Are you ready to buy a new car.
You have done all your homework.
You know your three FICO credit points.
You determine that your highest FICO credit rating is from Equifax (also known as your BEACON account).
So, you will find a car dealer who uses your highest score (which increases your ability to get approved at a good price).
You find yourself in a dealership and ignore all sellers by contacting the office of the financial director directly.
But when the CFO looks at your credit file in front of you … you cannot help but think that something is wrong.
Of course, the dealer says that your Equifax / BEACON account is not high enough for their lowest interest rate.
How can it be? You just checked your FICO credit ratings at http://www.myfico.com/12 a few hours ago. This is possible – albeit unlikely – the information in your credit report has changed, and your ratings have declined since the last check. Remember that your credit ratings are dynamic and will change as the information in your credit reports changes.
Your credit reports may change several times a month as your lenders add or update new information. But it is more than likely that your estimates would not have changed in this situation (especially if there were only a few hours between when you checked your estimates and when the dealership checked your credit reports).
So, if your credit reports have not changed, why does the CFO look at your ratings with such a depressing face?
Car dealerships may use “different” FICO results than what you see
The car dealer probably uses the so-called FICO Auto Industry Option instead of the traditional FICO credit rating. You see, car dealers not only choose a credit reporting agency from which they receive FICO credit points … they can also decide whether they will use a traditional FICO credit score or a variation of the FICO score, called the Auto Industry Option score. ,
What is the difference between these two types of ratings?
Most people don’t have many … but there are enough options to get most car loans to use Auto Industry Option. The real difference between the two is that the Auto Industry Option evaluation puts a lot more emphasis on how you handled your previous car loan.
– Have you made late payments on the current or previous car loan or rental?
– Have you ever paid a car loan or rent less than you should?
– You had a seized car?
– Did you have an automatic account sent to the collection?
– Have you included your car loan or leasing in bankruptcy?
These actions will affect your Auto Industry Option score more than your traditional FICO score. As a result, if you did a great job with your previous car loan, you should have a high FICO Auto Industry Option score – that’s good.
But what if in the past you had several problems on the car loan road? You guessed it … your option account in the auto industry will be lower. You will be perceived as a higher credit risk, and the auto lender may either refuse you or use your low score to justify charging you a higher interest rate.
You see, auto lenders are different from other types of lenders. And I'm not talking about their slimy clothes, leisure suits, short ties, courageous hairy chests or gold.
Many other lenders look at your entire credit picture to determine whether to give you a loan. But many auto lenders care only about one thing: how did you manage your past auto loan. This is what the FICO Auto Industry Option Score gives car dealers – a way to pinpoint how you dealt with what matters most to them.
Thus, even if everything else in your credit reports has become discouraged after your bankruptcy, if you did not include your car loan in bankruptcy and you never defaulted or missed payment for a car, your estimates in the automotive industry are likely to be better than yours traditional fico scores!
Which former auto finance director revealed to me
I recently spoke with a former CFO, and this is what she told me …
“Many of the people I helped could not believe that their ratings were so high with the FICO Auto Industry Option. They included all of their credit card debts and their mortgages in their bankruptcy, but they confirmed their car loan. What's good about Auto Score is that it really helps the car lender concentrate on what is important – how the client processes their car loans.
Thanks to our dealer center, which has FICO with automatic amplification, this helped 30% or more of our customers get better rates. ”
I do not believe that I will say this, but I think that in fact I have found something good to say about car dealers! Well, some of them, one way or another …
As you can see, FICO automated ratings can work in your favor if they are used correctly.
Okay, I just couldn't live with myself if I only said good things about car dealers.
So, in the interests of honest and balanced reporting, here's how to protect yourself from slimy car dealers who can use your FICO option for the car industry
against you …
Dirty Trick car dealers can play with your FICO results
Let's say your FIFO score at Equifax / Beacon is 585. Not too good. With such a low score, if you get approval for a car loan, you are likely to get a high interest rate and a high monthly payment.
So, you go to the dealership, talk to the CFO and tell him that your FIFO account at Equifax is 585. The CFO then looks at your FICO account for the automotive industry. And, unknown to you, this figure is actually higher than the result of the FICO Equifax / Beacon that you scored.
With this higher score, you will get approval at the best price … right?
Here's what unscrupulous car dealers can do. They will not tell you that your automatic score is higher than your traditional score!
They believe that a sucker is sitting in front of them. Therefore, they will try to get financing at a higher rate, based on a lower FICO score (thus making more profit for themselves).
How some car dealerships “play the spread” to make you pay more
Now check this out …
It is possible that your car dealer has the opportunity to get your traditional FICO points And your automatic FICO points. That means they will have six points on you. This ensures that some of these ratings are higher than others. So which ones will they use when trying to get financing?
Are you familiar with the term “distribution”? So car dealers make money when they finance you. If they can charge you a higher interest rate than you deserve, then they will make a good discount from the bank that finances you.
The only way to make killing “spread” is to make you think you have lower grades.
So what can you do?
Do not despair … I can help you.
How to use your FICO points to your advantage when buying a car
Fortunately, you should not give in to their dirty tricks. Now that you know all about the results of the FICO Auto Industry Option, you can protect yourself. Here is what I suggest …
1. When you first enter the CFO’s office, don’t tell him what your FICO ratings are. Wait until he reviews the results himself. Then ask him what your grades are.
2. If the ratings he rated are higher than the ones you have, do not say anything and just follow his ratings.
3. However, if your grades are higher, pull them out and show it to him. If he has a choice of the type of points he can use, there is a chance that he will be able to use your highest score. And this will make him understand that a fool is not sitting in front of him. He cannot use you!
How do you know what your FICO Auto Industry Option ratings are before you go to a car dealership?
You can not
Sorry. They are not for sale – at all costs. Only lenders have access to them.
FICO would like to sell them … but there is simply not enough demand. I mean, seriously, until you read this article, have you ever heard of the FICO Auto Industry Option points?
Remember that we just got access to purchase all three of our traditional FICO credit points on June 11, 2003 at 8:00 a.m. (I actually became foggy that day … what a moron I am.)
Only a very small percentage of the population even knows that they have three FICO credit points … not to mention three Auto Industry Option points.
So, how can you use this information to help you get your next new car, funded at the best interest rate
1. First get three credit reports. If you did a good job with your previous car loan, your FICO Auto Industry Option scores will be higher than your traditional FICO scores. So expect more from the lender.
2. You can also ask the lender to show you their levels. Levels are basically charts that lenders use and have different interest rates depending on your results. You want to see what level your level belongs to. To see an example of an automatic lender level schedule, click here.
3. If they do not show you … at least let them break it verbally for you. (Personally, I like to see this with my own eyes, because I never believe the word that comes out of the mouth of most car dealers.)
4. If you have mistreated your car loan … then you should just try to find a car lender that uses only traditional FICO credit points. When you find a lender that uses the traditional FICO credit rating, you will have the best chance of getting the lowest interest rate.
5. Start by calling the dealership and asking the CFO if they use the traditional FICO credit rating to make a loan decision, or if they use the FICO Auto Industry Option account.
These steps will lead you in the right direction. This will not be easy, as many car dealers use the FICO Auto Industry Option rating.