FICO stands for the Fair Isaac Corporation—a company that specializes in credit scoring. Your FICO score is a three digit number which represents your ability to pay off different types of loans, such as auto loans, credit cards and mortgage. This model is widely used by dealerships and financial institutions to distribute loans and for buyers to qualify for loans (the better the score, the better the terms of the loan).

Below is the breakdown of the FICO scoring system:

• 300 to 579: A poor score means lenders will consider you a risky borrower. You may still be able to obtain a loan but there will likely be stipulations, such as a hefty downpayment, high interest or the need for a cosigner.
• 580 to 669: A fair score usually means you have limited or no credit history. A fair score doesn’t necessarily mean you’re an unmanageable risk for the lender. You may still be approved for a loan but you may have to pay a higher interest rate or need to stick to more affordable vehicle purchases based on the amount you’re approved to borrow.
• 670 to 739: A good score means the lender will likely approve your loan, but you’ll still likely have to pay higher interest than those with better scores.
• 740 to 799: A very good score lets lenders know you’re a dependable borrower and can qualify for favorable terms.
• 800 to 850: An exceptional score tells lenders you are a very dependable borrower and have a strong credit history. You are likely to qualify for the best interest rates and loan terms.

The FICO score algorithm is often updated to meet the ever-changing needs of borrowers. For instance, the most recent version of the score no longer permits third-party collections you’ve paid off to have a negative impact on your score.

FICO Auto Score

As you may suspect based on its name, the FICO Auto score is a version of the FICO score that focuses mainly on the borrower’s ability to pay off auto loans. For instance, a missed or late auto payment on a past auto loan will carry more weight than a late credit card or house payment.

While some lenders may use the FICO score, dealerships in particular may choose to check the buyer’s FICO Auto score instead.

The FICO Auto score ranges from 250 to 900, with higher scores indicating a lower risk of defaulting on an auto loan. Lenders prefer borrowers with scores of 700 or higher.

Different dealerships check different credit scores and you may not know which score is checked when you apply for an auto loan. That’s why it’s generally best to maintain at least a good overall credit score.

Tips for Improving Your Credit Score

If you have poor or even fair credit, you may have a tough time qualifying for a loan with favorable conditions or qualifying for a loan at all. Owning a reliable vehicle is a necessity for most people in the DMV area, so taking steps toward improving your credit can help you qualify for an auto loan and get the vehicle you want and need.

Some useful tips for improving your credit score include:

• Pay your bills on time: Late payments can have a major impact on your credit score, so make sure to pay all of your bills on time.
• Keep balances low: High credit card balances can also hurt your credit score, so try to keep them as low as possible.
• Monitor your credit report: Make sure to check your credit report regularly for any errors or inaccuracies that could be dragging down your score.
• Don’t open too many accounts at once: Opening too many accounts in a short period of time can also hurt your score, so try to limit the number of new accounts you open.
• Use secured credit cards: Secured credit cards are a great way to build up your credit without taking on too much risk, and they can help you improve your score over time.