Your all-important FICO score can range from roughly 300-850 (depends on the credit bureau version) and is the major factor in determining what credit tier most lenders will place you in.
Like the scales of justice, a lower score will equal higher interest rates and a higher score will equal much lower rates. Overall, this can equal thousands of dollars in interest charges!
It's well worth it to pay attention to yours as a big score is like a master key that opens many doors to many lenders, while a low score opens far fewer doors...
Your FICO score is the first thing that most auto lenders will look at to determine:
If they want to loan you money
What credit tier you will fall into
What rates you will qualify for
What terms they will give you
How much they will let you borrow
How much down payment, if any, you may need
The first thing you'll want to know when determining, or understanding,what credit tier you fall into(below) is how most lenders scoring models work. In other words, How Lenders See You!
All auto lenders are not created equal but share some common traits. Thethree main credit factors(besides score) all auto lenders look at when determining if they'll give you a loan and what credit tier you'll fall into are your:
1: Ability
2: Stability
3: Past Credit History
Don't pass the lenders minimum requirements in one of these categories and it doesn't matter what your FICO score is...You're not getting a loan!
If you do pass those requirements, then your score is key to you getting the best rates. Keep in mind a Higher FICO Score =
Lower Monthly Payments!
FYI:The term FICO score is a general term used to describe your credit score. It's an abbreviation for Fair Isaac Corp. and most all credit reporting agencies determine your credit score using their risk model.
If Equifax (one of the three major credit bureaus) is primarily used in your region of the country than BEACON score may be more commonly used than FICO score.
If TransUnion (another of the three) is primarily used, then EMPIRICA may be the most common term used.
A+ Credit Tier
The typical FICO score for the A+ credit tier is 750 - 850and is also referred to as:
0 Tier Credit (Ford Motor Credit)
S Tier (GMAC Financial)
Diamond Tier
Tier 1+ Credit (Auto lenders that don't use lettered credit tiers)
Customers that fall into the A+ Credit Tier will qualify for:
The best auto loan rates
No money down loans
Larger loans to value
(borrow more money against the value of the vehicle)and May choose extended terms
(72, 84 and 96-month loans)
To qualify for the
A+ Credit Tier you'll typically need:
5 years of well-paid credit history
5 or more tradelines
A well-paid mortgage is preferred (but not necessary)
A prior or current well paid auto loan(s)
A 24-month history for either or both a mortgage or an auto loan
Low balances on revolving credit (under 35%)
Low total debt to income (includes mortgage, rent, loans, credit cards, etc.) under 50% DTI
Have a payment to gross monthly income under 25%
Lenders do not want to see:
Prior foreclosures
Prior bankruptcy
Charged off accounts
Collection accounts
Slowly paid accounts
The A+ Credit Tier is certainly the benchmark for anyone aspiring to have an excellent credit rating. It is well worth it to pay bills in a timely fashion and to not get in over your head with too much debt.
A+ Credit Tier customers will qualify for special car buying promotions like 0% financing. With both the savings from low APR financing and the convenience of no doc loans, this is definitely the Tier you want to be in.
A 720 FICO score is considered great and a 780 or higher score is considered excellent.
A Credit Tier
The typical FICO score for the A credit tier is 700 - 750and is also referred to as:
1 Tier Credit (Ford Motor Credit)
A Tier (GMAC Financial)
Platinum Tier
Tier 1 Credit (Auto lenders that don't use lettered credit tiers)
Very similar to an A+ Tier customers with regards to the positives needed. Typically what causes someone to fall into the A Tier as opposed to the A+ Tier is simply a lower FICO score.
Credit scores for
A Tier customers drop when:
There may be too much new credit reporting on your credit file.
See AlsoWhat is a tier 3 credit scoreIf there a multitude of new credit inquiries.
Your revolving balances (credit cards) have gone over 35% of your available credit limit.
A small (under $300) collection is reporting as unpaid.
The items auto lenders do not want to see is similar to A+ Tier, with a little, I stress a little, more flexibility for slowly paid accounts or small collections.
The allowance for slowly paid accounts does not include any slow paid mortgage or auto loan accounts within the last two years.
It's fairly simple to fall from the A+ Tier into A Tier. Small things like going a few percentage points over your balance to limit ratio on credit cards, new inquiries, new accounts, etc.
There are also some myths surrounding a700 Credit Score. Don't be tricked into thinking a 700 FICO score means an instant, easy approval.
If you want to keep your A tier credit rating, or even move up to an A+ tier credit rating, then you'll want to stay on top of your credit. What does your credit report say about you?
B Credit Tier
The typical FICO score for the B credit tier is 640 - 700 and is also referred to as:
2 Tier Credit (Ford Motor Credit)
B Tier (GMAC Financial)
Gold Tier
Tier 2 Credit (Auto lenders that don't use lettered credit tiers)
Very similar to an A Tier customer with regards to the positives needed.
Credit scores for B Tier customers drop when:
There may be too much new credit reporting on your credit file.
If there a multitude of new credit inquiries.
Your revolving balances (credit cards) have gone over 50% of your available credit limit.
A small (under $300) collection or multiple small collections are reporting as unpaid.
There are slow pays reporting in the recent past (credit cards, etc.).
The items auto lenders do not want to see are similar to A Tier, with more flexibility for slowly paid accounts and/or small collections.
One or two slow pays on a mortgage and/or auto loans are usually acceptable, but typically must be over 12 months old and not regularly late.
One small medical collection, that you may not even know about, can quickly drop you from either A+ or A Tier credit. It's easy to move up from B Tier, but you'll need to stay on top of your credit...Dispute any inaccuracies and settle any legitimate collections quickly.
Mistakes and/or inaccuracies in your credit report can cost you. The difference in rates between A+ and B tier can be 4% points or more.
C Credit Tier
The typical FICO score for the C credit tier is 580 - 640and is also referred to as:
3 Tier Credit (Ford Motor Credit)
C Tier (GMAC Financial)
Silver Tier
Tier 3 Credit (Auto lenders that don't use lettered credit tiers)
This is the hardest tier for me to give advice on without knowing more about your Ability, Stability, and Past Credit.
Customers that fall into the C Tier typically:
Less than 5 years of credit history.
They may be moved a little bit with their jobs or residence.
Have slowed paid on credit cards and maybe even auto loans a mortgage.
Have high balances on credit cards.
Have current collections (not totally out of control though).
Some, but limited charged-off accounts.
Some, but not a lot of recent bad credit.
May have had a bankruptcy in the past (over two years old).
As mentioned just above, C Tier customers can go in either direction fairly quickly. If you make the small investment of time to check your credit for inaccuracies (dispute them) and/or pay any legitimate collection accounts, then you can be back on top in a rather short period of time.
Get thatCollection Removed. When you are cleaning up your credit it's important to not just pay it, but remove it! This is very important to raising your FICO score, getting into the highest credit tier and overall improvement of your credit file.
You may also want to consider whether or not toFile Chapter 7 Bankruptcy. Should you? There are many customers that would certainly be better filing for Chapter 7 bankruptcy protection, while others have only some simple clean up to do. What category do you fall in?
If you've already had to file bankruptcy and are looking atBuying A Car After Bankruptcy, then you'll want to follow that link to view some valuable questions and answers that may help you understand the process.
D Credit Tier
The typical FICO score for the D credit tier is 360 - 580and is also referred to as:
4 Tier Credit (Ford Motor Credit)
D Tier (GMAC Financial)
Bronze Tier
Tier 4 Credit (Auto lenders that don't use lettered credit tiers)
Customers that fall into the D Tier typically:
Have no credit history or a bad credit history.
Have limited or no good credit.
Move job to job in short periods of time (three or more in a two year period).
Relocate frequently, state to state makes for a higher risk.
May have had a repossession and/or multiple slow pays.
May have had a bankruptcy in the recent past.
May have had a foreclosure (over three years old).
Have multiple collection accounts and possibly multiple charged-off accounts.
