What Credit Score Do Car Dealers Use?

Auto dealers and double-glazed window salesman are notorious around the world for one reason: “They want to sell you something and will do anything to get the sale.” If you ever walk into a used-car lot, you will probably be greeted by an eager salesman. They will walk you around the lot and sell you a dream of stepping into the “best car ever,” which you fear might be a lemon in the end. They are sure to say something to the effect of “If you need financing, no problem, guaranteed we can get you financing for this car.” But can they really? And what does that look like?

The first thing that an auto dealer is going to look at before offering you a comprehensive auto loan package is your credit score. However, it’s important to note that your credit score is not a one-size-fits-all carbon copy across the board. They could be pulling credit scores from a couple of different places. Furthermore, they might be looking at different aspects of your credit, such as if you are about to (or recently did) file for bankruptcy. Most auto dealers will use a variety of methods to gauge your creditworthiness and offer you an auto loan that best meets both of your needs.

Here are some important points to note before you walk into that dealership demanding a loan for this hopefully-not-a-lemon vehicle you have been ogling.

You may have seen your free credit report on any of a number of different websites. However, you should know that most of these websites offer an estimate of your credit, not necessarily the real number. Most auto dealers look at two credit scores: your FICO score and your VantageScore, each of which uses a slightly different credit scoring model.

It gets messier. Each model only looks at the information in one of your credit reports from Experian, Equifax, or TransUnion to determine your score. So, you will usually have three “scores” for each model: six in total.

Obviously, the higher the score the better because it indicates you are less likely to miss a loan payment, but you have no way of knowing which credit report a dealer will look at. So, you need to try to improve all of them. In general, auto lenders are more likely to use Equifax and Experian scores. However, TransUnion scores are also used, just not as frequently.

The FICO score is named after the Fair Isaac Corporation (originally Fair, Isaac and Company). Founded in 1956, this well-known tech company developed an algorithm to measure credit that is still used today. In 1989, the rating agencies standardized the credit rating algorithm by working with Fair, Isaac and Company. FICO scores are used to determine the risk of lending to a borrower and are currently used by up to 90% of lenders in the United States.

A FICO score is a summary of a borrower’s credit, determined by looking at their credit and payment history. Everyone who has ever used any financial product or who has had to pay a bill will have a FICO score.

A FICO auto score is a special score that is used by the auto industry. They take your base FICO score and weigh it against industry-specific risks to determine if you can pay back an auto loan. Although not widely known, it has become more prevalent in the industry as of late.

A VantageScore is similar to a FICO score in that it gives you a credit score based on your credit and payment history. It is actually a joint venture score created by the three major credit bureaus: Equifax, Experian, and TransUnion. They created this score in 2006 in order to help streamline credit ratings between agencies.

It’s worth noting that VantageScore isn’t widely used among auto lenders; however, some will be able to access it. Therefore, it’s worth being aware of your VantageScore before you go and negotiate an auto loan.

FICO and VantageScore use a lot of the same criteria, but there are some important differences to be aware of.

To have a FICO score, you need to have tradeline or credit information that is at least six months old. This means that you need to have been actively using credit in some capacity — and maybe even have multiple credit scores.

With VantageScore, you do not need a minimum of six months of credit history to have a score. As long as you have taken out a tradeline and used credit at some point in your life, you can have a VantageScore.

FICO and VantageScore each use a different credit scoring model. For instance, if you miss a payment, you might lose 50 points from your FICO score but only 45 points from your VantageScore. The exact same behavior can yield different results between the two types of credit score.

Typically, credit scores will range from 350 to 800 for either the FICO credit score or the VantageScore credit score. However, FICO scores are generally higher than VantageScores. Below is a table that shows the typical difference between FICO and VantageScore.

Have a bad credit score with both FICO and VantageScore and want to know how to raise it? There are several ways to improve your credit score. One is to get a credit card and make regular payments on time. Here are some credit cards that will increase your score in no time (and come with some nifty perks).

Auto dealers and auto loan financing providers have other methods of determining your creditworthiness beyond just your scores. Here are some other factors they will consider:

Have you filed for bankruptcy in the past? Even if your credit score is great now, if you filed for bankruptcy ten years ago, it could be a red flag in an auto lender’s credit score model. Likewise, if you are about to file for bankruptcy or already going through the process, this will come up in your background check. Make sure that you are upfront and honest about your bankruptcy history, as it will matter.

Obviously, an auto dealer wants to see if you have ever taken out a car loan before. If you have and everything went hunky-dory, this can be a huge plus toward getting your current auto loan. If you were late on payments or even defaulted, however, the adverse effects can be exponentially profound. It’s best to have a favorable history with auto loans before going in for another.

Auto dealers want to make sure that your good credit score sets a lot of precedents. This means that borrowers with a short credit history, even a good one, are at a disadvantage. If you are younger than the average car buyer, this could pose an obstacle to acquiring an auto loan.

Now that you know what an auto dealer looks at when determining your credit, how do you make sure that your score is good? And how can you ensure that other factors the auto dealer might consider are all in order? By keeping track of your credit score with weekly credit reports, of course.

There are multiple portals online that allow you to monitor your credit daily. All of the three major credit bureaus have an online portal that you can check on a regular basis. Tracking your credit, keeping good credit card balances, and consolidating your credit are smart ways to make sure you walk into the dealership with more knowledge of your credit than the people offering you a loan.

Equifax and Experian scores are typically used for auto loans. TransUnion scores are also used, but not as frequently.

Car dealerships use a VantageScore or FICO score. The three credit bureaus — Equifax, TransUnion, and Experian — all provide both scores to auto dealerships.

Car dealerships look at your FICO and/or your VantageScore credit score. They also consider factors like bankruptcy, previous auto loans, and credit history to determine your loan and interest rate.