Information Gathering, Part IV

What You Need to Know about YOU:

It really doesn't matter whether you get the value of your automobile or the value of yourself first. It is important, though, that you get these values prior to making your automobile purchase. You've already read, and hopefully researched, how to obtain the value of your vehicle. Now I'll show you why it's important to research the value of yourself.

If you're one of the lucky few that can step on a car lot and put down cash for a vehicle then this post isn't for you. You are a rarity, but still need to know what your car or truck is worth so refer to the previous posts. For the majority of you, though, financing your vehicle will be the avenue taken. Since this is the case, the value which determines YOU when buying any car, truck, SUV, or van, is your credit rating.

Most dealerships use a "beacon score" or "FICO" score to determine your credit rating. Beacon score is a term used loosely by many dealerships which actually applies to one of the credit reporting agencies' scoring format. FICO stands for the Fair Isaac Corporation, and is the leading credit score model used in the U.S. Whichever term they use, what the dealership's finance and insurance (F&I) manager is doing is checking your credit rating with one or more of the three major credit reporting agencies: Equifax, TransUnion, and Experian.

Initially, credit scores fell within a range between 300 and 850. In 2006, though, the three credit reporting agencies got together to develop another system, VantageScore, which rates the creditworthiness of consumers between scores of 501 and 990. A grade is then applied to the consumer from A to F (A=901-990; B=801-900; C=701-800; D=601-700; F=501-600). While this system is in use, FICO scores are still used by many dealerships. The majority of consumers fall between the 600 and 800 range. Generally, those with 720 or better receive better interest rates on loans while those with credit scores in the 500's will see higher rates (usually 3 to 4 points higher). As you can see, it would be important to know which scoring system the dealership is using when you apply for your auto loan. Simply asking once you get to that point in the auto-buying process will help you in more ways than one. First, it lets the person you're dealing with know you're a knowledgable consumer and that is essential. Secondly, it lets you get on the same page as the F&I manager when the time comes to negotiate your loan terms. If you would like some more background information about credit scores I found Wikipedia to be extremely helpful.

Every consumer is entitled to a free copy of their credit report from each of the three credit reporting agencies once every 12 months. You can obtain a copy of this information by going to annualcreditreport.com. Once there you'll be prompted to select your state and then you'll be directed to a page to fill in your pertinent information. After filling in the info you'll be directed to each one of the credit reporting agencies' sites. After answering a security question only you would know about your credit background, each agency shows the good and the bad information regarding your credit history. THE ONLY THING NOT INCLUDED IS YOUR CREDIT SCORE!! Of course, you can purchase your credit score from each for a nominal fee (To make things easier I've provided access to purchasing your FICO score on the side of this blog). Although these reports won't include your credit score, they will provide you with extensive information about your credit. Also, you'll have the opportunity to see if there's anything on your report that shouldn't be there which could be disputed, taken off the report, and, ultimately increase your score.

If you are financing your automobile, the importance of having your credit score cannot be stressed enough. As a consumer applying for any type of loan, knowing your credit score before applying for the loan is the single-most important negotiating tool you can have at your disposal. Having your credit score in hand prior to approaching the F&I manager at any dealership will save you money...Guaranteed! This will be explained later when I get to the negotiating step in the auto-buying process. For now get the information together, review, and GET YOUR CREDIT SCORE! You'll be glad you did.

We're almost done with the research phase of the auto-buying process. In the next post I'll tie things up prior to us moving on to the "Schedule" phase of the auto-buying process. Until then, good luck on obtaining that score.