Some answers on how FICO comes up with the credit score that is so important in determining whether o not you will have to finance your next vehicle with a bad credit auto loan
What we do with your score
At Auto Credit Express, we deal with FICO scores every day. Through our bad credit car loan web site at www.autocreditexpress.com we have helped thousands of applicants reestablish their auto credit by financing a new or low-mileage used car at one of our affiliate dealers. If you’re reading this, there is probably a good chance that you have bad credit and you need a car. If this is the case, read on.
Getting back on your feet can be difficult enough even with good credit, but if unforeseen circumstances such as a job loss, layoff or medical bills have lowered your credit score, your problems can get even bigger. This is where we come in. You can begin the process simply by filling out our online car loans with bad credit loan application. What we offer can help you because unlike tote the note dealers, the second chance auto loans our dealers can offer you originate with lenders that report your payment history to the credit bureaus. By making timely monthly payments, you can raise your credit scores and eventually position yourself to re-enter the prime auto loan market.
IF you are applying for auto loans for bad credit, you should already know what your FICO score is. But you also may be wondering how your credit scores (you have more than one) are computed and what information is used to come up with that all-important three-digit number.
The FICO score
There are 5 factors that FICO (the company formerly known as Fair Isaac) uses in order to determine your credit score. Where you fall in this ranking can determine a number of things ranging from how much you pay for car insurance to whether or not you’ll get approved for an apartment lease. It also has a great deal to do with whether you can finance a car with a traditional lender or whether you’ll need to apply for a bad credit auto loan.
Here are the 5 factors that FICO considers in determining a credit score:
Payment History - Payment history affects approximately 35 % of your score. Making all of your monthly payments on time goes a long way towards being able to finance a car through a traditional lender such as a bank or a manufacturer’s captive finance company. If your payment history shows a pattern of missed or late payments, your only alternative may be a bad credit auto loan. Of special note: recent late payments will have more of a negative impact on your score while those from the past will not affect your score nearly as much.
Balances - How much do you currently owe to creditors? Your current debt load will affect about 30 % of your FICO score. If your credit cards are at their limits and your revolving credit is maxed out, this will have a negative effect on your score. Bad credit car loan buyers, especially, should try and lower the ratio of debt to available credit before applying for a loan. The lower your balances (a rule of thumb is to keep your current balances at 30% of your credit limit or lower), the higher you will score. Even if a bad credit car loan is your only choice, having a lower debt load will increase your chances of an approval.
Credit Utilization - The types of credit you are currently using impact your credit score by approximately 15 %. Banks, finance lenders, credit cards, mortgages, and all other financing is included in this category. You will have a better chance of an approval for car loans with bad credit if you have auto loan installment credit history.
Depth of Credit – How long have you been using credit? Your time “in the bureau” accounts for approximately 10% of your credit score. The longer you’ve been using credit, the higher your score will be. Most bad credit lenders look for a minimum of 3 to 5 years of credit history.
Recent Credit Opened - Recent credit applications impact your score by about 10%. If you are constantly applying for new credit (such as a personal loan, credit cards, etc.) this will be reflected in a comparatively lower credit score. Be sure to keep this activity to a minimum in the months leading up to applying for a car loan
The Bottom Line
At Auto Credit Express we have helped thousands of people with bad credit find a dealer that can help get them financed so they can buy a car and reestablish their credit at the same time. Our national network of affiliate dealers specializes in bad credit car loans and, since our inception, we have processed over 1 million online bad credit auto loans and our dealers have closed over $2 billion in auto loans.
So if you are serious about getting your credit back on track, why not begin a new chapter in your life by filling out our bad credit car loan application now.
