What Credit Score Do Car Dealers Use?

If you’re thinking about buying a car, you probably know that your ability to finance or lease a car depends on having a good credit score. However, most people do not know that car dealers use an auto-specific credit score in addition to their base credit score when making a decision of whether to allow them to borrow money for a car. So, what credit score do car dealers use? We will discuss the answer to this question in much detail below.

What Credit Score Do Car Dealers Use?

Car dealers often use two different types of credit scores when evaluating the creditworthiness of a person applying for a car loan or car lease. They use a base FICO credit score and a FICO Auto credit score. The base credit score takes into consideration your entire credit history, such as credit card payments, home loan payments, and auto loan payments. Whereas, the FICO Auto score assigns more weight to how you’ve handled auto loans in the past. Both of these credit scores are used by car dealers to assess the likelihood that you’ll make car loan payments on time. Your regular (base) credit score ranges from 300 to 850, while your Fico Auto Score ranges from 250 to 900.

That said, both credit scores are used by auto dealers to assess how risky you are as a borrower seeking to borrow money to finance or lease a car. Although there are many services that offer free access to your base FICO credit scores, accessing your FICO auto scores is not free. For example, FICO offers you the ability to access your FICO Auto Score, but it does in exchange for a fee of 39.95.

That said, you should be aware that just as you have different versions of your base credit scores, there are a number of different FICO auto credit scores. So, if you check your auto credit score, you should be aware that the score you get may be different from the version that the car dealer uses when you go in to buy or lease a car.

Regular Credit Score vs Auto Credit Score

Your regular credit score, commonly known as your base credit score, is a general credit score that takes into account any type of credit account that you have when evaluating your risk as a borrower. On the other hand, your auto credit score measures your creditworthiness as it specifically pertains to auto loans. Again, although your regular credit score assigns you a credit score on a range of 300 to 850, an auto credit score assigns you a credit score on a range of 250 to 900.

The auto credit score was specifically designed to better predict the likelihood that a person will repay his or her car loan on time. Many experts believe that your auto credit score places a lot of weight on your history of handling auto loans. So, if you have a good history of repaying auto/car loans on time, you should have a good auto credit score.

Although auto credit scoring models do not disclose the factors they look at, here is a list of things that could have a large impact on your credit score:

  • Payment history on auto loans
  • Previous late payments on auto loans
  • Previous vehicle repossession
  • Whether you’re like to file bankruptcy
  • Length of credit history

How to Get the Credit Score That Car Dealers Use?

Car dealers typically look at your base FICO score and your FICO Auto Score. You can obtain a copy of your FICO Auto Credit Score directly from FICO by visiting MyFico and requesting a copy of your credit report. MyFico is currently offering three paid tiers of membership that start at $19.95 and go all the way up to $39.95. Upon purchasing the membership, you will be able to see all your base FICO credit score, as well as all of the different Fico Auto Credit Scores.

After signing up at My Fico, you will have access to the following credit scores:

  • Fico Auto Score 2
  • Fico Auto Score 8
  • Fico Auto Score 9
  • Fico Score 8
  • Fico Score 9
  • Fico Score 2

Basically, all of the credit scores that your auto dealer may look at are included in the MyFico membership portal that you’ll have access to upon signing up for credit monitoring.

What Credit Score Do You Need to Buy a Car?

According to Experian, the average credit score to purchase a new vehicle in 2019 was a 715 credit score. the average credit score to purchase a used vehicle in 2019 was a 662 credit score. Usually, the higher your credit score, the better interest rate, and repayment terms you will qualify for. That said, even if you don’t have an excellent credit score, you should not be discouraged from buying a car. Car dealerships will do everything possible to get you approved for a car loan. They are just as excited to sell you a car as you are to buy a car.

That said, you should be aware of the fact that the lower your credit score, the higher the interest rate that you will have to pay. For example, if two people were to buy the same brand new car that has a price tag of $20,000. One person has a credit score of 748 and qualifies for a 4.5% interest rate. Another person has a credit score of 635 and qualifies for a 13% interest rate. The person with a 748 credit score will end up paying $22,372 for the car at the end of the loan term. However, the person with a 635 credit score will end up paying $27,304 for the car at the end of the loan term. This means that the person with the lower your credit score ended up paying an additional $4,932 for the same vehicle simply because he did not have a better credit score. So, it’s definitely worth it to take the time to improve your credit score because a better credit score will save you a ton of money on things, such as car loans, home loans, and credit cards.

The main takeaway should be this: Although you may have a less than average credit score, you can still buy a car, but you will have to pay more interest since you present a higher risk to the bank that’s lending you money to buy your car.

How to Improve Your Credit Score?

There are a number of things that you can to improve your credit score, here are some quick actions to take:

  • Make all of your payments on time – Making all of your payments is the key to improving your credit score. Your payment history accounts for 35% of your credit score. So, if you want to improve your credit score, the single best way to do so is to make all of your payments on time. Missing even a single payment on one of your accounts can have a significant negative impact on your credit score. So, make all of your payments on time and you should see an improvement in your credit score.

  • Reduce your account balance – Reducing the amount of credit card debt that you have is a great way to improve your credit score. This is so because credit utilization makes up 30% of your credit score. As a rule of thumb, you should always strive to keep your credit utilization below 30%. For example, if you have a $10,000 credit limit, you should keep the balances on your credit cards below $3,000. The lower your credit utilization, the higher your credit score will be.

  • Don’t apply for too many credit cards or loan – You should not apply for too many credit cards or loans because each time you apply for credit, a hard inquiry is placed on your credit report. A hard inquiry will cause a slight drop in your credit score. Although a single hard inquiry will cause a slight drop, having too many of them within a short period of time can cause a significant drop in your credit score. A hard inquiry will remain on your credit report for 2 years from the date of your credit application. So, avoid applying for too much new credit if you’re seeking to improve your credit score.

  • Keep old accounts open – If you have an old account and it has a good credit history, you should keep the account open. Old accounts contribute to an older account age. The older the age of your accounts, the higher your credit score. So, keep the account open and continue to make timely payments to improve your credit score.

  • Check your credit report for errors – You should periodically check your credit score for any errors. Oftentimes, a derogatory mark, such as a collection account may have been added to your credit report by mistake. A derogatory mark can cause a significant decrease in your credit score. So, if you find any errors on your credit report, you should dispute the item with the credit reporting bureaus displaying the incorrect information. Once a derogatory item is removed, you should see a significant improvement in your credit score.

Credit Score Planet Frequently Asked Questions

1. Which credit score is used for car loans?

There are a number of credit scores that can be used by car dealers for car loans. Here are some of the most commonly used credit scores:

  • FICO Auto Scores 2, 9, and 8
  • FICO Score 2, 9, and 8
  • Vantage Score 2.0 and 3.0

2. What credit bureau do car dealerships use?

Dealerships will often pull your credit from all three credit reporting bureaus. (Experian, Transunion, and Equifax).

3. Can I get a car loan with a credit score of 600?

Yes, you may be able to get a car loan with a 600 credit score, but the dealer may only approve you for a high interest rate loan, such as 15% interest. So, you will end up paying more than would a person with a good credit score for the same car.

4. What FICO score do car dealerships use?

Car dealerships use FICO credit scores and FICO auto credit scores, which are more aimed at lending money for purchasing automobiles.

5. What are my chances of getting approved for a car loan?

The better your credit score, the better yours odds of being approved for a car loan. That said, even if you do not have a good credit score, you may be approved for a car loan, but you’ll have to pay more in interest.