Auto loans Credit score of 625 and Fair Issac
More on
auto loans, credit score of 625 and dear old Fair Issac.
By Peter
Bonavista
Factor 1 = 35%
on your payment history.
Factor 2 = 30% on your outstanding debt.
Factor 3 = 15% on the length of your credit history
Factor 4 = 10% on recent inquiries on your credit report.
Factor 5 = 10% on the types of credit you have.
So lets figure
out a credit score of 625 shall we.
In my previous installment I stated the range starts at 300-900. The half way
mark between 300 and 900 is 600. So taking in the factors listed above, a credit
score of 625 is 25 points above the half way point. You could score a zero,
goose egg, nothing, on factors 3-5, but if factors 1 and 2 are good, you are
usually driving that shiny new baby off the lot.
Dear Fair Isaac
has many different styles of Fico scores that they sell to lenders around the
world. They can make a call on your auto loan application in minutes. Classic
Fico Risk Scores are similar to Classic coke, except not that sweet. These scores
are the original scores that the Fair Isaac company came up with. They basically
let the lender or bank know the odds on whether or not you will be paying off
your car loan. The credit grantors
use this info to make automatic decisions. Like: do you get the boat, do you
get the car, do you get the toy, do you get the motorcycle, do you get the house,
do you get the shaft...........do you get the point? Generally speaking, Classic
Fico Rick scores give banks the least amount of flexibility.
They also have
different names for their Fico scores. (isn't that cute) They use Beacon at
Equifax - United States and Canada. They use Emprica at Transunion United States
and Canada. The same at Transunion ITC in South Africa. God forgive the people
of the world people with bad credit. Next on the list of
Fair Isaac's risk scores is called......................................drum
roll please.........................."Next Gen Fico Risk Scores!".
Next Gen Fico
Scores enable the lender, bank, or loanshark (kidding), the ability to be more
flexible when approving your loan. For example, if you have a credit score of
625 or perhaps lower, and a bank wants do business with you, they would have
to use NextGen Fico scores.
A credit score
of 625 can mean different things to different lending institutions. Credit dealers
can lower rates between 10%-25% or increase their approval rates if they want,
up to 5% or more. So as you can see....the NextGen Fico Score by Fair Isaac,
was likely designed to take into account the many banks who have to compete
in the new world. Basically..... banks are giving people with bad credit loans.
For more direct information on Fair Isaac and their Fico scores go to www.fairisaac.com.
This is the last
installment regarding "good and bad
credit auto loans". I am tired of typing "credit score of 625",
as I am sure your are tired of reading it. I will finish up this article with
the last three Fair Isaac scores available. Number one:
"Fico Industry options scores". These scores are used by financial
institutions to access risk in a particular industry. For example: auto, home,
bankcard, etc.
Number
two: "CallScore". Callscore is used to keep records
on UK consumers, and the odds of whether or not they will default on their payments.
As described by Fair Isaac® "CallScore leverages CallCredit's database
of UK consumer credit profiles and demographic information, in combination with
Fair Isaac's predictive analytic expertise, to assess each consumer's relative
likelihood of default."
Number
three: "Global FICO® score". Global Fico Score is
the big mama of the Fair Isaac company. Global Fico Scores take into account
all the bureaus, agencies, other Fair Isaac scores from around the world, and
gives finance companies the ability to make broad and accurate assumptions about
consumers.
That's it for
FICO products in a nutshell. I have enjoyed passing on some of my knowledge
regarding "credit score of 625", the Fair Isaac company, and their
fine products. I hope Fair Isaac has a sense of humor (because their lawyers
are bigger than mine), and realize that I like to create entertaining copy when
I provide some of the dryer (but informative) financial information.
Now that I have
covered the methods in which the auto
loan providers calculate their risk factor, you may think that the financial
institutions are fairly stringent in their policies and procedures. Actually...they
are reasonable due to the fact that they have some flexibility with the newer
generation FICO products. The interest rates for auto loans are excellent right
now and are likely to stay that way. Allan Greenspan's reports don't even send
banks and consumers into stress mode anymore. These are the good times if you
need to borrow some funds for your dream car loan, or simply a work vehicle.
There is a fair
amount of fiction floating around the internet regarding the pros and cons of
getting your auto loan through a dealership. Zero percent financing and all
that. Yes - sometimes car dealerships are trying to clear out last year's models
and they offer great financing deals. There are many that simply make their
money off their own financing by hitting the consumer with the interest. They
say it is zero percent financing, but it truth they have added the interest
in to the sticker price.
The rule of thumb
is to get your own low interest financing before you get on the car lots and
catch that car buyer's fever. This way you can tell the dealership you want
to know their price without their financing. Depending on the value and their
motivation, you will have to do the math on which auto loan to accept. This
is where you can bring them down usually. They really want to make their money
on the car loan, so they may have to get competitive to win your signature.
Keep in mind that
there a few a variables in play here, so keep your calculator near by, and try
to avoid "car buyer's fever". You can wait for the right deal. I've
seen many people lose thousands of dollars because they just could'nt wait.
Of course, if you are one of the fortune five hundred, you don't need to worry
about it. That's it for this installment. I hope you come back again to this
fine website. We try to keep our information up to date and as accurate as possible.
If you have any corrections, or letters to the editor, please click to Auto
Loan 4U and email Brent. He (and I) always enjoy getting feedback on our
work. Good or bad, it's usually constructive.
Peter Bonavista
is a successful author and publisher specialized in Auto Financing.
He resides with his wife
Twyla in the midwest.
Back to Auto Financing
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