Financial institutions, including credit card industry, rely on a system of calculation to establish your credit worthiness. This method of calculation was devised by the Fair Issac Corporation and is known as FICO score. It relies on the report provided by the three audit bureaus-Equifax, Experian and TransUnion to calculate the score. FICO score ranges from 349 to 849. The bigger the score, the better your credit worthiness is. Even your auto loan, the interest and the monthly installment, depends upon your FICO score.
When you are going to shop for a car, you must be prepared and armed with information about your credit score and report so that you can get the best interest rates. If your score is high, you will be in a position to negotiate with the financial institution to get good rebates and low interest rates but if the score is low, then you must be prepared to pay high interest.
The FICO score is calculated on the basis of your credit history. If you have been making payments on time and have no outstanding debts and balances, you can expect to have a good score. Your report will include every financial transaction that you have made in the past one year. A low score will make creditors and lenders look upon you as a bad investment and chances are that either you will not get the loan easily or when you do, it will be with high interest rates. Sometimes, they may also require a down payment on the auto loan, to recoup as much amount as they possible can to safeguard themselves.
When you get your FICO score and you find that it is low, then you can either wait till the score improves or purchase the car with higher interest rate and at the same time continue to work on improving your score. When the score improves, you can get the auto loan refinanced at better interest rates.
FICO score, though independent of the official bureaus, is accepted by all major financial institutions and lenders. It is available at the website of the company along with a credit report for free for a trial period. As your score is indicative of your financial status and creditworthiness, it is essential that your check the score and report regularly. Report any mistakes so that when you apply for the auto loan, it is not the mistakes that is decreasing your score and making you pay higher interest rates.