Expert: Regan Shinski - 3/24/2010

Question
Let me start off by saying that my credit is far from great.  When I graduated college and got a job, I went a little crazy with applying for every credit card under the sun.  Needless to say, I've got tons of late payments on my report, plus I've been turned over to collection agencies in the past due to medical bills. I am finally starting to get things under control. Despite this, I've only made maybe one late payment on my auto loan, which I got in February 2004.  I've always made it a priority to pay my car note on time.  I am looking to purchase a new car, and am a little worried about my current credit score affecting my getting an auto loan with a decent interest rate.  I've been doing a lot of research online and came across the "FICO auto industry score".  Will this help me to get a decent rate since I've got a near perfect auto credit history?  Could you maybe tell me more about what this score looks at?  Thank you.

Answer
Hi Jamie:

Fair Isaac %26 Company (FICO) produces several products that they sell to their clients/lenders.  They try to tailor the scoring model to the industry type.  They are also always tweaking their scoring systems and the economy and laws change.  These later versions can also be sold to their clients.

So... as an example, having your credit pulled at one lender that is using an older FICO scoring model may produce a slightly different score than having it pulled at another lender that is using the latest scoring model.

The three major credit bureaus also have different scoring methods.

What has happened is that most auto lenders are purchasing the FICO auto enhanced scoring system.  The exact scoring methods are a closely guarded corporate secret but most experts seem to think the auto enhanced version does put more weight on the history of installment loans and scores revolving (credit card) accounts less than other scoring methods.

This is obviously good for you, but even the one late payment on the car will not be good.  Additionally, even the auto enhanced version still looks at the overall score.  It's not like they ignore other payment histories - good or bad.

If you think you are at risk of an approval, I would ask which version of FICO they use BEFORE pulling your credit and only use those dealers or lenders with the auto enhanced version.  

Also remember that on big purchases such as cars and houses there are other factors than credit.  Most notably, down payment, loan-to-value of the collateral, job history, income and the co-signer's credit - if applicable.

Good luck, I hope this helps.

Regan
mbscompany@aim.com