Monday, October 8, 2007

Secret Credit Scores Car Dealers Don't Want You To Know

Car dealers can use "different" FICO scores than the ones you see

by Stephen Snyder

The car dealer is probably using what is known as the FICO Auto Industry Option score instead of a traditional FICO credit score.

You see, car dealers not only get to select the credit reporting agency they receive FICO credit scores from...they also get to decide if they will use a traditional FICO credit score or a variation of a FICO score called an Auto Industry Option score.

What's the difference between these two types of scores?Not a whole lot to most people......but there's enough variation to make the majority of auto lenders use the Auto Industry Option score. The real difference between the two scores is that the Auto Industry Option score pays a lot more attention to how you handled previous auto credit.

Have you made late payments on a current or previous auto loan or lease?

Have you ever settled an auto loan or lease for less than you owed? Have you had a car repossessed?

Have you had an auto account sent to collections? Did you include your car loan or lease in your bankruptcy?

Those actions will affect your Auto Industry Option score more than they'll affect your traditional FICO score.Bottom line—if you handled your previous auto credit perfectly, you should have a high FICO Auto Industry Option score—that's a good thing.

But what if you've had a few bumps in the auto credit road in the past? You guessed it...your Auto Industry Option score will be lower.You'll be perceived as a greater credit risk and the auto lender may either deny you or use your lower score to justify charging you a higher interest rate.

You see, auto lenders are different than other types of lenders. And I'm not talking about their slimy ways, leisure suits, short ties, manly hairy chests, or gold bling. A lot of other lenders look at your whole credit picture to determine whether or not to give you a loan.

But many auto lenders care about only one you handled your past AUTO credit.

That's what a FICO Auto Industry Option Score gives car dealers—a way to pinpoint how you've handled what matters to them the most. So, even if everything else on your credit reports went down the toilet after your bankruptcy, if you didn't include your auto loan in your bankruptcy and never defaulted or missed a car payment, your Auto Industry scores will probably be better than your traditional FICO scores!

auto finance poor credit no credit

Saturday, October 6, 2007

auto finance poor credit no credit

How to get the right sub prime auto loan

Auto Finance Poor Credit No Credit loans are created for consumers who fail to meet qualification for traditional bank financing such as credit unions, financial institutions, and banks due to their low credit scores, previous vehicle repossession, recent bankruptcy, low income, or inability of producing specified down payment.

On average, the car dealers fund bad credit auto loans initially, which are then either sold or assigned to the particular car company. Pull your credit report. Knowing what’s on your credit report is very important.

However if sub prime credit is involved it is simply a must. Most dealers can supply you with sub prime financing alternatives, but the consumers that shops for their financing before they look for a car usually save money.

Make sure you have done a fair amount of homework before heading to a dealer.This prevents you from ending up at a dealership that is not equipped to handle your special needs. Next, try financial institutions that you've researched that seem to have a good track record.

"You really want to shop the prime lenders," says Michael Stegman, professor of public policy and director of the Center for Community Capitalism at the University of North Carolina-Chapel Hill.Many lenders now have subprime divisions. If you go in for a prime loan and don't qualify, they may be able to refer you to another part of the same company.Also, some lenders have community development requirements.

Another very important tip is don't give permission to just any auto loan company to access your credit report and credit score. Only give them permission if you like their offer.

The reason for this is because multiple credit inquiries made over a short period of time will lower your credit score.

Auto financing: Dealer tricks to avoid

At the core, most dealers aren't out to rip you off.

But they employ experienced and aggressive salespeople who have a bag of tricks designed to maximize the salesperson's cut and the dealer's profit.

The single transaction strategy: Many people view buying a car as one transaction.

It's not, and dealers know this. It's really three transactions rolled into one -- the new-car price, the trade-in value, and the financing. The dealer sees all three as ways to make money.

Treat each of these as separate transactions, and negotiate each one. If you get a new car for $200 over invoice, but receive only $1,000 for a trade-in car that's worth $2,500, you haven't done as well as you could.

The payment ploy: A dealer might say, "We can get you into this car for only $389 a month.'' Probably true, but how? In some cases, the dealer may have factored in a large down payment, or may have stretched the term of the loan out to 60 or 72 months.

Focus on the price of the car rather than the monthly payment. Never answer the question, "How much can you pay each month?'' Stick to saying, "I can afford to pay X-dollars for the car.

The rollover ruse: Often, it's tempting to want to trade up to a more expensive car -- even before you've finished paying off the car you're currently driving.

One way that some car buyers do this is by "rolling over" the remaining payments on your current car into a new car loan or lease. While this isn't illegal, it's risky. Why? You'll end up owing more on the second car than it's worth.

In the parlance of the automobile world, you'll be "upside down" in the vehicle.

If it's totaled in an accident, or if you decide down the road to trade it in, you'll end up writing out a big check to cover the remaining amount of the loan.