These are the things the Banks and Finance companies are looking at when they are deciding on whether or not to lend you money. A good indicator of this is your Credit Score. Your Credit Score is a number between 300 and 850. The higher the number, the greater the probability that you will pay the loan back. The lower the number, the probability that you will repay the loan is less.

What makes up a Credit Score?
FICO Scores: Based on Software developed by the Fair Isaac Company. It uses items such as length of time you have had your accounts, payment history, available credit, etc to compute a score. This score represents your probability of repaying a loan.

Equifax calls their FICO score a Beacon Score.
Experian calls theirs the Experian Fair Isaac Risk Model.
TransUnion calls theirs an Empirica Score.

These are the 3 major Credit Score companies, depending on which lending institution, and which geographical location you are in on which company gets looked at or reported to. Your car loan or Mortgage may report to all 3 or just 1 of the bureaus. Which means, your credit score can be different with all 3 companies. So, your Equifax score may be higher than your TransUnion score etc, and so forth. Most lenders only pull one bureau, but they can be persuaded to pull all 3 if necessary. So, if you know, let the Finance Manager know which bureau shows your best score.

Individual Loan: You are borrowing the money by yourself
Joint Loan: You are borrowing the money with someone who has equal interest in the loan. Most likely spouse.
Co-Signer Loan: You are borrowing the money, but someone else is signing to be responsible for the loan in the event that you do not repay it.

You can get a loan even with a lower credit score if you can show a greater amount of one or more of the 3 C’s. For example, if your credit score does not normally qualify you for a loan on a motorcycle, you may put up the title to your automobile. This gives the bank more Collateral, which tilts the odds in your favor. If your Debt to Income ratio is too high, you may have to put money down or have someone cosign on the loan with you. This increases your Capacity to repay the loan. If you have had a good history with a particular lender, or if a lender can see the reason for the derogatory lines on your credit report, (a good Finance Manager can help “paint the picture”) they may still lend to you based on your Character.

Lending institutions will have there own Internal Scoring Systems. They input the information from your credit report with information from your credit application, (income, time on job, time at residence, down payment, etc), to come up with their own internal “score”. This internal scoring system will be different from lender to lender. Some lenders like to see more time on job than others. Other lenders may want to see a longer time at residence, etc. But, the all use their internal scoring systems to decide if to lend you money, how much money to lend you, and what interest rate to give you.

It is a good idea to know your credit score and what appears on your credit report. That way you can have an idea of what interest rate and terms you may qualify for. If you know your credit is less than perfect, be up front with the Finance Manager and help them understand the how’s and the why’s. This will increase your chance of getting approved and or get a better interest rate.

Finance Amounts:
The amount of money the banks and finance companies will lend you also depends on your Collateral, Capacity, and Character. They also look at a part of your credit report that tells them your high credit limit. This is the largest amount of money that you have borrowed at one time. If your high credit is $5000, you may not get them to give you a $10,000 loan. They also look at the part of the credit report that tells them if your loans are individual, co-sign, or joint. If your High Credit is $10,000, but it is a joint or co-sign loan, they may not loan you $10,000 without a cosigner or joint applicant. Know what is on your credit report, so you know what to expect when you go to the dealership. Let the Finance Manager know up front what your credit looks like, so he can help with the Character and Capacity characteristics with the lending institutions.

Interest Rates:
The interest rate you pay will depend on your Capacity and Character more than your Collateral. Generally, the higher your credit score, the lower your interest rate. But, as stated before, the lenders have their own internal scoring systems to determine your interest rate and the amount that they will finance. The Finance Manager at the dealership will know what criteria his lenders value, and have an idea of their scoring systems, so the more he knows about your credit, the easier it will be for him to find you the best loan.

Generally, the higher your score the better your interest rate will be. But, your content will effect it as well. If your beacon score is high, but you don’t have much content on your credit report, your interest rate will not be as good as someone whose credit report has multiple lines on the report for long periods of time.