Why are the Credit Scores Used by Auto Lenders Different and Unavailable?

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File this story under the “Why Can’t Credit Scoring Be Less Complicated.”

I received the following question from a Minter a couple of weeks ago and couldn’t wait to write an article answering his question.

“John, last week I went to a car dealership to buy a new truck. I went on the test drive, really liked the truck and asked the dealer if they could get me a better interest rate than by credit union, which was offering me a great rate for 48 months. When the manager showed me my credit report I noticed that the FICO score that was used was some sort of auto credit score. I asked the guy what that meant and he was clueless. What gives?”

The FICO Auto Industry Option

What gives is that most auto lenders that use FICO credit scores use a different variety of FICO score called the “FICO Auto Industry Option” score. Let’s call it the FICO Auto Score, for short.

FICO develops a variety of credit scores including these semi-customized scores referred to as Industry Option scores. These scores are used by lenders in the auto, credit card, and installment industries, which pretty much covers everyone.

Here’s How They Work

Stop thinking like a consumer and start thinking like a lender, just for a moment.

If you are an auto lender do you really care how an applicant is paying their mortgage loan or their credit card bills?

You probably do, but not nearly as much as you care about how they’re paying their auto loans.

Well, you’re not the only one who thinks that way. FICO has built an entire stable of these credit score variants specifically for different loan types.

There are auto specific scores, bankcard specific scores, mortgage specific scores, installment specific scores and personal finance specific scores…all on the market today.

The choice of which score to use is one made by the lender.

Because you’re asking about the FICO Auto score we’ll focus on that one. The FICO auto score calculates your base or generic FICO score, and then holds on to it in credit score limbo.

Then, using what’s technically referred to as a “scorecard overlay” the FICO auto score takes a second bite at the apple and re-evaluates the consumer’s credit report but this time focuses on attributes that are especially important for auto loan risk evaluations.

For example, do you have other auto loans on your credit report?

If so, are those loans paid on time or are you missing payments? These are specifics that tell an expanded story about how you’re likely to pay an auto loan rather than simply “any” loan.

How Different are the Two Scores?

Don’t get me wrong, your auto score isn’t going to be wildly different than your generic FICO score.

You’d be safe to assume that the two score varieties will be within plus or minus 15 to 20 points, but that can vary.  Of course this is all academic if you’ve got fantastic credit reports.

Those are going to yield a great credit score regardless of the score type.

This rule is going to hold true not only for FICO’s generic score, but also their industry specific scores.

And, it’s going to hold true for every other credit scoring system on the market, like the VantageScore credit score, which I wrote about for Mint here.

It’s also going to hold true for the free scores available from the variety of websites that give them away, like www.CreditSesame.com. The better your credit reports the better your scores, regardless.

Unlike sites that allow you to check your credit report for free, FICO’s industry specific scores are not available to consumers on any website for any price.

In order to get those you’ll just have to keep relying on the Finance and Insurance Manager at the local auto dealership.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of Mint.com or Intuit. Follow John on Twitter.