Which Credit Bureau Is Used
Ive included a table indicating which credit bureau in Canada each issuer uses. These are general guidelines and are not strict rules. The credit bureau that each bank checks may vary depending on the individual consumer. However, the majority of applicants have the same results as this table. Ive added a; list of which Canadian credit bureaus are pulled by major credit card and other financial issuers. If you have any additional data points youd like to contribute, please send me an email.;Most of this information is from various online resources including RFD, and pretty much match my own credit history with the bureaus. The split pretty much is right down the line Equifax and TransUnion are pulled equally.
What Is A Credit Score
Auto lenders evaluate an applicants creditworthiness based largely on their FICO score. Created and curated by the Fair Isaac Corp., FICO says its scores which range from 300 to 850 are used by 90% of the nations top lenders.
Learn more about how to finance a car
According to FICO, consumers with scores in the 700-850 range are considered the most reliable borrowers. They get the lowest interest rates and the most favorable loan terms. On the other end of the spectrum, borrowers with scores below 669 are often considered subprime. That means theyll pay more to finance a car.
Though the FICO score is the one used by most lenders, some use a credit score known as the VantageScore, which also uses a scale ranging from 300 to 850.
Whats The Ideal Credit Score For A Car Loan
Auto-loan lenders look for a borrower with a credit score in the mid-600s in Canada. A credit score between 630 and 650 is generally what lenders want to see.With this, there is some leeway around your credit score requirements when looking to obtain a car loan. Dependent on your lender or bank, sometimes they will be stricter and look for higher credit scores. At the same time, alternative lenders are often willing to accept lower credit scores. Some dealerships can also help borrowers find financing to meet their specific credit needs.
If your credit score is below 630, dont stress! You can still obtain a car loan. When youre shopping around, its important to keep your mind open to the idea your loan may cost a little more. It can take some time to find a lender that will work your low score. Find out more on obtaining a loan with bad credit here.;
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Dont Give The Dealership Your Car Keys Or Your Drivers License
It is almost as anachronistic as a pocket watch, but some dealershappily fewer than ever before, according to Christopher Sutton, vice president of automotive retail at J.D. Powerstill engage in tactics designed to keep you in the showroom until a deal is made. A couple of the tried-and-not-so-true tactics revolve around test-drive vehicles. Before a test drive, the salesperson might ask for your car keys and/or your drivers license as security. Then, when you return and want to leave without buying, the car keys or the license will go missing. We dont see it that much anymore, Sutton told us, referring to abusive dealer tactics. And I think the advent of ratings and reviews online . . . has contributed to that.
Yes, a wise dealership needs to determine that you have a valid driver’s license before allowing you to take a car out for a test spin, but they don’t need to take it from you and hold it as some sort of deposit. It should be enough for them to know your identity and your address. Since you have typically parked your own car at the dealership, there is the strong likelihood you will return. Further, when you go on the test drive, it is obviously good for you to have your driver’s license in your possession.
Car Loan Rates By Credit Score
Its smart to have some idea what dealers will see when they check your credit profile by checking your;free credit score.;You can also buy your FICO automotive score through that company’s website. That specialty score gives more weight to how you have repaid car loans in the past.;Many lenders use auto-specific credit scores that weigh past car-loan payments more heavily.
Someone with a score in the low 700s might see rates on used cars of about 6.05%, compared with 17.78% or more for a buyer scoring in the mid-500s, according to the data from Experian.
On a $20,000, five-year loan, thats a monthly payment of about $387 for the buyer with better credit versus $505 for the buyer with bad credit. The buyer with better credit would pay about $3,222 in interest over the life of the loan, while the buyer with lesser credit would pay $10,329. Plus, in most states, bad credit can mean higher car insurance rates, too.
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Cosigning Can Be Good For Both Parties
Needing a cosigner isnt the worst thing that can stand in your way when you need a car loan. It also isnt something to be entered into lightly because of the impact your actions could have on someone elses credit. So, if you need a car loan, but bad credit is weighing you down, consider speaking with a close friend or family member about becoming a cosigner. Even if its not required, having a cosigner with better credit can help you get a better interest rate.
If youre ready for financing but dont know where to turn, look to Auto Credit Express. We work with a nationwide network of special finance dealers that have the lenders available to help people that are struggling with credit issues. Go ahead and fill out our easy online auto loan request form, and well get to work matching you with a local dealer today!
Why The Car Dealer’s Score Will Never Match Your Score
People having been falling for the marketing from the credit bureaus for many years, thinking there is only one credit score available; the one they are about to sell to you.
There are actually thousands of possible credit scores, depending on the direction of the prevailing winds. You know the saying ask 100 people you’ll get 100 different answers. Go to 100 dealers and lenders and you will get 100 different scores. There are a zillion ways you can slice and dice the data from your credit report to generate a score and everyone’s formula is different. The dealers use a different software tool to generate your score than you do, so they will never match up.
The credit bureaus will tell you that the 3-Bureau scores are calculated by their own proprietary models, so if you order the 3-score from Experian, Equifax or TransUnion, each will give you a different number.
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Rise In Complaints Of Car Dealers Lying About Credit Scores
We’ve seen an uptick in complaints we receive from car buyers reporting that car dealers are telling them their credit scores are lower than they really are in order to charge a higher APR on their loan. Many car shoppers who supposedly have great credit scores are also being rejected after applying their car loan. Is this really true? Are the dealers lying? How do you prevent it from happening to you? We’ll explain all of it for you and how to prevent it.
A Good Credit Score Does Not Guarantee Approval Or Lower Loan Apr
It really stinks for some people how suspicious it is that the dealer’s generated number often seems to be lower than the one you got from the credit bureaus.
The complaints we hear from our visitors show the average difference is 75 to 100 points. If the score that you obtained from the credit bureau shows you at 660, then the dealer’s 100 point lower score makes it look like you are a deadbeat at 560, when you are in fact a financially responsible person.
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Wed Like To Introduce Ourselves
Were Kasasa® a financial and technology services company. We believe that small banks and credit unions supply critical resources to drive the growth of businesses and families. Nobody knows your communitys needs the way you do.
At Kasasa®, we also partner with institutions like yours, providing our relationship platform, Kasasa, as a comprehensive strategy. It begins with innovative banking products and includes marketing, training, compliance, research, support, and consulting.
Together we can show the next generation of banking customers an experience the mega-banks will never match.
Besides The Impact To My Fico Score Are There Other Risks To Having A Dealership Check My Credit History
It isn’t a good idea to divulge personal information unless it is necessary. There is always the chance someone could take your Social Security number and other personal information and use it to access your bank or credit card accounts. So, despite his explanation of why dealerships do what they do, Cutright advises consumers to decline early invitations to run your credit.
“Only allow them to run your credit when you are certain you are interested in buying a car,” he says.
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What Is A Good Credit Score For An Auto Loan
While lenders can set their own standards when assessing an individual’s FICO score, generally accepted standards across the board for multiple lenders. According to Experian, “higher scores represent better credit decisions and can make creditors more confident that you will repay your future debts as agreed.”
So what’s a “good” credit score? Anything above 700 will at least allow borrowers to be in a good position to obtain auto loans. Once you build your score over 800, you can pretty much be assured of your excellent credit and an ace up your sleeve when negotiating your annual percentage rate and your loan terms. However, if you credit score is higher than 600 and lower than 750, you’re in line with most borrowers. The average credit score in America is 657.
The Auto Fico Can Sometimes Be Your Doom
Adding insult to injury, many dealers run a particular type of number, called the Auto FICO score which is focused on automotive lending. That type of score tends to come in notably lower than your regular score based on feedback from our visitors. Remember to keep this in mind as you shop.
Many car loan underwriters want to see that you have prior auto loan experience before they approve you for a loan and they want confirmation that you paid your car loan monthly payments on time. If you have no prior car loans, and your dealer runs an Auto FICO, you will score low and they will reject you, even though you otherwise have a better than average normal credit score. This is like being cash rich and credit poor.
It is like the dog chasing its tail. How do you get a car loan if they won’t take a chance on you? If this happens to you, call ahead to another dealer finance manager and ask them if they run the Auto FICO, so you can avoid them too if they do.
If you have prior car loan experience and you paid your bills on time, you should score well on the Auto FICO and even better if the finance manager runs a regular credit score on you.
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Don’t Overthink Your Credit Scores
While your credit scores can be important, there are three reasons that it makes more sense to focus on general healthy credit habits rather than a specific score:
Building a positive credit history can help increase all your credit scores, and you won’t need to worry about which score the lender uses.
Giving Good Credit Where Its Due
On the other hand, if you make all your loan payments on time and in full, it begins to have a positive impact over the course of your loan. By doing this, you can improve not only your credit, but your cosigners, as well. Your payment history is the biggest factor that makes up your credit score, but it takes time to build.
As you can see, its not a question of whose credit improves, because your car loan will impact both of you. Be careful, because just one late car payment can have a big negative impact much more quickly than your positive payments. Because of this, its important that you and your cosigner discuss the pros and cons before entering into a car loan, and have a plan in place if you fall behind on your payments.
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Dont Let The Salesperson Steer You To A Vehicle You Dont Want
Typically, a dealership is always trying to sell the vehicles it has in stock, Fuller told us. And that is not always in the best interest of the customer. If the salesperson really knows the inventory, then he or she is trying to match up the customer with something that can be sold today, Fuller said. If you are not specific and firm about what you want, the dealership will attempt to put you into a vehicle that its trying to move, even if it isnt whats best for you. Dont let yourself be sold a car.
How Do You Check Your Credit Score
Even if youre not buying a car right now, its wise to keep track of your credit score. Federal law allows consumers to obtain one free report each year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. Many banks and credit card companies also provide free credit scores to their customers, so take advantage of that if you can. Checking your credit report regularly will not adversely impact your score.
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Why The Credit Check
Car dealers check your credit to learn more about your financial situation and to protect themselves from fraudulent shoppers. Your credit report helps verify you are who you say you are. The information in your credit report is also essential to obtaining financing. When a dealer pulls your credit report and history, he will get a better idea of whether you are a good risk for a loan, and what terms to offer you. If you have poor credit, you can expect a higher interest rate on a loan for the same vehicle than someone with good credit. If you tell the salesman you want to stick to a certain payment range, running your credit can help determine which cars will fit your budget. For people with a very low credit score, financing may not even be an option.
Whose Credit Is Affected
Your cosigners credit is used to get you the auto financing. But, as your cosigner, theyre putting more on the line for you than just their good credit. In the event that you cant or wont pay, a lender will turn to your cosigner to collect payments. If you default, a lender can even go after your cosigner after the car has been repossessed. Even before that happens, both your credit and that of your cosigner will be affected. Since your cosigners credit is tied to your loan, neglecting your financial responsibilities will bring down their score too.
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Auto Loans And Credit Bureaus
Experian, Equifax, and TransUnion all use FICO. But which credit bureau of the three is most used for auto loans? Equifax comes out on top, with Experian being the close second. Both Experian and Equifax earn a sizable chunk of their profit from business plans tailored specifically to auto lenders: In 2019, working with the automotive industry accounted for 7% of total Equifax earnings and 5% of Experians yearly earnings. And TransUnion is not far behind.
In conclusion, auto lenders use Equifax and Experian the most, while TransUnion is less used for auto loan credit checks, at least in some parts of the US.
Keep in mind that knowing which car dealer works with what credit bureau is not as important as knowing your credit score or FICO score since that will help you get the best loan rates.
How To Boost Your Credit Score
There are many ways you can begin boosting your credit score before you consider applying for a car loan. Check out these guidelines to get you started.
Pay Your Bills On-Time;
Since your plays a massive role in your final score, its essential to pay your bills on time. If you make sure you at least pay the minimum on your loans and credit cards, and dont make late payments, this should have a positive impact on your score.
Follow The 30% Rule;
If you have numerous credit cards that are all maxed out, this rings alarm bells to your potential lenders. Its vital to ensure you keep outstanding balances on your credit cards below 30% of your overall limit. This will demonstrate to your banks or financial institutions that youre not low on cash and that youre responsibly for handling your finance.
Keep Credit Card Accounts Open
Its a common myth to think that if you close your credit card accounts, your credit score will increase. Thats not necessarily true. Whereas closing your credit card accounts will help you to fight the temptation of spending, it will affect your .
For example, if you have three credit cards and only one is maxed out, youve used less of your total available credit limit. But if you only have one credit card that one is maxed out, you have no available credit, therefore your credit utilization ratio is very high and your credit score will be negatively affected.;
Written by Grace Gearon from | Contributing Writer for Loans Canada
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