F&I managers, otherwise known as finance and insurance managers, are responsible for overseeing the portion of a vehicle transaction where financing and insurance are sold. This is an extremely important part of the process for both the car buyer and the dealership. F&I is where dealerships make a lot of their profits, and it is also where buyers find out how much it will cost in interest for them to finance their vehicle. This amount can vary depending on the health of their credit score. Therefore, it’s important for any individual working in F&I, and managers especially, to understand the basics of credit scores.
Read on to find out what you need to know about credit scores!
1. Automotive Business Managers Use Credit Scores to Determine a Customer’s Financial Health
After automotive F&I manager training, you will use credit scores to determine your buyer’s financial health and ability to buy a car. In order to determine a customer’s credit score, numbers contained within their credit report need to be inputted into a secret equation that produces a number somewhere between 300 and 900. For credit scores, a score of 900 is the best and highest, and 300 is the worst and lowest. Factors like the client’s ability to pay bills on time, the amount of their debt, and more all affect the rating.
Just because a client has average or poor credit, doesn’t necessarily mean you won’t be able to provide them with a loan for the vehicle they want. Poor credit may mean the customer is charged higher interests rates, which helps protect the loaner. Generally, when an individual has a score below about 650, they may begin running into trouble when trying to borrow money.
2. There Are Several Different Credit Reporting Agencies Automotive Business Managers Use
When a client comers into a dealership to buy a car, it’s common practice to obtain their credit score at some point during the sales process. At some dealerships, credit score inquiries are made even before a test drive occurs. However, understandably, this may put off buyers who are wary of revealing their personal financial information early in the car buying process. Most commonly, the credit score isn’t obtained until after the client has committed to the car and is now looking at their financing options.
Either way, when the time comes to run a credit report as an automotive business manager, there are two main bureaus in Canada that you can turn to: Equifax Canada and TransUnion Canada. Equifax refers to the credit report as a credit file disclosure, while TransUnion refers to it as consumer disclosure. Because both bureaus may have varying information about your client, the reported scores could vary slightly depending on which one you use.
3. Credit Ratings Are Categorized By Letters and Numbers
As mentioned above, credit scores are calculated based off the ratings provided by a credit report. On a credit report, types of credit are categorized into three subsections:
I: Credit provided in installments, like a car loan
O: Open credit, like a line of credit that can be used when needed and paid back completely at the end of the period
R: Revolving credit, like a credit card
Beside each of the categorization letters there will be a number, ranging from one to nine, rating the individual’s history with that type of credit. A nine rating is bad, meaning the individual fails to pay their bills on time, and a score of one is good, meaning the individual pays their bills within the 30 days of the loan due date.
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