Why Your FICO Score Is Important In Fleet Financing

If you’re looking to finance new or used commercial trucks, trailers, or construction equipment, did you know your FICO® credit score plays a huge role in assessing you as an applicant and determining the financing rate and terms? Your credit score will also be a deciding factor on how much you’ll need to put towards a down payment or whether you’ll get approved for any loan at all. For three decades, FICO sits as the industry standard, and 90 percent of lending decisions in the U.S. use FICO scores.

What is a FICO score?

A FICO or Fair Isaac Corporation score ranges from 300 to 850 (up to 900 for some industry-specific scores). Based on your credit reports, the scores help creditors determine how likely you are to repay debt. A higher credit score assists you in securing a loan with more attractive terms, such as down payment, interest rate, etc.

Five Factors of Your FICO Credit Score and How to Score Higher

When it comes down to calculating your credit score, five factors affect your credit scores. Here are some essential ways to improve your credit score.

1. Payment history

The top question on a lender’s mind is will I get this money back? Your payment history makes up a large chunk of your credit score – 35%! Can lenders trust you to repay the funds? Do you pay your bills on time? Late payments on your accounts will have an adverse effect on your credit score. If you pay your bills late, how late were the payments? The longer it takes, the lower your credit score. So, if your history shows a frequency of missed payments or late payments, don’t be surprised if your credit score is low. Also, you should beware that factors, such as bankruptcies, foreclosures, lawsuits, debt settlements, etc., can come into play and affect your credit score. These factors are red flags for lenders. A savvy tip to live by is to pay your bills on time, all the time.

2. Credit utilization

Credit utilization, the ratio of your outstanding credit card balances to your credit card limits, heavily influences your credit score, making up 30% of the score. So, if you have large balances on your cards, your credit score will decrease. This factor shows you may be living beyond your means. Try to maintain low credit card balances. For example, if you have a $1,000 credit line and carry a $500 balance on your credit card, your utilization ratio would be 50%. According to NerdWallet, you should try not to use more than 30% of your available credit.

3. Length of credit history

How long have you been using credit? Your credit history length accounts for 15% of your credit score. If you have a long credit history, you will have a better credit score as long as other unfavorable factors don’t alter your score. Lenders can track your payment history over time and assess your trustworthiness and credit behavior.

4. New credit

Applying for a new line of credit can affect the length of your credit history as it decreases the average age of your total accounts, thereby lowering your credit score. However, there are some instances where a new credit can increase your score.

• A new credit line shows lenders you can hopefully manage various types of credit.

• If you don’t use the new card for purchases, then your credit score can increase.

• You can create a new line of credit to show lenders you can pay your bills on time.

5. Credit mix

Do you have different types of credit accounts? The credit mix makes up 10% of your credit score. If you can show that you can manage your blend of accounts well and make fixed payments each month to various loan accounts, you will score extra points.

Understanding the New FICO Scoring Suite

In January 2020, FICO announced a new scoring model suite with two versions, the FICO 10 Score and 10 T Score, which provide lenders with precise details to make more empowered lending decisions.

According to FICO.com: “FICO Score 10 and 10 T provide a precise assessment of consumer credit risk on all credit product lines – mortgages, auto loans, credit cards, and personal loans – and can be used across the entire customer credit lifecycle, starting with marketing/pre-screen, origination and account management, all the way through early-stage collections.”

With the new scoring models, late payments and debt will be taken more strictly into account when applying for a loan with these new models. Lenders will also assess historical information about your credit card balances and payment amounts, and your FICO score may change.

How do you achieve a good credit score with the new model?

Commercial Fleet Financing offers excellent tips to maintain good credit with FICO 10.

Is your credit score low? If yes, then pay your bills on time, open a new credit line, and create a good payment history. Commercial Fleet Financing offers several finance options to help you purchase a new truck(s) or equipment. You can get credit approval in less than two hours and receive loans and funds in 24 hours.

Get in touch to learn more!

Do you want to book the highest paying truckloads and stop focusing only on the loads that pay quickly? Factoring your freight bills can help you with your cash flow so that you can book more loads and get paid the same day.

Get all 10 FAQ’s: “10 FAQ’S Everyone in Transportation Needs to Know Now” booklet below.

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The experts at CFF answer the most commonly asked questions about financing, including refinancing, which is better loan or lease, and how credit is measured for a company.

About Commercial Fleet Financing, Inc.:

At Commercial Fleet Financing (CFF), our pros have given smart advice to fleet owners and owner-operators in the transportation, moving, towing or construction industries for more than two decades. With CFF, finding the right financing solutions is a phone call away and most borrowers secure commercial vehicle financing with ease. To talk directly with one of our finance pros and get started with credit approval in as little as two hours, CFF’s phone number is (469) 281-2962.

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