What Every Car Shopper Should Know About Credit Reports

Let’s face it, car shopping can be a minefield. The average person buys a car 12 times in their life and it never gets easier, right?

Thank goodness there’s Google to go to for help. Before search engines and social media, you had to put yourself into the mix unarmed. You were forced to trust what advertising and salespeople said.

Today, smart, savvy car shoppers do their homework before setting foot inside a dealership.

  • They gather info on makes and models
  • They ask their friends
  • They make inquiries on social media
  • They look at dealership websites
  • They are influenced by online reviews
  • They use car loan calculators to figure their payment

The one piece of homework that many car shoppers overlook is their credit report.

When financing a car or truck, lenders decide on your rate and terms based on four main factors:

  1. Vehicle choice: the age, mileage and cost of your selected vehicle.
  2. Credit application: income, employment and residency information.
  3. Credit history: information obtained through your credit report.
  4. Down payment: total of cash and/or trade equity (amount you received for your trade-in).

Credit history is something of a mystery to many car shoppers. You go about your day, living your life, without paying too much attention to it.

But, when the time comes to buy a car, shoppers really do need to understand the specifics of what makes up their credit report. The information (or lack thereof) on your credit report dictates exactly what you’ll be able to buy.


What is a Credit Report?

A credit report is a record of your current and past interactions with lenders and others with whom you’ve had financial dealings.

Under the Fair Credit Reporting Act, all consumers are entitled to one free credit report/disclosure every 12 months upon request from each nationwide credit bureau and from nationwide specialty consumer reporting agencies. See www.ftc.gov/credit for additional information.

Car loan decisions are often based on a consumer’s Credit Score. The credit agencies use consumer credit history data to produce sophisticated models that can predict an individual’s likelihood of making payments reliably.

The most widely recognized credit score is called a FICO score. It’s produced by the Fair Isaac Corp, hence the “FICO” name.

FICO scores range from 300 to 850, with the higher numbers indicating better creditworthiness.

Even though every score is factored based on the individual’s personal credit history, FICO maintains a particular breakdown for calculating credit scores:

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Types of credit/credit mix in use (10%)
  • New credit (10%)


Stay smart and savvy with your Credit Report

Most people need to finance their car. At Exit5 Auto Group in Latham we tell our customers that shopping for a loan is as important as shopping for a car.

Two rules of thumb to avoid trouble:

  • If you’re not ready to apply for a car loan, don’t provide your Social Security number or other detailed personal or financial information, even in conversation.
  • Don’t sign a loan application until you’re ready to buy.

Last but not least, obtain copies of your credit reports from all three major credit reporting agencies and check your Credit Score yourself before visiting a dealership.

Having your credit information will let the dealer know that you’re a knowledgeable shopper and will help you avoid making a potentially costly mistake.

Got more questions about your credit situation? Contact us at518-541-5000.

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