How Credit Scores Affect Your Ability to get a Car Loan.
Creditors use a point scoring system to determine whether to give you credit, and how much to charge you for it
Your credit information like bill-paying history, number and type of accounts you have, late payments, collection actions, etc are collected from credit applications and your credit report. Creditors compare this information to the credit information of other consumers. A credit scoring system awards points to predict how creditworthy you are. Or how likely you are to repay loans and make the payments on time. People who are good credit risks have higher credit scores.
What goes into a credit score?
Data from your credit report goes into five major categories that make up a FICO score. The scoring model weighs some factors more heavily, such as payment history and debt owed.
Payment history: (35 percent) — Your account payment information, including any delinquencies and public records.
Amounts owed: (30 percent) — How much you owe on your accounts. The amount of available credit you’re using on revolving accounts is heavily weighted.
Length of credit history: (15 percent) — How long ago you opened accounts and time since account activity.
Types of credit used: (10 percent) — The mix of accounts you have, such as revolving and installment.
New credit: (10 percent) — Your pursuit of new credit, including credit inquiries and number of recently opened accounts.
- Superprime 740 and above.
- Prime 680-739.
- Non-prime 620-679.
- Sub prime 550-619.
- Deep sub prime, below 550
Improve Your Credit Report
The Fair Credit Reporting Act (FCRA) requires credit reporting companies and information providers (person, company, or organization providing information about your credit) are responsible for correcting inaccurate or incomplete information in your report. To take advantage of all your rights under the FCRA, contact the credit reporting company and the information provider if you see inaccurate or incomplete information.
- Notify the credit reporting company in writing what information is inaccurate. Include copies, not originals of documents. Provide your complete name and address. Your letter should clearly identify each item in your report that you dispute. State the facts and explain what you dispute. Request the information be deleted or corrected. Send your letter by certified mail, return receipt requested, so you can document what the credit reporting company received. Keep copies of your dispute letter and enclosures.
Credit reporting companies must investigate the items in question usually within 30 days unless they consider your dispute frivolous. They forward your information to the information provider. The information must investigate and report their results to the credit reporting company. If the information provider finds the disputed information is inaccurate they must notify all three nationwide credit reporting companies so they can correct the information in your file.
When the investigation is complete, the credit reporting company must give you the written results and a free copy of your report if the dispute results in a change. (This free report does not count as your annual free report under the FACT Act.) Again, see our Credit Reports page to obtain your free credit report.
If an item is changed or deleted, the credit reporting company cannot put the disputed information back in your file unless the information provider verifies that the information is, indeed, accurate and complete. The credit reporting company also must send you written notice that includes the name, address, and phone number of the information provider.
Upon your request credit reporting company must send notices of any correction to anyone who received your report in the past six months. A corrected copy of your report can be sent to anyone who received a copy during the past two years for employment purposes.
If an investigation doesn’t resolve your dispute with the credit reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the credit reporting company to provide your statement to anyone who received a copy of your report in the recent past.
Expect to pay a fee for this service.
- 2. Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a credit reporting company, it must include a notice of your dispute. And if you are correct — that is, if the information is found to be inaccurate — the information provider may not report it again.
Accurate Negative Information
When negative information in your report is accurate, only the passage of time can assure its removal. A credit reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place. Improving your credit score before applying for your car loan will help you qualify for a better auto loan finance rate