Which Credit Bureau Is Most Used for Auto Loans?
Buying a car should be an adventure: You feel joyous at the prospect of getting a new car and excited to see how the vehicle will perform on the open road. But when you have to add your credit score to the entire calculation, it can suddenly seem like a lot less fun. What do car dealers look for in credit reports? Which credit score will the car company check? Which credit bureau is most used for auto loans?
Suppose you subscribe to a service that monitors your credit. In that case, you already have enough help to get the answers to the questions above. But, if you are buying a car on your own, you’ve got your work cut out, as there is a lot of seemingly conflicting data out there.
For example, there are multiple credit scores on one side and the FICO score on the other. FICO scores themselves have several versions. Then, there are the three credit bureaus. Each one uses its score system, which makes an auto loan credit check sound like rocket science. Not to mention that car dealers might be in contact with all three credit agencies or perhaps just one of them when assessing your creditworthiness.
Worry not. We’ve gathered all the tips and tricks you’ll need to turn those credit checks to your advantage. By the time you’re done reading, your expertise will rival that of the auto loan companies.
Why Your FICO Score Is Important
Let’s answer first the question of which credit score is used to buy a car.
When buying a car (unless you already have the whole sum you’ll need) you’ll have to work with lenders. More than 90% of car lenders use the FICO credit score. An individual FICO score results from an algorithm that factors in many aspects of your credit history, such as unpaid debts, the number and types of open loan accounts, and how long you have kept these accounts open. Then, there is the percentage of the total credit you’ve used, new credit requests, potential bankruptcy reports, foreclosure, and debt collections.
We’ve mentioned the credit score first because every time you apply for an auto loan, a FICO score check will be performed to determine your creditworthiness. Credit bureaus are intrinsically important to the overall story. Still, as a potential car buyer, you should know your credit score beforehand.
Obtaining Your Credit Score
The most straightforward way is to go to myfico.com and ask for the 1B report. The service isn’t free, but the good thing is that this report is very exhaustive: It includes 28 industry-specific scores, and one of them is the auto credit score you need.
Another way to obtain your credit score is to check your monthly billing statements from the company that issued your credit card. Bank of America, Citibank, and American Express offer free FICO score status for their clients. You can also get your FICO score via the Discover Credit Scorecard program that is free for all users. You only need to leave your Social Security number along with a few other personal details.
Improving Your FICO Score
FICO scores go from 300 to 850. The higher your score, the better your chances of getting favorable loan terms. Good score ratings go from 670 upward, with most credit holders having a score between 600 and 750.
It’s important to know which credit bureau is most used for auto loans, so we’ll cover that in a later section of this article, but your FICO credit score will affect you more. Buying a car with a bad credit score means you’ll have fewer options to choose from when looking for an auto loan to finance your new car purchase.
Luckily, there are ways to improve your FICO score. Pay your bills on time, keep as low as you can on the credit card balance and credit utilization rate (preferably below 30%), and only request a new line of credit when needed. Check if your credit reports are frozen because, if they are, the lenders will not be able to access them, and that could lead to your loan request being denied.
The steps we’ve listed above are the tried and true way to improve your credit score with the most used credit bureau, Equifax, as well as the other two bureaus. Some additional tips to improve your FICO score include asking for a debt consolidation loan to settle your credit card debt, but this should be viewed as a last resort measure. Don’t close your credit cards since keeping them open will positively affect your credit score. Lastly, avoid taking a second loan until you get the car loan.
The Difference Between FICO Score and Credit Score
Different types and versions of credit scores can enter the car credit report lenders will pull to determine your creditworthiness.
The name FICO comes from the name of the company that issues these scores, called Fair, Isaac, and Company. Other companies, too, give credit scores that may look similar to FICO. Still, the formulas they use vary significantly, leading to scores that can differ from your FICO score by as much as 100 points. This can sometimes create problems as it can give you a false sense that your credit is in good standing and that you’re likely to get approved for a loan.
Other Credit Scores
Besides FICO, what other credit scores do car dealers use? While these are not nearly as popular, it’s good to know about alternative credit scores.
CreditVision is designed to help auto lenders, dealers, and financial companies when approving loans. It’s a TransUnion credit score that anticipates the odds of a 60-day delinquency happening in the first two years of the life of the auto loan. This score varies between 300 and 850 points. There is a chance an auto lender will use it to decide if you’re suitable for an auto loan.
VantageScore versions 3.0 and 4.0 were also used by every most used credit reporting agency in auto loan checkups. This credit scoring model calculates the influence of multiple variables on your credit history. Payment history is most influential, followed by the length and type of credit, credit utilization, while credit debt has the lowest impact. VantageScore was created jointly by Equifax, TransUnion, and Experian.
Versions of FICO Score
We’ve spoken so far mostly about FICO because it’s the most used model not just among car dealers but overall. But its algorithm is constantly changing. There have been nine versions of it so far. Something that didn’t affect one version of the FICO score might negatively impact a newer version. The complexities of dealing with a car dealership and the credit score are among the reasons people turn to the credit repair companies to find the way out of this maze.
The most used versions of FICO scores are models 8 and 9. Auto lenders will most likely look at your recent credit history, information about bankruptcy, previous auto loans, and late payments.
The FICO Auto Score
One more thing you have to keep track of when dealing with FICO scores is the type of FICO scoring algorithm that the industry uses. Different FICO score types have specially optimized algorithms for specific uses.
What credit report do car dealers use for an auto loan? There is a dedicated FICO score type - called the FICO Auto Score - car lenders frequently look for in credit reports. It uses the standard FICO score and adapts it to give auto lenders realistic chances of how likely you’re to make regular loan payments.
FICO Auto Score has several versions. Most auto lenders use FICO Auto Score 8, as the most widespread, or FICO Auto Score 9. It’s the most recent and used by all three bureaus.
FICO Auto Score ranges from 250 to 900, meaning your FICO score will differ from your FICO Auto Score.
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 Experian’s 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.
The Bottom Line
If you know the rules of the game, you’ll be able to get the best out of your credit score when buying a car. Focus on your FICO score and Auto Score to secure the best auto loan. Use myfico.com to check your score in a specific FICO version. If you’re not sure, ask auto lenders which version they use. Asking yourself what credit reporting agency is used the most is only half of the question - credit scores are the other important half. Once you know your credit score status, go through the list of financial aspects auto lenders will look for in your credit report and try to improve them.
FICO Credit Score and Auto Score are used the most for car loans. Auto Score modifies your original FICO score to reflect the probability you’ll pay your auto loan installments on time.
As we’ve mentioned in our “Which credit bureau is most used for auto loans?” article, the most widely used credit score is FICO Score 8. FICO Score 9 is the newest version and will take over the top spot as the most used credit score in the future.
According to myfico.com, auto lenders use multiple FICO Auto scores, including FICO Auto Score 2, 4, 5, and 8. There’s also the newly released FICO Auto Score 9.
There is no exact answer since this depends on the region you are in.
I have always thought of myself as a writer, but I began my career as a data operator with a large fintech firm. This position proved invaluable for learning how banks and other financial institutions operate. Daily correspondence with banking experts gave me insight into the systems and policies that power the economy. When I got the chance to translate my experience into words, I gladly joined the smart, enthusiastic Fortunly team.
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