When you’re in the market for a car loan, it’s challenging to know exactly how much to spend and whether or not your credit score would get you a specific interest rate. You can have the best interest rate, but it won’t make any difference if the lender doesn’t consider you a good risk. Knowing which credit score lenders use for car loans can be a powerful tool to improve your chances of approval.
Read along to see which scores lenders use for car loans.
Your Scores with The Big Three Bureaus
Experian, Equifax, and TransUnion are the three major bureaus responsible for compiling credit history data to reveal scores that predict what kind of risk you pose. Earlier, each bureau would serve a specific geographic location, but now, they operate across the country. While Equifax and Experian are the better-known credit bureaus, TransUnion is just as important.
Which Credit Score Do Lenders Use?
Two primary models used to calculate credit scores are VantageScore and FICO. Each sector has its own industry-specific model. According to Experian, VantageScore 3.0 and 4.0 and FICO Score 8 and 9 are the two most widely used general scoring models in the United States today. There are also many versions of FICO Auto Scores, which depend on your general credit score. These are used to predict how likely you will pay your auto loan on time.
Usually, auto lenders follow the FICO Score 8 model. Some lenders also use VantageScore, which was founded by the three main credit bureaus. Lenders might also use other models, depending on your credit history and score, to get around restrictions and offer you a loan.
Why Is Your Credit Score Different with Every Bureau?
The three credit bureaus use the same information in your credit report for calculating a score, but their formulas are different. Each of them has their own algorithms to weigh your debt and come up with a score. They may rely on the VantageScore or FICO model to generate your score.
Remember that the credit score you get from an online source (like Credit Karma) might differ from what an auto lender can obtain. This can be because of the bureau, scoring model, and the version used. In addition, lenders don’t need to report data to all three bureaus. This means that one credit report might have the data the other doesn’t. The time when a lender performs a credit inquiry can contribute to different credit scores.
