Auto dealers pull up a FICO score to determine your eligibility for a loan and the rate you will pay if you are eligible at all.  This FICO score is referred to as your “Auto Enhanced” or “Industry Option” FICO score. This is a custom formula.  For the most part it will closely resemble your classic FICO score, but it emphasizes certain things.  In particular it heavily weighs whether or not you have ever had a repossession, whether you are chronically late with your car payments, whether you have had an auto account referred to collections and whether a car loan or lease has ever been included in a bankruptcy.  Whether or not you have a good payment history on an installment loan of some type is a huge factor.

Keeping in in Mind that Car Loans tied to Credit Score is Never a Bad Idea

I recommend that you call the dealer ahead to see what their requirements are.  This will avoid denting your score with an unnecessary hard credit pull.  You can get your own score at without a negative impact.  Now you can pay separately for the auto enhanced score. The auto enhanced score is proprietary.  This means that an auto enhanced score is only available to you and those in the car selling business.  Your classic FICO score will be close enough for you to see whether or not you are in the credit score ball park.

Getting Interested in Interest

If you are just going to depend on the dealer’s financing arm, find out whether the loan is calculated as simple or add on interest.  With simple interest the interest is calculated on the loan balance which is reduced with each payment.  Add-on interest is a sneaky system that calculates the interest on the original amount of the loan for the life of the loan and therefore is much more costly.

OK let’s get real.  The following chart is for a loan of $10,000.00, a term of 60 months, with interest computed at the national average.

     FICO                                              INTEREST                            PAYMENT

  • 720-850                                                     3.865%                                      $295
  • 690-719                                                     5.270                                           301
  • 660-689                                                     7.401                                           311
  • 620-659                                                    11.067                                          328
  • 590-619                                                    16.087                                          352
  • 500-589                                                    17.239                                          358
Some Final Thoughts

The worst breaks come when you score below 660 and in particular when you score below 620. The best quick fix is to pay down your credit card debt to increase your debt to available credit ratio.  Car loans tied to FICO score can be made more attractive this way. Work on improving your score by ordering and reading my book and keeping up with my blog.

The difference between the high and the low = a total of $21,480.00 vs. $17,700.00 for a total savings of $3,780.00!


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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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