Auto Loan Credit: How Your FICO Score Affects Car Financing

Obtaining auto loan credit is not necessarily a difficult process; there are many lenders and many different types of loan options. You can obtain an auto loan to purchase a car from a dealer or from a private party, or you can obtain a loan to complete a lease buyout, or refinance your existing auto loan. Your credit rating, otherwise referred to as your FICO score, can significantly affect the cost of your auto loan, because the interest rate you are offered is  dependent on the score with which you have been rated.

What is Your FICO Score?


Your FICO score is a number that is determined by information about your credit debt, including how much credit you have, what your credit balance is compared to your open credit available, how many credit sources you have, how recently you've opened new credit, and your payment history. Payment history is one of the most important components in determining your FICO score; late payments, liens and judgments, and charge-offs from not paying your debts will adversely affect the score, while on-time payments will improve it.

Items not considered in your FICO score include race, religion, gender, marital status, number of dependents, or information about any public assistance you may receive. FICO credit scores can be as low as 300 and as high as 850. To improve your FICO score and improve your ability to obtain low-cost auto loan credit, pay your bills on time, pay off credit debt, and refrain from opening credit cards that you don't need.

Credit Reporting Agencies

There are three credit reporting agencies who report your scores. Each agency may have a slightly different score for you depending on which of your creditors have reported to which agency. It is imperative that you know your score before you start shopping for auto loan credit and keeping regular tabs on your credit report can help catch and prevent identity theft.

The three agencies from whom you should request your updated FICO score are:

1. Equifax
    equifax.com
    PO Box 105069
    Atlanta, GA 30349
    (800) 525-6285

2. Experian
    experian.com

3. TransUnion
    transunion.com
    PO Box 6790
    Fullerton, CA 92634
    (800) 680-7289

Obtaining Auto Loan Credit

To obtain the best possible interest rate and terms on your auto loan, review your credit report and take care of any errors you find on the report. The three agencies listed above are required to allow you to dispute false information, add comments or explanations regarding derogatory credit reports, and remove information when you provide proof that it is inaccurate.

The higher your FICO score, the lower the interest rate will be that you will be able to secure for your auto loan credit. Take copies of the reports with you when you see your lender; depending on which credit reporting agency they use, you may be able to provide more detailed information and negotiate better terms for your loan.

Need an Auto Loan? Get a Free Quote Here!