You’re prepared to buy a fresh car.
You’ve done all your homework.
You know your three FICO fico scores.
You determine that your highest FICO credit score is from Equifax (also called your BEACON rating).
So, you find an automobile seller who uses your highest score (which increases your chance to get approved at a good rate).
You can the dealership and ignore all the salespeople by going right to the finance director’s office.
But as the financing director reviews your credit history before you…you can’t help but think something is wrong.
Affirmed…the seller says your Equifax/BEACON score isn’t high enough because of their lowest interest rate.
Your credit file can change many times each month as new information is added or updated by your lenders. But probably, your scores wouldn’t change in this situation (particularly if there were just a few hours between when you examined your scores and when the dealership examined your credit file).
So, if your credit file didn’t change, how come the finance director staring at your scores with such a discouraging face?
Car Dealers Can Use “Different” FICO Ratings Than The Ones YOU OBSERVE
The car dealer is probably using what’s known as the FICO Auto Industry Option score instead of a normal FICO credit history. You see, car sellers not only get to select the credit scoring agency they receive FICO fico scores from…they also reach decide if indeed they will use a normal FICO credit history or a variation of a FICO score called an Car Industry Option score.
What’s the difference between these two types of scores?
Not a good deal to many people…but there’s enough variation to help make the most auto lenders use the Car Industry Option score. The real difference between your two scores would be that the Auto Industry Option rating pays much more attention to how you taken care of previous auto credit.
– Have you made late obligations on a current or previous auto loan or lease?
– Perhaps you have ever settled an auto loan or lease for less than you owed?
– Have you had a car repossessed?
– Have you had an auto accounts sent to collections?
– Do you include your car loan or lease in your personal bankruptcy?
Those actions will affect your Auto Industry Option score more than they’ll affect your traditional FICO score. Bottom line, if you dealt with your previous car credit perfectly, you ought to have a higher FICO Auto Industry Option score–that’s a very important thing.
But what if you’ve had a few bumps in the auto credit road before? You guessed it…your Auto Industry Option rating will be lower. You will be regarded as a greater credit risk and the car lender may either deny you or use your lower score to justify charging you a higher interest rate.
The truth is, auto lenders are different than other styles of lenders. And I’m not talking about their slimy ways, leisure suits, short ties, manly hairy chests, or precious metal bling.
A whole lot of other lenders look at all of your credit picture to determine if to give you financing. But many auto lenders care about only one thing…how you handled your recent AUTO credit. That’s just what a FICO Car Industry Option Score provides car dealers–a way to pinpoint how you’ve handled what counts to them the most.
So, even if everything else on your credit reports transpired the toilet after your personal bankruptcy, if you didn’t include your auto loan in your bankruptcy and never defaulted or missed an automobile payment, your Auto Industry ratings will probably be much better than your traditional FICO ratings!
Just what a Former Auto Finance Director Revealed if you ask me
Not long ago i spoke with a past finance director, and this is what she told me…
“More and more people I’ve helped couldn’t believe their ratings were so high with the FICO Car Industry Option rating. That they had included all their personal credit card debt and their mortgage in their bankruptcy, but they reaffirmed their car finance. What’s good about the auto score is it truly helps the car lender focus on what’s important–how the customer handles his/her automobile financing.
By our dealership getting the auto enhanced FICO, it helped 30% or more of our customers progress rates.”
I don’t believe I’ll say this, but I believe I may already have found something good to state about car sellers! Well, some of them, anyway…
As you can see, the FICO car scores can work in your favor, if they are used correctly.
OK, I simply wouldn’t have the ability to live with myself if I only said good stuff about car sellers.
So, in the eye of fair and balanced reporting, here’s how to safeguard yourself against slimy car sellers that can use your FICO Car Industry Option
ratings against you…
A Dirty Trick Car Dealers Can Play with Your FICO Scores
Let’s imagine your Equifax/Beacon FICO rating is 585. Not too good. Using a score that low, if you do get approved for a motor vehicle loan, you’ll probably find yourself with a high interest rate and high payment.
So you go to a dealership and talk to the financing director and tell him your Equifax FICO score is 585. The fund director then reviews your FICO Car Industry Option score. And, unknown to you, this rating is actually higher than the Equifax/Beacon FICO rating you pulled.
With this higher score, you’ll get approved at a better rate…right?
Here’s what unscrupulous car sellers can do. They won’t let you know that your auto score is greater than your traditional score!
They figure they have a sucker sitting in front of them. So they’ll make an effort to get you financed at an increased rate based on the lower FICO rating (thus making more profit for themselves).
How Some Car Sellers “Play the Spread” to make you Pay More
Now check this out…
It’s possible a car seller has the ability to draw your traditional FICO scores As well as your FICO car scores. Which means they’ll have six scores you. It’s a guarantee that some of these scores are going to be greater than others. So which ones will they use when looking to get you financed?
Are you familiar with the term “pass on”? It’s how car sellers generate income when they fund you. If indeed they can estimate you an increased interest than you deserve–then they stand to make a nice chunk of change from the lender that budget you.
The only path to make a killer “spread” is to make you believe you have lower scores.
So, what can you do?
Don’t despair…I could help you.
How to Use Your FICO Scores in your favor when Investing in a Car
Fortunately, you don’t need to fall because of their dirty tricks. Given that you know about FICO Car Industry Option scores, you can protect yourself. Some tips about what I suggest…
1. When you first head into the finance director’s office, don’t simply tell him what your FICO scores are. Wait until he reviews the scores himself. Then ask him what your scores are.
2. If the ratings he reviewed are greater than the ones you have, don’t say anything and just pass his scores.
3. However, if your ratings are higher, then pull them out and show him. If he has a choice in the kind of ratings he may use, which possibility that he’ll be able to use your highest score. And, it’ll tell him that he does not have a fool sitting in front of him. He can’t take benefit of you!
How do you uncover what your FICO Auto Industry Option ratings are before you walk into a car dealership?
Sorry. They’re not for sale–at any price. Only lenders get access to them.
FICO wish to sell them…but there seriously isn’t enough demand. After all seriously, up until you read this article, had you have you ever heard of the FICO Auto Industry Option rating?
Keep in mind, we were just given gain access to purchase all three of our traditional FICO credit scores on June 11, 2003 at 8:00 a.m. (I actually got misty that day…just what a geek I am.)
Only a very small percentage of the population even understands they have three FICO credit scores…let alone three Car Industry Option scores.
So How DO YOU REQUIRE This Information to obtain THE NEXT New Car Financed at the very best Interest Rate
1. First, get your three credit reports. If you managed your previous car credit well–your FICO Car Industry Option scores will be greater than your traditional FICO scores. So expect more from the lending company.
2. You can even ask the lender showing you their tier levels. Tiers are fundamentally graphs lenders use that have different interest rates predicated on your scores. You intend to see which tier your fall in. To find out a good example of a car lender’s tier routine, click here.
3. If indeed they won’t show you…at least have them break it down verbally for you. (Personally, I love to see it with my very own eyes, as I never believe a phrase that comes out of all car dealers’ mouths.)
4. If you’ve handled your car credit badly…then you should simply try to find an auto lender that uses just the traditional FICO fico scores. When you find a lender that runs on the traditional FICO credit history, you’ll have your best chance to get the cheapest interest rate.
5. Start by calling dealerships and requesting the fund director if indeed they use a normal FICO credit score to make their financing decision or if they use the FICO Auto Industry Option rating.
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