Consumer Car Buying Advice Blog

The myFICO explanation of how certain actions affect credit scores may help applicants hoping to qualify for a bad credit car loan realize how their financial decisions have affected their credit scores.

What we do

Auto Credit Express has been working with credit challenged consumers for the last 20 years. During that time, we’ve helped thousands of these consumers raise their credit scores and reestablish their car credit by financing a vehicle with a bad credit car loan. We have also tried our best to educate our applicants on the bad credit car loan process. But in addition to using a bad credit car loan to raise your FICO score, there are a number of other things that you can do to ensure that 2010 will see an improvement in your personal financial situation.

Earlier this year, the vice president of consumer education for TransUnion’s TrueCredit division had this to say about consumers giving themselves a fresh start in 2010: “Consumers should approach the New Year as a time to start fresh and begin managing their credit more closely. While it can be overwhelming, now more than ever, consumers need to play a more active role in their financial management to ensure they are in the best possible position with lenders.”

You and your FICO score

In order to bring up your credit score, it’s important to understand how your financial decisions will affect your credit score. On its myFICO web site, the Fair Isaac Corporation (creators of the FICO credit scoring system) explains how different credit issues can impact your credit score by giving examples of two individuals and their credit histories:

Alex has a FICO score of 680 and:

• Has ten credit accounts, including several active credit cards, an active auto loan, a mortgage and a student loan
• A fifteen-year credit history
• Low utilization on her credit card accounts (her balances are 15-25% of her limits)
• Never has missed a payment on any credit obligation
• Has no adverse public records on file

myFICO then goes on to cite what their FICO scores might look like following certain adverse credit situations:

For Alex:

Maxing out a credit card 735-755
A 30-day delinquency 670-690
Settling a credit card debt 655-675
Foreclosure 620-640
Bankruptcy 540-560

As is clearly illustrated by the above examples, higher initial credit scores are affected more than lower initial credit scores, as the lower initial score, according to FICO, “already reflects his riskier past behavior. “

In the FICO credit scoring world, maxing out a credit card has the least impact, while a bankruptcy will cause a credit score to drop the furthest because, again according to FICO, “the FICO scoring model generally gives the most weight to payment history when calculating the score, and bankruptcy is included in one’s payment history. Also, a bankruptcy often involves more than one credit account, compared with a foreclosure which often involves just a single account.”

The Bottom Line

As a customer hoping to reestablish your car credit and improve your credit score with a bad credit auto loan, it’s also important to understand how your other credit behaviors can also impact your FICO scores (you will have a different score from each of the three credit bureaus).

For more information on the bad credit auto loan process, please visit our web site at www.autocreditexpress.com to see what we can do for you.

Tags: bad credit lender, bankruptcy, better business bureau, car loan calculators, car loan quote, chrysler employee discount, consumer portfolio services, credit monitoring, credit score, ford, free car loan quote, gm, honda, second chance auto loan, subprime

This entry was posted and is filed under Used Cars. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.