One of the things that comes immediately to mind with the phrase “car credit” is the word “credit bureau”. This is because in order to get car credit, a lender and/or the car dealer has to pull your credit report with one, two or all three of the credit bureaus. When they do this, you’ll notice two things – the credit scores from all three lenders are probably different and, even if you know your credit score, it will probably be different from anything the dealer of lender has. Here’s why:
All three credit bureaus, Equifax, Experian and TransUnion, may use a version of the FICO score that was developed by the Fair Isaac Corporation in 1956. Equifax calls theirs a BEACON score, Experian uses the Experian/Fair Isaac Risk Model and TransUnion’s version is the EMPIRICA score. All three bureaus have also rolled out a new model that they will share, that is not from Fair Isaac, called the VantageScore.
In a perfect world, the three FICO scores should all be the same and the three VantageScore scores should all be the same. But the scores are usually not the same and the difference can almost always be attributed to the fact that the three bureaus contain different information about you.
In the first place, unless your credit file is fairly new, there are bound to be differences in the credit bureaus. Among the many reasons these differences exist:
- While many creditors report to all three bureaus, some report to only one or two.
- It may take one bureau longer than another to report a new creditor
- It may one bureau longer than the others to remove an old record
The other factor that can cause a difference is called “weighting”. When you request your credit score, it is based on standard factors that treat or “weight” your credit score according to a set formula.
When a car dealer or lender requests your credit score, they request a score that is “weighted” to further emphasize how you have paid your car credit in the past. If your car credit payment history is worse than your overall payment history, this will lower your weighted score versus a standard score. If, on the other hand, your car payment history has been better than your overall credit history, your weighted score will actually be higher than your standard score.
Tags: Car Credit