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Warning

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Most consumers that opt for dealer financing expect to have their credit scores pulled and reviewed by a car dealer. Car dealers, however, do not always rely on mere FICO scores when making lending decisions. Car dealers have the option to pull a credit score known as the Auto Industry Option Score to evaluate how likely a consumer is to make regular payments on a vehicle loan.



The Auto Industry Option score, like the FICO score, is calculated by Fair Isaac. The difference, however, is that the Auto Industry Option scoring method assigns individuals credit scores based primarily on their past vehicle loans and the account activity connected to those loans. If the only negative entry on your credit report is a couple of late payments to a vehicle lender, your FICO score will be substantially higher than your Auto Industry Option score. This could cost you the loan you want or result in a higher interest rate. All forms of derogatory information related to automobile loans, such as a repossession or a deficiency balance that was sent to collections, will negatively impact an Auto Industry Option score.


Unfortunately, paying all of your past car payments on time does not necessarily mean that you are in the clear. Many car dealers that pull Auto Industry Option scores will pull standard FICO scores as well. Your loan eligibility and interest rates can then be based on either set of scores. If a late payment or repossession isn’t hanging around on your credit report to hurt you, an old credit card charge-off still can.


You have the ability to find out ahead of time exactly what information is being used to calculate your Auto Industry Option score. Although numerous types of credit scores exist, all of them are calculated based on the information found within your credit reports. Each consumer has the right to request a free credit report each year from each credit bureau. You can then review your credit reports and dispute any inaccuracies before you begin shopping for a new vehicle. Keep in mind, however, that the credit scores offered by the credit bureaus are not your actual FICO scores. You can purchase your Equifax and TransUnion FICO scores directly from Fair Isaac through myFICO.com. Unfortunately, consumers cannot access their Experian FICO scores.


Reviewing your credit reports is a smart move because you can easily identify and dispute any accounts that you do not recognize. In addition, the federal government enforces a limit on the amount of time information can appear on your report before the credit bureaus must remove it. Some negative information, such as tax liens and bankruptcies, is not bound by the standard reporting period. Most derogatory information, however, must be removed from a credit report after seven years. Having old derogatory information removed will improve your credit scores and make lenders more likely to finance your new car. Each of your credit reports may contain different information; therefore, it is important to review each credit report carefully.


Not all car dealerships use Auto Industry Option scores when measuring the amount of risk a consumer presents. Ask your lender ahead of time how your credit will be reviewed and what type of scores will be used. If the only items damaging your credit are tied to past vehicle loans, you may be better off seeking financing from a local bank or credit union. Banks and credit unions are more likely to use your FICO scores rather than your Auto Industry Option scores when deciding whether to approve your loan application.