How Your FICO Score Affects Your Car Loan Rate
Kate Ross
March 04, 2009
If you are in the market to buy a car, you might be wondering what type of interest rate you will be able to obtain on your car loan. The interest rate that you will pay on your car loan can affect the total price of your car by hundreds of dollars. The factor that will have the most impact on the interest rate for your car purchase and car loan is your FICO credit score, and everybody has got one - although some are better than others.
What Is A FICO Score?
The Fair Isaac Company is the creator of the FICO score. Your FICO score is based on certain credit behaviors and patterns, such as the credit you have had extended to you, the amount of credit that you had extended to you that you used, the amounts that you paid back, and most importantly, the timeliness of your monthly payments. Each credit reporting bureau - Experian, Trans Union, and Equifax update your credit report every quarter - and thus your FICO credit score is updated four times each year to indicate your credit performance and use of credit.
Your FICO score will also reflect any bankruptcy proceedings that you have been party to, as well as unpaid bills (sometimes including utility bills or rent payments) and other delinquencies. The FICO score is used by creditors to judge the risk level that you pose to their institution when borrowing money or when they extend credit to you. Whether the FICO score is a fair judgment of your financial responsibility is debatable; nonetheless, the FICO score is used by nearly one hundred percent of lenders to determine your creditworthiness.
What Is My FICO Score?
Because of the importance that the FICO score has on your ability to obtain credit to purchase the car you want or need, its most imperative that you know what yours is to get a clear indication of how lenders look at you as a borrower. Although you are entitled to one free copy of your credit report from all three major credit bureaus each year, you may have to pay additional charges to get your actual FICO score from them.
Be sure to check your credit reports for accuracy and dispute any item(s) that does not look to be reported accurately. This will improve your chances of getting a good interest rate on your car loan. In most instances, derogatory accounts on your credit report that cannot be substantiated by the credit bureau will be removed from your report - so be sure to dispute any item that you do not recognize or claim. When a negative item is removed or deleted from your reports, your FICO score will rise, and your interest rates will lower.
Where Can I Find Additional Savings?
You can save even more money on your next car loan by going with an online lender. Online lenders have historically lower interest rates than traditional credit unions and lending institutions. Additionally, online lenders give you the freedom of applying online from the comfort of your home or office for your next car loan.
What Is A FICO Score?
The Fair Isaac Company is the creator of the FICO score. Your FICO score is based on certain credit behaviors and patterns, such as the credit you have had extended to you, the amount of credit that you had extended to you that you used, the amounts that you paid back, and most importantly, the timeliness of your monthly payments. Each credit reporting bureau - Experian, Trans Union, and Equifax update your credit report every quarter - and thus your FICO credit score is updated four times each year to indicate your credit performance and use of credit.
Your FICO score will also reflect any bankruptcy proceedings that you have been party to, as well as unpaid bills (sometimes including utility bills or rent payments) and other delinquencies. The FICO score is used by creditors to judge the risk level that you pose to their institution when borrowing money or when they extend credit to you. Whether the FICO score is a fair judgment of your financial responsibility is debatable; nonetheless, the FICO score is used by nearly one hundred percent of lenders to determine your creditworthiness.
What Is My FICO Score?
Because of the importance that the FICO score has on your ability to obtain credit to purchase the car you want or need, its most imperative that you know what yours is to get a clear indication of how lenders look at you as a borrower. Although you are entitled to one free copy of your credit report from all three major credit bureaus each year, you may have to pay additional charges to get your actual FICO score from them.
Be sure to check your credit reports for accuracy and dispute any item(s) that does not look to be reported accurately. This will improve your chances of getting a good interest rate on your car loan. In most instances, derogatory accounts on your credit report that cannot be substantiated by the credit bureau will be removed from your report - so be sure to dispute any item that you do not recognize or claim. When a negative item is removed or deleted from your reports, your FICO score will rise, and your interest rates will lower.
Where Can I Find Additional Savings?
You can save even more money on your next car loan by going with an online lender. Online lenders have historically lower interest rates than traditional credit unions and lending institutions. Additionally, online lenders give you the freedom of applying online from the comfort of your home or office for your next car loan.
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