Know Your Credit Score

One of the most important things about auto financing is your credit score--the higher your score, the better deals you will be offered. Credit scores focus on your payment track record, the amount of debt you owe and how long you have been using credit. They can range as high as 850, but ideally you want your score to be above 720, the top rung as seen by many lenders that would qualify you for the 0% financing offered by the major car companies. The advertisements on television don't specify the strict guidelines and terms of eligibility for those enticing low-interest deals.

For instance, if you had a much lower score of 620, you probably would qualify for only 3.9% or 4.9% from the credit subsidiaries of Ford or General Motors. Upscale brands such as Audi, Land Rover and Porsche are not as aggressive in offering such low-interest loan deals, but credit scores are just as crucial in determining whether you can get the lowest lease payments--an area where luxury auto manufacturers focus their promotional efforts.

The 2003 Fair and Accurate Credit Transaction Act (FACT Act) has been passed into law and is being phased in regionally; it will be in effect nationwide by Sept. 1, 2005. The law enables consumers to obtain a free copy of their credit report. However, you will still need to pay a fee to learn your credit score. The three major credit-reporting agencies, Equifax, Experian and TransUnion, will charge you between $5 and $7 for this information.

"You're going to have to check all three companies to make sure that the information on record is correct, because information can vary," advises Heather Greer, a public relations manager with California-based Experian. "That way, there are no surprises when you go to buy that car," she says. This will give the consumer an opportunity to correct any errors in the reports before lenders see them. To find out if your state has already adopted the FACT Act, go to AnnualCreditReport.com, a central site for credit file disclosure requests that is sponsored by the big three credit reporting agencies.

Now that you have determined your budget and know your credit score, it is time to get specific about low-cost financing.

Published on 04/28/05

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