And how is this not fraud lol?
Fraud has nothing to do with it. Although fraud does exist in the car lending industry, most dealerships and finance managers donât commit anything thatâs even questionable legally when it comes to banking regulations. No one is deceiving the banks to get a better rate, but rather speaking to the under writers to try to convince them to bump it up a tier (or a few). The Finance Managers might explain things about the customers credit that worries the under writer, such as missed/late payments, lack of history, high credit utilization, etc. Maybe they call and try to ask to beat a rate from another bank. These clarifications sometimes get the customer into a higher tier (and thus a lower rate), but it doesnât always work.
Itâs the equivalent to you shopping around for a mortgage and getting 3.8% from some bank youâve never done business with before and 3.9% with your local bank that you use. You might speak to the loan officer and explain what your intentions are, your job history, etc. and ask him to beat the rate from the other bank. He might then give you 3.7% interest beating the other bank. Is this fraud?
1 Like
There are different formulas or models that will change your FICO score. The most widely used model is called FICO Score 8. The newest model is FICO Score 9, which doesnât take into account any 3rd party paid collections, medical debt, or medical collection agencies on your credit report. For some this is the difference between a 620 and a 720.
The finance manager at a dealership can use a different FICO model, called an âauto-enhancedâ score, or officially FICO Auto Score 8, which favors your auto loan history over other accounts. Kind of like what @Falcon01 mentioned with the lady and the Toyota. The lady was in the low 500âs according to the FICO Score 8 model, but was a high 600âs when using the âauto-enhancedâ version, which qualified her for a Tier 2.
Now if youâre applying for a credit card, itâs most likely that the FICO model will be FICO Bankcard Score 8, which heavily looks into your previous credit card accounts and history.
1 Like
Where does income come into play? If someone has a tier 1 credit score is there typically any income verification done?
Iâve never had to prove income on a tier 1. Iâd say it would depend on how strong your credit report is. If you donât have a well established report with a nice mix of accounts, previous auto history, low utilization, they will probably ask you to verify your income. Income doesnât really mean much without good credit history You can make 35k annually and still have an 800 score.
There is a difference between shopping for a rate and shopping for a credit score. I understand that within a credit score, you can still have an interest or MF range. I can understand how a finance manager can give 3.8% to a Tier 1 and 3.7% to another Tier 1.
But I canât see how a âfinance managerâ can bump someone from Tier 2 to Tier 1 without at least exploiting some loophole. I am sure the bank would have stipulated Tier 1 on FICO Auto 8 score or whatever. If the bank just says FICO 720 and I play around until I get a score that meets that number (say FICO ice cream warcraft unicorn score 22), then the finance manager is being âcreativeâ.
Thatâs the same way that people were getting loans on mortgages in early 2004-06 by coming up with all kinds of numbers that would eventually get you a mortgage.
Absolutely.
When I was a teenager with bad credit and didnât know jack shit, I financed a used Nissan Maxima with 70k miles. Price was 11k internet price.17k window price.
I couldnât get approved with a score in the 500âs. The finance manager called it âcreative financingâ. He put down I worked for jetblue (which I didnât) and made 75k annually (which I didnât obviously). Told me to stick to the story Iâd anyone called me from the bank. Got me approved by Wells Fargo for 12% interest. 19k loan. Monthly payment was around $340. The bank didnât ask me to verify income. I got ass raped on the deal, really really bad, but thatâs another story. He said he had a contact at the bank.
The bank employees and finance managers do kickbacks and other shady shit under the table. Not all of them, but I have first hand experience with it.
Edit: if youâre wondering why I got a $19k loan on a $11k car, I was sold the car for $17k+$2k warranty. I didnât understand /read the sales contract. I was young and stupid and just wanted my new car. I signed the dotted line wherever he told me.
Fuck you Jermaine from Luxury Autos of Great Neck. Thereâs a special place in hell for you. Cocksucker. I know it was my own fault, Iâve since learned from my mistakes and proud to say I have a 849 FICO.
3 Likes
Itâs actually not that complicated.
If you have a solid portfolio with a lender, you often can get a rate bump.
The challenge here is most folks think score is the end all be all ⌠it is not.
@bvman can go into it, if he would be so kind.
The two are separate. You can make $1M and never pay your bill on time, or you can make $20K a year and never miss a payment. They are mutually exclusive and thatâs why income isnât part of a credit score.
But when applying for a loan - whether car, mortgage, whatever - the way it works basically is
Income determines how much you can afford. Credit score determines how much interest you will pay.
Iâd be happy to.
Tier 1 credit can vary lender to lender. it can also vary from bureau to bureau. For example you may have a TU score of 680 and an EQ score of 730. Some lenders will only use one particular score, some may use the highest of the three. Some may use an aggregate. This can also vary by what part of the country your in. TU is used in the Midwest because it reports better for people here, I believe EQ is used on the west coast. In addition to that what is commonly used is a FICO Auto Score which is scored differently then a mortgage or a credit card for example.
Most dealers use an auto approve tool for submitting credit applications, many lenders will not âbumpâ you into a higher tier even if your just a point or two away. Some lenders will depending on the strength of the relationship of the finance manager with the bank.
Often times finance managers will tell you that you just missed tier 1 buy a few points, so they can actually contract you at tier 2, even though you qualify for tier 1 and pocket the difference to profit for the dealership. For more detail, my buy rate from the lender is 1.9% since you are tier 1, Iâll tell you that you we got you qualified at tier 2 and that your at 2.9%. If you address the fact that your score is very high I can almost find something on your credit report that looks bad to justify it. If you really push Iâll say something like âthis was an auto approval and it works on algorithms for risk, let me go back and see if I can get a real person on the phone and get it moved up for youâ then I go and have a smoke.
There are many other factors involved as well when talking about APR such as, money down, credit history, book out value of the vehicle as well ETC.
Credit tiers may also change day to day and month to month. Depending on risk portfolios that banks place people in day to day.
I have seen customers with a 520 credit score get approved for 50k cars with no chance of paying the loan back and I have seen people at 620 get denied.
Its about relationships, the rep at BOA may be goods friends with me. Maybe we just had drinks or went golfing the other day and will do me a favor.
Credit tiers are at the purview of the lender and can be changed anytime, for any reason they see fit within the guidelines of the CFPB.