When applying for an auto loan, lenders will look at your credit reports and scores to determine your creditworthiness. But not all credit scores are created equal Auto lenders rely heavily on your FICO Auto Scores, specialized credit scores tailored specifically for auto lending risk In this article, we’ll take a close look at FICO Auto Score 9, the most recent version, to help you understand what it is, why it matters for auto loans, and how you can check and improve yours.
What Are FICO Auto Scores?
FICO Auto Scores are industry-specific credit scores created by the Fair Isaac Corporation (FICO) to help auto lenders predict the likelihood that borrowers will make payments as agreed Just like regular FICO Scores that range from 300-850, FICO Auto Scores range from 250-900
While based on information from your credit reports, FICO Auto Scores differ from regular FICO scores in how they weigh your credit history. Factors like your overall credit utilization and credit age matter, but FICO Auto Scores place more emphasis on your specific auto loan payment history. This tailored model aims to identify any auto-related credit habits that indicate higher risk of default or delinquency on a new auto loan.
Introducing FICO Auto Score 9
FICO periodically updates their credit score models to improve predictive accuracy. FICO Auto Score 9 is the newest version specifically designed for auto lending, introduced in 2020.
Some of the key updates in FICO Auto Score 9 include:
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Less emphasis on medical collections – Auto Score 9 will disregard paid medical collections and give less weight to unpaid medical collections compared to non-medical ones. This reflects research showing medical debt is less correlated with auto loan repayment risk.
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Renewed focus on auto loan data – Auto Score 9 places more importance on your specific auto credit history, especially severe delinquencies. If you have past auto loan issues, it will be harder to offset them with positive credit behavior in other areas.
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Inclusion of rental payment history – Applicants who reliably pay monthly rent on time can now get credit for that in their Auto Score 9, whereas it didn’t impact previous versions.
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Exclusion of paid collections – No matter the type, collections accounts paid in full will be excluded from the Auto Score 9 calculation. This change aims to encourage consumers to pay off collections.
What is a Good FICO Auto Score for Auto Loans?
Since lenders all have their own standards, there is no single score cutoff for what is considered “good” credit in auto lending. Industry experts recommend a FICO Auto Score of 700 or higher as a good starting point before applying.
Here are some general credit tiers and likelihood of approval based on your FICO Auto Score range:
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781-900 – Excellent credit. Highest approval odds for lowest rates.
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660-780 – Good credit. Very strong chance of approval at competitive rates.
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620-659 – Fair credit. Decent loan approval odds but may not get best terms.
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500-619 – Poor credit. Loan approval difficult and higher interest rates likely.
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250-499 – Very poor credit. Low approval odds for most standard loans. May require subprime financing.
Actual loan decisions depend on the lender’s policies and market rates at the time. Those with fair or poor FICO Auto Scores may improve approval chances by applying with subprime auto lenders focused on higher-risk borrowers.
Checking Your FICO Auto Score
Since auto lenders rely so heavily on FICO Auto Scores, checking yours can give helpful insight before submitting an application. Unfortunately, FICO Auto Scores are not included with free credit scores from Credit Karma or your credit card company.
Here are a few options for accessing your FICO Auto Scores:
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Order directly from myFICO.com for $19.95-$59.85 depending on selected options.
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Sign up for Experian’s credit monitoring service for $24.99/month. Includes your Experian-calculated FICO Auto Score 8.
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Ask your auto lender if they offer complimentary FICO Auto Score checks for applicants.
When checking scores, be sure to verify which FICO Auto Score model version you are viewing. The latest FICO Auto Score 9 may show a different number than previous versions like Auto Score 8. Also keep in mind that different credit bureaus may calculate slightly different FICO Auto Scores based on their credit data.
How to Improve Your FICO Auto Score
The good news is the ways to boost your regular FICO Scores can also help strengthen your FICO Auto Scores. Here are some top tips for credit repair to improve auto loan approval odds:
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Pay all bills on time – Payment history is critical. Set up autopay if needed to avoid missed payments.
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Pay down credit card balances – Lower utilization on revolving accounts can help.
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Limit hard credit inquiries – Too many applications hurt, so only apply for credit selectively.
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Pay off collection accounts – Settling unpaid collections can improve your FICO Auto Scores.
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Correct credit report errors – Dispute any inaccurate negative items dragging down your scores.
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Become an authorized user – Being added as an authorized user on a spouse or family member’s older credit account can give your credit a boost.
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Wait for time to improve scores – Negative marks like late payments stay on your reports for years. Older bad credit history hurts less.
The Takeaway
FICO Auto Scores play an outsized role in auto lending decisions. Checking your latest FICO Auto Score 9 before applying for an auto loan can help set realistic expectations for loan approval and interest rates. Monitoring your score over time is also useful for gauging the success of your credit-building activities. While expensive paid options provide the most detail, free credit scores can also give you a general sense of your credit health as you work toward improving your FICO Auto Scores.
Introducing the FICO® Score 10 suite, the most recent updated FICO Score version
FICO Score 10 relies on the same design and key ingredients of prior models as well as captures the subtle shifts in consumer credit data that have occurred over the 5+ years since FICO Score 9 launched, such as the increasing use of personal loans, especially for purposes of debt consolidation.
As long as consumers practice good habits like consistently paying bills on time, lowering their debt as much as possible, and applying for credit only when needed, they can achieve and maintain a good FICO Score 10.
FICO Score 10 T builds on FICO Score 10 by also assessing “trended credit bureau data” when determining your score. Scores that dont use trended data typically use the most recently reported month of data to drive certain components of the score such as the most recently reported balance and/or credit limit on an account.
By contrast, with FICO Score 10 T the “trended data” considers a longer historical time frame (the previous 24 months or longer) of the balance and/or credit limit to get a more refined view of your credit risk.
The trended data allows the credit scoring model to determine what your “trend” is: are your balances trending up, down, or staying the same? Someone whose balances are trending up may be higher risk than someone whose balances are trending down or staying the same.
FICO Score 10 and FICO Score 10 T are currently available to lenders.
Industry-specific FICO® Scores are FICO Scores versions that are optimized for a certain type of credit product, such as auto loans or credit cards. The foundation of these versions is the same as the base FICO Score versions, but they are fine-tuned based on industry-specific risk behaviors.
This helps ensure that lenders get optimal information and can make better decisions, so that you get access to the right credit.
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What is a good FICO auto score?
FAQ
What does FICO auto score 9 mean?
Is FICO score 9 reliable? FICO Score 9 is a widely used credit scoring model considered reliable by many industry experts.
Why does my FICO score say 9?
FICO is giving a score on the probability that you will pay a loan back. Different versions weigh certain aspects differently, for example version 9 is more friendly to No Scores because it is supposed to look at utility payments which isn’t looked at in different versions.
What is a good FICO auto score?
A FICO Auto Score of 670 or higher is generally considered good for securing favorable auto loan terms. Scores in the 670-739 range are typically considered “good,” while scores from 740 to 799 are “very good,” and those 800 and above are “exceptional”.
Do dealerships use FICO 9?
The base FICO score is also called FICO Score 8 or 9. It’s not designed specifically for auto loans, but many lenders use it. It’s a number between 300 and 850, and a higher score means that a person is more likely to make loan payments on time.