Which Credit Score Should I Check for Buying a Car
When it comes to purchasing a car, one of the most important factors to consider is your credit score. Your credit score plays a significant role in determining the interest rate and loan terms you can qualify for when buying a car. However, with multiple credit scoring models available, it can be confusing to know which credit score to check. In this article, we will discuss the different credit scores and provide answers to some frequently asked questions regarding credit scores and buying a car.
Understanding Different Credit Scores:
1. FICO Score: The FICO score is the most commonly used credit scoring model in the United States. It is a three-digit number that ranges from 300 to 850. Lenders often refer to your FICO score to assess your creditworthiness and determine the interest rate for your car loan.
2. VantageScore: VantageScore is another widely used credit scoring model. It was developed by the three major credit bureaus (Equifax, Experian, and TransUnion) as an alternative to the FICO score. It also ranges from 300 to 850, with higher scores indicating better creditworthiness.
3. Auto Industry Option Scores: Some lenders use specialized credit scoring models tailored specifically for the auto industry. These scores may focus on factors like previous auto loan history, payment behavior, and the likelihood of defaulting on a car loan. Examples of auto industry option scores include the FICO Auto Score and VantageScore Auto.
FAQs about Credit Scores and Buying a Car:
1. Which credit score should I check before buying a car?
It is recommended to check your FICO score, as it is the most commonly used credit scoring model by lenders. However, it is also beneficial to monitor your VantageScore, as some lenders may use it as well.
2. How can I check my credit score?
You can obtain a free copy of your credit report every 12 months from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at annualcreditreport.com. Additionally, many credit card companies and financial institutions provide free access to your credit score on a monthly basis.
3. What credit score is considered good for buying a car?
A credit score above 700 is generally considered good for buying a car. However, higher scores will provide access to better interest rates and loan terms.
4. Will checking my credit score negatively impact it?
No, checking your own credit score is considered a “soft inquiry” and does not negatively impact your credit score. However, if a lender or creditor checks your credit as part of a loan application, it may result in a small, temporary decrease in your score.
5. Can I get a car loan with a bad credit score?
Yes, it is still possible to get a car loan with a bad credit score. However, you may face higher interest rates and stricter loan terms. It is advisable to work on improving your credit before applying for a car loan to secure better rates.
6. How can I improve my credit score before buying a car?
To improve your credit score, make sure to pay all your bills on time, reduce your credit card balances, and avoid applying for new credit accounts. Additionally, checking your credit report for errors and disputing any inaccuracies can also help improve your score.
7. Should I get pre-approval for a car loan before shopping for a car?
Getting pre-approval for a car loan can provide you with a better understanding of your budget and negotiation power at the dealership. It also allows you to compare loan offers from different lenders. However, keep in mind that multiple loan applications within a short period can negatively impact your credit score, so it’s best to limit your applications to a two-week timeframe.
In conclusion, understanding which credit score to check before buying a car is crucial to ensure you are well-informed about your creditworthiness. While FICO scores are widely used, monitoring your VantageScore and auto industry option scores can also provide valuable insights. By maintaining a good credit score and obtaining pre-approval for a car loan, you can confidently navigate the car buying process and secure the best loan terms available to you.