Car News

Know Your Credit Score and History

RELATED READING
RESEARCH BY MAKE
Toyota cars, trucks and SUVs Ford cars, trucks and SUVs Honda cars, trucks and SUVs Chevrolet cars, trucks and SUVs Jeep cars, trucks and SUVs Nissan cars, trucks and SUVs Lexus cars, trucks and SUVs Volkswagen cars, trucks and SUVs BMW cars, trucks and SUVs
Acura cars, trucks and SUVs Alfa Romeo cars, trucks and SUVs AMC cars, trucks and SUVs Aston Martin cars, trucks and SUVs Audi cars, trucks and SUVs Bentley cars, trucks and SUVs BMW cars, trucks and SUVs Bugatti cars, trucks and SUVs Buick cars, trucks and SUVs Cadillac cars, trucks and SUVs Chevrolet cars, trucks and SUVs Chrysler cars, trucks and SUVs Daewoo cars, trucks and SUVs Datsun cars, trucks and SUVs DeLorean cars, trucks and SUVs Dodge cars, trucks and SUVs Eagle cars, trucks and SUVs Ferrari cars, trucks and SUVs FIAT cars, trucks and SUVs Fisker cars, trucks and SUVs Ford cars, trucks and SUVs Freightliner cars, trucks and SUVs Genesis cars, trucks and SUVs Geo cars, trucks and SUVs GMC cars, trucks and SUVs Honda cars, trucks and SUVs HUMMER cars, trucks and SUVs Hyundai cars, trucks and SUVs INFINITI cars, trucks and SUVs Isuzu cars, trucks and SUVs Jaguar cars, trucks and SUVs Jeep cars, trucks and SUVs Kia cars, trucks and SUVs Lamborghini cars, trucks and SUVs Land Rover cars, trucks and SUVs Lexus cars, trucks and SUVs Lincoln cars, trucks and SUVs Lotus cars, trucks and SUVs Maserati cars, trucks and SUVs Maybach cars, trucks and SUVs Mazda cars, trucks and SUVs McLaren cars, trucks and SUVs Mercedes-Benz cars, trucks and SUVs Mercury cars, trucks and SUVs MINI cars, trucks and SUVs Mitsubishi cars, trucks and SUVs Nissan cars, trucks and SUVs Oldsmobile cars, trucks and SUVs Plymouth cars, trucks and SUVs Pontiac cars, trucks and SUVs Porsche cars, trucks and SUVs RAM cars, trucks and SUVs Rolls-Royce cars, trucks and SUVs Saab cars, trucks and SUVs Saturn cars, trucks and SUVs Scion cars, trucks and SUVs smart cars, trucks and SUVs SRT cars, trucks and SUVs Subaru cars, trucks and SUVs Suzuki cars, trucks and SUVs Tesla cars, trucks and SUVs Toyota cars, trucks and SUVs Volkswagen cars, trucks and SUVs Volvo cars, trucks and SUVs Yugo cars, trucks and SUVs
RESEARCH BY STYLE
AWD/4WD
Commercial
Convertible
Coupe
Hatchback
Hybrid/Electric
Luxury
Sedan
SUV/Crossover
Truck
Van/Minivan
Wagon

author photo by Russ Heaps October 2011

Finding the right car and negotiating the best price are only part of a successful car-buying experience. Equally important is getting the best financing deal possible. And finding the best financing might require just as much research and shopping around as purchasing the car.

Don't wait until you are sitting across from the loan officer at a finance company or the financing manager at a car dealership to discover your credit worthiness. Their best interests may not always be yours. Knowing where your credit stands could save you a lot of money.

If you think the first step to securing an automobile loan is to search for finance companies and banks on the internet or in the yellow pages, you're already off on the wrong foot. Your first order of business should be to determine your credit worthiness. How? By getting your credit score and obtaining a copy of your credit report.

Here's why: People with the best credit will have the most financing opportunities and the better position from which to negotiate a low rate.

Know the Score

Your credit score is a snapshot of your credit worthiness at a particular moment. "A person's credit score reflects all aspects of credit history," said Danielle Arlow, the senior vice president of the American Financial Services Association. AFSA is the national trade association for the consumer credit industry. Most banks, finance companies and car manufacturers' finance arms are AFSA members.

Arlow added that one big advantage of using credit scores is that they are objective. They are calculated using a truly mathematical process that doesn't include prejudices such as age, gender or race.

Every lender you shop, however, won't necessarily use the same credit score to evaluate you. Always ask the lender which credit score they're using. If it's lower than the one you obtained through, say, www.freecreditscore.com, ask why.

Although unlikely, it is possible a lender is low-balling your credit score to push up the rate. You can challenge the lender's credit score if significantly lower than yours. Or, you can just move on to another lender; there are certainly plenty of them out there.

Generally, the higher your credit score, the better financing deal you can negotiate; but sometimes how a particular lender rates your credit score can make a difference as well.

Various lending agencies may have somewhat different boundaries defining the classifications of credit worthiness, such as prime and subprime, consequently, an identical credit score may be treated differently at one lender than another down the street. That is, you may qualify for a better rate from Lender A than Lender B based on the very same credit score - a good reason to shop around.

You may ask the lenders you shop to provide their numerical classification of credit scores to determine exactly where your credit score lands on their scale.

Experian is one of three credit information gathering and reporting services in the United States. For its internal purposes, here's how it classifies credit scores:

  • Super Prime:              740+
  • Prime:                        680 - 739
  • Nonprime:                 620 - 679
  • Subprime:                  550 - 619
  • Deep Subprime:        <550

According to Experian's director of automotive credit Melinda Zabritski, the Super Prime and Prime categories were responsible for nearly 65 percent of all open auto loans through the first half of 2011. Those classifications are also where the best financing deals can be found.

If your credit score falls in the nonprime category or below, you still have plenty of options. "Credit scores reflect risk," Arlow explained, "and lenders can tailor loans to different risk levels."

Finally, credit scores are constantly changing. Your credit score today may be quite different than it was two months ago, so you may look more attractive to lenders today. The farther away you get from past credit problems, the more your score increases, Arlow advised.

Credit Report

Although, at a glance, your credit score provides a summary of your credit status, lenders consult other credit evidence as well, including your credit report.

Your credit report is your credit history.

Experian and the other credit bureaus (Equifax and TransUnion) gather from your creditors your account information that may include credit limit, high balance, current balance, payment history and so forth. This collection of account and creditor information is your credit report. It tells a potential lender how much indebtedness you currently have and how reliably you have paid your bills in the past.

Also listed are accounts turned over to a collection agency, bankruptcy and other negative information.

Although the credit bureaus are diligent in keeping reports up to date, it's not unheard of for a credit report to contain inaccurate or outdated information. Moreover, your report might vary depending on the credit bureau issuing it.

Don't take for granted that because you pay your bills on time that you have a star-studded credit report. Mistakes are made.

If you discover such a mistake on a credit report, you have the right to dispute any piece of information appearing in it. Each credit bureau has a procedure for challenging incorrect information.

But don't wait until you are sitting in a car dealership's business office to discover that there is misinformation on your credit report that will translate into a higher rate, or maybe even prevent you from getting a loan at all.

Securing your credit reports is fairly simple. Four to six months before applying for vehicle financing, request a copy of your credit report from www.Experian.com, as well as the other credit bureaus. This should give you enough lead time to challenge any misinformation. It will also provide an opportunity to fix any smaller credit problems, such as catching up delinquent payments or paying off balances reported by collection agencies.

To qualify for the best financing terms and rates, you need to successfully manage your credit, but aggressively managing your credit information is also critical.

Where your credit is concerned, always be proactive.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
Know Your Credit Score and History - Autotrader