December 7, 2023

A automobile is a significant buy, and most Individuals don’t have the money available to purchase one outright. That’s why so many individuals use an auto mortgage. In truth, in accordance with Experian’s State of the Automotive Finance Market report, patrons used auto loans for nearly 80% of latest car purchases and simply over 40% of used car purchases in Q1 2023.

While you apply for a automobile mortgage, the lender will run a credit score examine to find out whether or not or to not approve the mortgage. However which credit score rating is used for automobile loans? The reply is difficult and might differ from lender to lender.

What’s the distinction in credit score scores?

There are two most important credit-scoring fashions that lenders use: FICO rating and VantageScore. In terms of automobile loans, it’s as much as the lender’s discretion which one they select—and in some instances, the lender would possibly examine your credit score utilizing each scoring fashions.

Each fashions use data from one of many three main credit score bureaus (Equifax, Experian, and Transunion) to give you their scores, which generally vary from 300 to 850. Nonetheless, FICO additionally has some industry-specific scores, together with one for auto lenders. These lenders might select to make use of the FICO auto rating when contemplating a mortgage utility.

What’s a FICO auto rating?

A FICO auto rating is a credit score rating calculated particularly to find out the probability {that a} borrower will repay a automobile mortgage as promised. FICO auto scores can vary from 250 to 900.

The rating is predicated on a generic FICO rating, however there’s just a little extra emphasis positioned in your previous historical past with auto loans. If you happen to’ve paid off earlier auto loans with no issues, you’ll probably have a better FICO auto rating. However if in case you have defaulted on an auto mortgage or been repeatedly late with funds, it’s possible you’ll discover your rating is decrease than you suppose.

How you can examine your FICO auto rating

Checking your FICO auto rating is a bit more difficult than checking your different credit score scores. You’ll be able to entry your common FICO rating pretty simply and totally free—many banks supply this as a service for patrons, or you’ll be able to join a credit score monitoring service to entry your rating data.

To examine your FICO auto rating, nevertheless, you’ll want a paid subscription to a credit-monitoring service. Some examples embody myFICO and Experian. A subscription to FICO will allow you to examine all of your FICO scores, together with for auto loans and mortgages. It may not be value paying for a subscription should you’re solely keen on understanding your FICO auto rating, particularly since there’s no assure the lender you select will use this rating. Nonetheless, a subscription additionally provides perks equivalent to id theft insurance coverage and id monitoring, which can make it value the fee to some.

MyFico credit score rating

Month-to-month payment

$19.95 to $39.95 monthly

Credit score scoring mannequin used


Identification insurance coverage

As much as $1 million

Experian ECW

Credit score scoring mannequin used


Equally, you’ll want a paid subscription to Experian to see your FICO auto rating. Different options embody subscription cancellation providers, invoice negotiation providers, id safety, and id theft insurance coverage. Once more, it is probably not value paying for a subscription if all you need is to see your FICO auto rating, however you would possibly discover a subscription value it for the opposite advantages it provides. 

Higher credit score means decrease prices

Which credit score rating is used when shopping for a automobile?

Every lender determines which credit score rating they’ll use when contemplating an utility for a automobile mortgage. That makes it unattainable to foretell which mannequin might be used once you apply for a automobile mortgage. You’ll be able to all the time ask the lender which credit score rating they use as a part of the credit score examine course of, however they’re not obligated to inform you. 

Methods to enhance your credit score rating earlier than shopping for a automobile

If you happen to’re planning to purchase a automobile within the close to future, it’s sensible to examine your credit score rating first so you’ll be able to gauge how straightforward it will likely be to get a mortgage. If it’s decrease than you thought it was, the next suggestions may help you construct a greater rating earlier than you apply for a automobile mortgage:

Pay down balances

If in case you have a number of bank cards with excessive balances, it’s a good suggestion to start out paying them down earlier than making use of for a automobile mortgage. Utilizing greater than 30% of your whole obtainable credit score can have a destructive influence in your credit score rating. 

Consolidate debt

Consolidating debt is a standard method to cut back curiosity funds and pay down debt sooner. Relatively than paying off balances on a number of bank cards with various rates of interest, you’ll be able to consolidate your debt to at least one mortgage or card, presumably with a decrease rate of interest.

Pay payments on time

The best method to enhance your credit score rating is to pay payments on time. If you happen to’re steadily late paying payments, you’ll see your credit score rating drop shortly. A straightforward method to be sure you’re paying your payments on time is to join computerized invoice funds at any time when attainable. For payments that don’t supply this, set reminders to make sure you’re making funds on time.

Keep away from making use of for different loans or bank cards

While you apply for a mortgage or line of credit score, the lender will run a tough credit score examine, which can negatively have an effect on your credit score by a couple of factors. Making use of for a number of loans or bank cards shut collectively may have a extra noticeable impact in your credit score rating, and it may well additionally make you appear extra dangerous to lenders. Normally, it’s finest to carry off on new mortgage or bank card purposes earlier than making use of for a automobile mortgage.

Monitor your credit score rating

Monitoring your credit score rating may help you establish any points as quickly as they come up. It can be a motivator should you’re actively engaged on boosting your credit score rating, because you’ll be capable to see the optimistic adjustments taking place in actual time. There are a number of credit score monitoring providers obtainable, together with Experian and myFICO, that may assist you hold an in depth eye in your credit score.

Further components that may assist you qualify for a automobile mortgage

Your credit score rating is essential should you’re planning to finance a automobile buy utilizing an auto mortgage. However there are different components that would assist you qualify for a automobile mortgage, together with the next:

  • Enhance your down fee: Placing a bigger sum down in your automobile buy means you’ll have to borrow much less. This might make it simpler to get mortgage approval, particularly if in case you have a subprime credit score rating.
  • Show your reliability: Your credit score rating reveals lenders how accountable you might be along with your funds, nevertheless it doesn’t present details such because the size of time you’ve labored to your employer or lived at your present residence. Bringing paperwork that show these details to a lender may help present them that you’ve secure employment and housing, which might make you appear extra dependable.
  • Store round for financing: Earlier than heading to the dealership to purchase a automobile, examine and see whether or not you will get a mortgage out of your present monetary establishment. They could supply a greater charge than the supplier’s financing provides. You’ll be able to convey your mortgage preapproval letter to the dealership and see if they’ll beat your financial institution’s charges.

TIME Stamp: Completely different lenders use totally different credit score scores for automobile loans

Whereas it’s attainable a lender will use the FICO auto rating when checking your credit score for a mortgage, there’s no assure. Lenders can use whichever rating they select, which may very well be your primary FICO rating, your FICO auto rating, or your VantageScore. Figuring out your credit score scores may help handle your expectations when making use of for a automobile mortgage—and having a plan to spice up your rating earlier than shopping for a automobile may help you qualify for higher charges. 

Steadily requested questions (FAQs)

Whose credit score rating is used when shopping for a automobile with a cosigner?

While you apply for a automobile mortgage with a cosigner, the lender will use each candidates’ credit score scores as a part of the appliance course of. In case your credit score rating is on the low finish, having a cosigner with a brilliant prime credit score rating may qualify you for a decrease charge.

Are you able to cosign a automobile with a 650 credit score rating?

The necessities for a cosigner can differ between lenders, however on the whole, a cosigner will want a credit score rating of a minimum of 670, which falls within the excellent to wonderful vary.

Can I purchase a brand new automobile with a 530 credit score rating?

Every lender has totally different necessities on the subject of minimal credit score scores for an auto mortgage. A 530 rating is taken into account subprime, and a few lenders is not going to approve a automobile mortgage for a borrower with this rating. Nonetheless, there are many lenders who will—you’ll simply find yourself with a a lot larger rate of interest than you’ll should you had a more healthy credit score rating.