Three Ways You Can Look At Your Customer's Credit-Worthiness For A Car Loan
If, up until now, your car dealership has offered in-house credit and payments and that system has not worked out quite so well, you might be considering a switch to traditional car loans for your customers. If that is the case, you will need to set up some sort of system to look at each customer's credit and decide if you can help them get into a car. There are three ways you can look at a customer's credit-worthiness.
A Single Credit Report
There are three credit reporting agencies, and many businesses only report to one. You could choose to check just one credit report from one of the three agencies. Choosing this method would provide the customer with better odds of getting a car loan and buying a car. However, a single report may be deceiving, since there could be other, more negative entries on the reports from the other two agencies. A single credit report is more like a snapshot of the bills that the customer keeps up with or still has to pay off, with a negative entry here or there and no mention of a FICA score (which is very different from a credit report and credit score).
Credit Reports from All Three Reporting Agencies
Other money services would allow you to pull credit reports from all three agencies simultaneously. Then you could see the entries that are missing from one or two of the reports. It gives you a clearer picture of the amount of debt a customer really has, not just what one credit reporting agency says. The truest test of credit, however, is the FICO score, and while you may have just pulled three credit reports for one customer, you may not have received this telltale score, which fluctuates often in response to recently missed or made payments. (The car dealer credit report may also list bankruptcies, charge-offs and legal issues with money that you may want to know about.) Some money service providers may also give you the FICO score for a customer, but usually that is an extra charge for that service.
The Fantastic FICO Score
Last (but definitely not least) of all is the FICO score. The FICO score looks at five pieces of data, and each piece carries its own weight in how this score is computed. It may be the most important of all of these ways, since the FICO score tells you how regular the customer is with payments and how much or how little the customer still owes on the rest of his or her debts. These two factors account for 65% of the overall score, meaning that the best and most current way to judge if a customer can repay a car loan is by pulling and looking at his or her FICO score. The FICO score pulls the data it needs from all three credit reports, too, making it almost unnecessary to pull credit reports when you only really need the FICO score. Click hereto learn more about car loan credit reports.
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