December 10, 2023

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

Once you apply for a automobile mortgage, the lender will run a credit score test 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 range from lender to lender.

What’s the distinction in credit score scores?

There are two principal credit-scoring fashions that lenders use: FICO rating and VantageScore. Relating to automobile loans, it’s as much as the lender’s discretion which one they select—and in some instances, the lender may test 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 usually vary from 300 to 850. Nevertheless, FICO additionally has some industry-specific scores, together with one for auto lenders. These lenders could select to make use of the FICO auto rating when contemplating a mortgage software.

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 relies on a generic FICO rating, however there’s somewhat extra emphasis positioned in your previous historical past with auto loans. Should you’ve paid off earlier auto loans with no issues, you’ll doubtless have the next FICO auto rating. However when you have defaulted on an auto mortgage or been repeatedly late with funds, you could discover your rating is decrease than you assume.

Tips on how to test your FICO auto rating

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

To test your FICO auto rating, nonetheless, 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 test all of your FICO scores, together with for auto loans and mortgages. It may not be price paying for a subscription when you’re solely serious about figuring out your FICO auto rating, particularly since there’s no assure the lender you select will use this rating. Nevertheless, a subscription additionally presents perks akin to identification theft insurance coverage and identification monitoring, which can make it price the price to some.

MyFico credit score rating

Month-to-month payment

$19.95 to $39.95 per 30 days

Credit score scoring mannequin used


Id 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 companies, invoice negotiation companies, identification safety, and identification theft insurance coverage. Once more, it is probably not price paying for a subscription if all you need is to see your FICO auto rating, however you may discover a subscription price it for the opposite advantages it presents. 

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 may use when contemplating an software for a automobile mortgage. That makes it not possible to foretell which mannequin will probably be used whenever you apply for a automobile mortgage. You may at all times ask the lender which credit score rating they use as a part of the credit score test course of, however they’re not obligated to let you know. 

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

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

Pay down balances

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 damaging impression in your credit score rating. 

Consolidate debt

Consolidating debt is a standard method to cut back curiosity funds and pay down debt quicker. Somewhat than paying off balances on a number of bank cards with various rates of interest, you possibly can consolidate your debt to 1 mortgage or card, presumably with a decrease rate of interest.

Pay payments on time

The simplest method to increase your credit score rating is to pay payments on time. Should you’re ceaselessly late paying payments, you’ll see your credit score rating drop rapidly. A simple method to be sure to’re paying your payments on time is to enroll in 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

Once you apply for a mortgage or line of credit score, the lender will run a tough credit score test, which can negatively have an effect on your credit score by a number of factors. Making use of for a number of loans or bank cards shut collectively can have a extra noticeable impact in your credit score rating, and it will possibly additionally make you appear extra dangerous to lenders. Normally, it’s greatest 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 will help you establish any points as quickly as they come up. It may also be a motivator when you’re actively engaged on boosting your credit score rating, because you’ll be capable of see the constructive modifications taking place in actual time. There are a number of credit score monitoring companies obtainable, together with Experian and myFICO, that may provide help to preserve an in depth eye in your credit score.

Further components that may provide help to qualify for a automobile mortgage

Your credit score rating is vital when you’re planning to finance a automobile buy utilizing an auto mortgage. However there are different components that might provide help to 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 must borrow much less. This might make it simpler to get mortgage approval, particularly when 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, but it surely 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 will help present them that you’ve steady employment and housing, which may make you appear extra dependable.
  • Store round for financing: Earlier than heading to the dealership to purchase a automobile, test and see whether or not you will get a mortgage out of your present monetary establishment. They may supply a greater charge than the vendor’s financing presents. You may carry your mortgage preapproval letter to the dealership and see if they will beat your financial institution’s charges.

TIME Stamp: Totally different lenders use completely 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 could possibly be your fundamental FICO rating, your FICO auto rating, or your VantageScore. Understanding your credit score scores will 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 will help you qualify for higher charges. 

Continuously requested questions (FAQs)

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

Once 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 an excellent 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 range between lenders, however on the whole, a cosigner will want a credit score rating of at the very least 670, which falls within the superb to glorious vary.

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

Every lender has completely different necessities in terms of minimal credit score scores for an auto mortgage. A 530 rating is taken into account subprime, and a few lenders won’t approve a automobile mortgage for a borrower with this rating. Nevertheless, there are many lenders who will—you’ll simply find yourself with a a lot larger rate of interest than you’d when you had a more healthy credit score rating.