What FICO Score Is Used for Car Loans?

There’s a lot to keep track of when you’re car shopping. And one of the most important numbers to know is your FICO score. This number builds upon the information from your credit reports and shows your financial realities with more depth than a traditional credit score. FICO scores are used in several industries in different types.

Read on to learn more about why this score is important and what number you should aim for to get a good rating.

What is a FICO score?

A photo illustration of a hand holding a smartphone showing a graph with the credit score
How is a FICO score different from a credit score? | Rafael Henrique/SOPA Images/LightRocket via Getty Images

A FICO score is a three-digit number that acts as a summary of your credit reports, myFICO.com explains. It measures how long you’ve had credit, how much you currently have, how much of that credit is being used, and if you’re making payments on time. These scores were created in 1989 to improve the decision-making process for lenders and increase consistency. The number helps lenders understand how likely a person is to repay a loan. This affects how much money you can borrow, how many months you’ll have to repay, and how much the interest rate will be. 

FICO scores are a win-win for everyone involved. They help lenders make better decisions about whom they lend money to and why, and customers get a more fair shake when it comes to accessing credit. Each lender can determine what is a good score, but generally speaking, they go like this:

  • 580 and below (poor): Your score is well below the average score of U.S. consumers and demonstrates to lenders that you are a risky borrower.
  • 580-669 (fair): Your score is below the average score of U.S. consumers, though many lenders will approve loans with this score.
  • 670-739 (good): Your score is near or slightly above the average of U.S. consumers, and most lenders consider this a good score.
  • 740-799 (very good): Your score is above the average of U.S. consumers and demonstrates to lenders that you are a very dependable borrower.
  • 800 and above (exceptional): Your score is well above the average score of U.S. consumers and clearly demonstrates to lenders that you are an exceptional borrower.

Because FICO scores are based on your credit, your score is affected by whether you pay your bills on time, your amount of personal debt, and other major financial decisions. 

How is this score different from a credit score, and which is used for car loans?

FICO scores are related to your credit score, but they are far more useful than that. They are used by over 90% of top lenders, and the widespread nature of their use brings uniformity to the loan approval process, which leads to more informed financial decisions. 

Non-FICO credit scores can differ by as many as 100 points. The amount of variance can distort your belief in your likelihood in getting approved. If you think you qualify for a better line of credit or a low interest rate when you don’t, it can lead to some damaging consequences in the future.  

By contrast, FICO scores have been in use for over 30 years and have evolved over time to meet different needs. These scores offer far more security regarding your finances than a credit score. 

There are also different types of scores. For instance, FICO Auto Scores are generally used for car loans.

Types of FICO scores

Different FICO scores have been used to create industry-specific scores to better the loan process even further. This is done so that normal credit usage doesn’t come off as riskier than it should. 

Industry-specific scores use base FICO scores while providing lenders with a refined credit risk assessment for the type of credit the consumer wants. FICO Auto Scores are used for financing a car, FICO Bankcard Scores are more common when applying for a new credit card, and mortgage-related credit evaluations utilize base versions of FICO scores. 

The most commonly used standard is FICO Score 8. This type differentiates itself from others by being more sensitive to highly used credit cards and more forgiving about isolated late payments than previous FICO scores. 

Updated FICO scores are already in circulation. The UltraFICO Score is made for people with a low or no FICO Score at all. It uses more sources of data, such as checking and savings accounts, in conjunction with credit report data to give people more chances to increase their score. UltraFICO Scores are generated only if you opt in, giving you even more leeway when attempting to get a high score. 

And FICO Score 10 builds on prior versions to cover modern shifts in consumer credit data, such as the increasing use of personal loans for debt consolidation. There’s also the FICO Score 10 T, which takes a longer timeframe of your credit limit (at least the past two years) to get a more refined understanding of your credit risk.  

There are plenty of other steps when it comes to getting financing for a car, but a FICO score is a great way to determine your creditworthiness. 

RELATED: Does Buying a Car Build Your Credit Score?