How to Read Your Credit Score for Auto Financing
Not knowing how to interpret your own credit score — the numerical indicator of your borrowing history — can turn you into the tender prey of a savvy car dealership’s cutthroat F&I (Finance & Insurance) department. We have explored the implications of subprime credit in terms of spot-delivery and other common scams, but not knowing what your credit score means is where these F&I tactics start; you may be taking a risk by borrowing from a dealer with a low credit score. Conversely, not knowing how strong your credit score is can put you in a situation where you are paying much more than you should in terms of interest. So you are a little hazy about what the credit score represents, the Honest Car Dealer is here to clear a few things up before your next financing experience. To be sure, a Finance department representative will certainly know how to exploit your credit score — for better or worse.
How Your Credit Score is Determined
The credit score was created as an analytical tool for lending institutions, so it can be quite confusing for the casual borrower. In a nutshell, the credit score represents certain aspects of your borrowing history as weighted numbers; lenders treat different facets of financing and debt management differently in an effort to give a numerical label of how “safe” of a bet you are in terms of borrowing. The best possible score is 850 as set by FICO, otherwise known as Fair, Isaac, & Company — a consumer credit analysis firm.
A credit score has three main components: your payment history, the size of your debt, and the types of credit and amalgamated credit history. How much debt you have accrued, and how well you have made due on that debt are the two single most important factors in calculating your credit score. You will notice your credit score change even if patterns in either one of these aspects changes only slightly.
Prepare Yourself and Your Score for the Dealer
If you are considering financing a new or pre-owned vehicle, take the time to examine your credit history first. Knowing the nature of the beast is the first step to defeating it. Many times, you might find that the rates your local dealer’s F&I are unwarranted for someone with your score, or you might even find out that part of your credit history was misreported and with a few phone calls you can alter your score dramatically. At any rate, you know it is a good idea to be familiar with your credit history before going shopping for a new automobile — and to consult the Honest Car Dealer too!
August 7, 2012 by Jamie Rettig