Most of the auto lenders will look into one of your FICO® scores to determine the rate they will offer you.

What is FICO?

FICO, created by The Fair Isaac Corporation as the first credit scoring system for a bank credit card in 1970, is the representation of your credit worthiness, i.e., your risk to your auto lender. If your score is less, you will not be fit for a loan. So, more your score, less risky you are. That shows you will not run away, but you will pay!

When your FICO gets affected?
There are few factors (by which you can Guess) affecting your Credit Score. (Source: wikipedia)

  • 35% — Payment History: Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer’s FICO score to drop. Paying bills as agreed over time will improve a consumer’s FICO score.
  • 30% — Credit Utilization: The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on their FICO score.
  • 15% — Length of Credit History: As consumer’s credit history ages, assuming they pay their bills; it can have a positive impact on their FICO score.
  • 10% — Types of Credit Used: (installment, revolving, consumer finance) – Consumers can benefit by having a history of managing different types of credit.
  • 10% — Amount of credit obtained recently: Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual’s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score.

“Sometimes we do mistakes not unknowingly but well knowing them! We are aware of these things but we “Realize” it when a (bit) tough situation, like unable to pay your loan, Repossession of the vehicle, late payment, loan for higher interest rate, comes. This may seriously affect your Credit Score. (Repossession of your vehicle will definitely reduce your chance of obtaining a loan for the next vehicle)

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