Editorial Policy

Do I really need to buy all three FICO scores?

Eva Norlyk Smith Ph.D.

October 7, 2013

QHi Eva,

Is it safe for me to use a free FICO estimator online to determine if my credit is good enough for a car loan? If not, do I really need to buy all three of my FICO scores and spend about $60? — Cameron

ADear Cameron,

There are two very good reasons to check your FICO scores before getting a car loan. You need to be sure that your score qualifies you for a loan in the first place. Second, you need to determine what kind of interest rates your score qualifies you for.

If your score is below 700, it may behoove you to wait a while and take steps to improve your credit score before applying. The interest rate on the loan determines how much extra you will pay in interest charges over the life of the loan and impacts your monthly loan payment amount, which will determine how much car you can afford to buy.Ask Eva

Considering how much is at stake, I'm going to tell you to pull your real FICO scores –all of them.

Free FICO score estimators can be a good way to play with how certain actions (such as increasing your credit limit or canceling a card) can affect your score. But it's not a good move to rely on them when you're about to take out a huge loan. While the estimators can be quite good, I'm more concerned about your accuracy. When inputting your information, you might forget to include a late payment or an older, forgotten account. Plus, using an estimator won't show you any mistakes on your credit reports — mistakes you should correct before you apply for a major loan.

MyFICO.com has a package deal that gives you all three FICO credit scores for $54.98, which isn't cheap, but I think it's worth it to find out where you stand.

You seem to understand this already, but for those who are just tuning in: Everyone has three FICO credit scores, one generated from the information about you with each of the three credit reporting agencies: Equifax, TransUnion and Experian. The scores can differ quite a bit. In extreme cases, the FICO score from one agency might qualify you for a loan, while another might not. The average of the three scores will give you some idea of which interest rate you might qualify for.

If the three FICO scores all are based on the FICO scoring formula, why are they different? Well, each score is based on the information that particular credit reporting agency has on file for you, and that can differ quite a bit. Banks don't necessarily report consistently to all rating agencies, and in some cases, a rating agency may have information on file that the other two don't. Or, one agency may record a piece of data differently than the other two, and it is then valued differently in the FICO scoring formula.

These variations are typically small, but there can be significant differences. When that is the case, it can be due to errors in the underlying credit report that may be important to look into and correct.

Knowing exactly what your score is can give you vital intel when car shopping, as the interest rates on auto loans differ tremendously based on your credit score. At current rates, people with excellent credit (average FICO score of above 720) could pay as little as 3.38 percent APR on a 36-month auto loan. In contrast, people with bad credit (average FICO Score of 500 to 589) could pay around16.89 percent. That's a significant increase over the life of a loan — so if you can, put off the car purchase until after you spend some time trying to boost your credit rating.

Of course, interest rates fluctuate all the time, but to see what rate your FICO score might qualify you for, use this auto loan calculator from myFICO.com, which matches auto loan rates with FICO scores. For used cars, the rates may differ somewhat.

While buying all your FICO scores requires a big chunk of change, chances are that you can easily save much more than that by knowing the range of rates you qualify for and then shopping around until you find the best deal. Good luck!

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