What Does a FICO Score Mean On a Credit Bureau?
Q. What does the FICO score mean on a credit bureau?
A. FICO stands for Fair Isaac Company, the organization that conducts statistical research on the probability of a loan repayment. The resulting repayment “score” is driven by revolving credit.
Basic FICO Scale
729 and above is “A++”
700-728 is “A”
650-699 is “B”
600-649 is “C”
Below 649 is “D” **Correction Below 600 is “D”
A score of 700 typically represents “A” credit and a 70% chance that the loan will be repaid.
If your customer’s revolving credit balance is 50% of his credit limit, the FICO score will be lower than what you think it should be, even though your customer makes on time payments.
Unused credit cards also lower the score, as they represent an opportunity for the customer to become burdened by revolving credit payments overnight.
Customer initiated inquiries to a credit bureau can also lower a FICO score, although a score is unaffected when credit card companies prescreen credit bureaus before extending card offers by mail.
Note: A credit bureau can sell customer credit information to credit card companies. Customers must contact the credit bureau directly to request removal from the bureau’s list. The removal is good for two years.
Used vehicle loan resources may view FICO scores differently than new vehicle lenders. “A” paper to one lender may very well be “B” paper for another lender.
The FICO score is only one component used to determine the value of a loan. You need to make a C-A-S-E for every loan you present to a lender.
C = Credit. This could be the credit score, the credit ratings, or direct credit checks on rent payments and utility bills.
A = Ability. What is the debt ratio? Does the customer have the means to repay the note without any hardship?
S = Stability. How long has the customer lived in the area? What does the customer do for a living? How long has the customer worked in current job? Do any of the customer’s relatives live in the area?
E = Equity. What is the advance? Is it in line? Do you have financial commitment from the customer in the deal? Lenders prefer to have equity in every deal.
If you or your personnel need assistance in reading credit bureaus or in working with lenders, look for F&I training that specifically addresses these areas.
Kelly’s Korner, OIADA Newsletter, October 2004, p.23