FICO. It’s a word people hear often, especially if they are in the market for a loan. But what does a FICO credit score mean to you? These days, the general term “FICO” is synonymous with a person’s credit score, but it didn’t start out that way.
Now known simply as FICO, this corporation actually began as Fair, Isaac and Company. And it had nothing to do with a man named Isaac who was fair. What it is, is a data analytics company started by engineer William Fair and mathematician Earl Isaac in 1956. What it did, was come up with a standardized three-digit number, or credit score, with the goal of bringing uniformity to the lending industry. Before FICO, there were no credit scores; creditworthiness was up to the individual lender.
The idea of distilling people’s credit reports down to number took a lot of randomness out of the lending process and formed a less discriminatory standard. The process began slowly, but credit scores gained prevalence through the '90s, and credit took on a much bigger role in the American economy. FICO was not only the pioneer of the industry, but remains the world leader in credit scoring today.
What FICO Means for Auto Loans
If you are in the market for a vehicle loan, it’s good to know your FICO score. This allows you to gauge where your credit ranks—excellent, good, fair, poor, or bad—and determine what type of loan you will be able to acquire, prime or subprime.
FICO credit scores use a scale of 300–850. The breakdown of where a person ranks can vary greatly depending on the lender, but, as a general rule, it runs as follows:
- Excellent is above 750
- Good is approx. 700-749
- Fair is approx. 650-699
- Poor is approx. 550-649
- Bad is below 550
Again, where you fall on this scale will vary. However, the general consensus seems to follow the rule that if your credit is less than “fair”, subprime financing may be necessary.
Keeping an Eye on Your Credit Score
It is always a good idea to know your credit score and what is on your credit reports. Thanks to the Fair Credit Reporting Act (FCRA), you are entitled to a free credit report from each of the national credit reporting agencies—Experian, TransUnion and Equifax—once every 12 months. Because it is a good idea to monitor your credit throughout the year, we recommend requesting a report from a different company every four months. However, you typically have to pay for your credit score.
Fortunately, there are several ways that will allow you to get your FICO credit score for free. Here are some of the top ways, according to Moneytalknews.com.
- Discover Bank—via their Credit Scorecard program, which is available to anyone and can be signed up for online.
- Credit Cards—some institutions offer their credit card holders a free look at their FICO scores, such as American Express, Bank of America, Citi and Wells Fargo.
- Auto Loans—car buyers financing through certain companies, such as Ally Financial or Hyundai Capital America, get to see their scores.
- Credit Unions—Some credit unions give their members access to free FICO scores,so check with yours to see if this service is available.
- Student Loans—borrowers and co-signers under some Sallie Mae programs can see their scores quarterly.
- Credit Counselors—Credit counseling clients are entitled to receive their scores for free, because this enables counselors to better help improve client financial situations.
There are plenty of other ways to see your credit scores for free, just keep in mind that they may not be your FICO scores. You may find access to scores such as your VantageScore credit score, which was set up by the national credit reporting bureaus.
Putting Your Credit Score to Work
No matter how you keep track, know that knowing your credit score and what is on your reports, is the first step to getting auto financing. If you are facing a challenging credit situation and low score, a subprime auto loan may be right for you. Auto Credit Express has a network of dealers who have lenders equipped to work with many types of bad credit situations. Our free online auto loan request form helps you take the first step toward your next vehicle, so fill one out today!