Your credit score plays a huge role in the interest rate you'll get when financing a new vehicle purchase. The higher your score, the lower the interest rate lenders will offer. But not all credit monitoring services are giving you an accurate picture of where your score really stands. To ensure you get the best possible rate on your next auto loan, you need to know your true FICO credit score.
The Pitfalls of Free Credit Score Sites
You've probably seen the ads for free credit score sites
like Credit Karma. While these can be useful for getting a general idea of your
credit health, they don't give you the full picture that lenders see. That's
because Credit Karma and similar free services use proprietary scoring models
rather than the FICO score that over 90% of lenders actually use.
The FICO scoring model calculates your credit risk in a very
specific way, taking into account factors like payment history, amounts owed,
length of credit history, new credit inquiries, and credit mix. A single missed
payment can impact your FICO score much more than the proprietary models used
by free sites. So, getting your true FICO score is crucial before applying for
an auto loan.
The Best Sources for Your Real FICO Score
To get accurate score information that car dealers and
lenders will see, you need to check your scores directly from a FICO-approved
source. Two of the most reputable options are:
Experian: One of the three major credit bureaus, Experian
allows you to purchase access to your official FICO score from their site.
MyFICO.com: This is the consumer division of Fair Isaac
Corporation, the company that created the FICO scoring model. At MyFICO.com,
you can buy your scores from all three bureaus.
Why FICO Matters for Car Loans
When you walk into a car dealership or apply for a loan from
a bank or credit union, they will pull your credit report from one or more of
the major bureaus. But crucially, they look at your FICO score, not proprietary
scoring models. Dealers and lenders use FICO because its scoring methodology
was developed specifically to predict credit risk for new loans and lines of
credit.
By knowing your true FICO score ahead of time, you can
better negotiate for the best possible auto loan rate based on your current
credit profile. If your FICO score is lower than you expected based on free
sites, you may want to spend some time improving it before applying for
financing. Just a few months of positive credit behaviors can make a big
difference in raising your FICO score and qualifying for cheaper interest rates
on a car loan.
Don't leave such an important factor up to chance. Get your
real FICO scores from a reputable source and put yourself in the driver's seat
for the best deal on your next vehicle. A little preparation can easily be
worth saving thousands over the life of your auto loan.
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