The Credit Score Car Dealers Really Use

If you're a savvy auto loan shopper, you know to check your credit score before walking into the dealership. Your credit score is a 3-digit number that lenders use to estimate how likely you are to repay debt, such as an auto loan or home mortgage. A higher score makes it easier to qualify for a loan and can result in a better interest rate. Most credit scores range from 300 to 850.

Although a credit score is a good representation of the creditworthiness of an individual, this singular number doesn't tell the whole story. When researching and approving loans, car dealerships have access to a few different scores that consumers may overlook, such as the FICO auto score, Vantage Score, or other models.

How Credit Scores Are Factored

Most consumers don't realize that multiple credit scores exist for each individual, a fact that credit-scoring companies generally avoid explaining to their users. It's important for consumers to know exactly how their credit scores are being issued and rated, so as to avoid fraud and false advertising.

In 2017, the Consumer Financial Protection Bureau (CFPB) ordered TransUnion and Equifax to pay more than $17.6 million in restitution to consumers for deceiving them about their personal credit scores. TransUnion and Equifax had each advertised that the credit scores they issued would be the numbers that lenders would use when making decisions, but this was determined to be a lie. The two credit bureaus also had to pay $5.5 million in fines to the CFPB.

The credit score given by providers like CreditKarma.com and CreditSesame.com are generic, educational credit scores, meant to give consumers an approximate idea of where their credit stands.

According to the CFPB, credit scores are based on the following factors:

• Your bill-paying history
• Your current unpaid debt
• The number and type of loan accounts you have
• How long you have had your loan accounts open
• How much of your available credit you are using
• New applications for credit
• Whether you have had a debt sent to collection, a foreclosure, or a bankruptcy, and how long ago

When you apply for an auto loan, the lender will typically use a credit score that's tailored to predict the likelihood you'll default on your auto loan specifically. This scoring methodology assumes that if you're in a financial pinch, you'll likely prioritize some bills over others. Auto lenders use scores that analyze past payment habits and predict what these patterns might mean for your auto loan payments.

Unfortunately, none of the credit scoring models have a breakdown of the exact factors that auto lenders use, but it's safe to assume that these auto scores place more weight on variables that signal potential 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

FICO Auto Scores

FICO offers a FICO Auto Score that's specific to auto lenders. If you purchase the FICO Score 1B Report through myFICO.com, you'll get access to 28 variations of your FICO score, including your Auto Score. The FICO Auto Score uses a 250 to 900 range, which means the auto lender's credit score could be much higher or lower than the score you check.

There are four versions of the FICO Auto Score that a lender may use. The FICO Auto Score 9 is the latest iteration, and the one that's currently used across all credit bureaus.

Other Industry Credit Scores

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

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 a predictive score for how much revenue your loan might generate. Lenders may use any of these scores to help decide whether to approve your loan application.

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 reflect some changes. 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.

Here are a few tips for making sure your FICO Scores remains the same:

• Make payments on time
• Keep credit card balances low
• Open new credit accounts only when needed

Checking Your Credit Score

For ongoing credit monitoring, free scores like those from Credit Karma, Credit Sesame, and WalletHub are useful for seeing where your credit stands.

Credit scores can give you a general idea of whether you have good or bad credit, as well as and how much you'll need to improve your score before being approved for an auto loan.

If you're preparing to apply for a loan in the next several months, it's worth buying a FICO Score 1B Report, or the ongoing monitoring product. A one-time, three-bureau report is currently priced at $59.85 from myFICO. Purchasing directly from FICO gives you the option to look at the scores your auto lender is most likely to receive.

Doing research before you go car shopping can help you optimize your credit score before applying for an auto loan, and improve your overall understanding of the complex variables in the loan approval process. Above all, you should ensure that the information in your credit report is verifiable and accurate, and dispute any errors you find. If you're diligent about building and maintaining your credit, your report will show that you have excellent standing, regardless of what scoring model an auto lender might choose.