Bad Credit Car Loans & FICO Scores

All consumers but especially those with bad credit probably wonder just how FICO determines their credit score.

We know what you’re going through

At Pierre Money Mart, we’ve been helping bad credit car buyers reestablish their car credit by financing a new or recent pre-owned vehicle with a bad credit car loan. During that time, we’ve tried to educate consumers on high to take advantage of the process – since these very same people begin with a distinct disadvantage due to the high interest rates charged by these loans.

Your FICO score

There are 5 factors that FICO (formerly known as Fair Isaac) uses to determine your credit score. Where you fall in this ranking will determine whether you can finance your next car with a traditional lender or whether you will need to apply for a bad credit car loan (there will be more, later, on where and how you should do this). The 5 factors and how they affect auto financing include:

Payment History - Payment history affects approximately 35 % of your score. Making all of your monthly payments on time goes a long way towards being able to secure vehicle financing through traditional lending channels. If you have been a bit remiss in making your payments on time, bad credit car loans could be an alternative.

Balances - How much do you currently owe to creditors? Your current debt load will affect about 30 % of your FICO score. If your credit cards are at their limits and your revolving credit is maxed out, this will have a negative affect on your score. Bad credit car loan buyers, especially, should try and lower their debt load before applying for a loan. The lower your balances (a rule of thumb is to keep your current balances at 30% of your credit limit or lower), the higher your score and the lower the interest rate that you will be charged on a bad credit car loan.

Credit Utilization - The types of credit you are currently using impact your credit score by approximately 15 %. Banks, finance lenders, credit cards, mortgages, and all other financing is included in this category.

Depth of Credit – How long have you been using credit? Your time “in the bureau” accounts for approximately 10% of your credit score. The longer you’ve been using credit, the higher your score will be.

Recent Credit Opened - Recent credit applications impact your score by about 10%. If you are constantly applying for new credit (loans, credit card application, etc.) this will be reflected in a comparatively lower credit score.

THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.