What FICO score do RV lenders use?
In today’s blog post, we will answer the following question: What FICO score do RV lenders use? We will explain what a FICO score is, how it is calculated and how to maintain a strong FICO score.
What FICO score do RV lenders use?
Most RV lenders use a 660 to 700 FICO score, but it is possible to finance your RV even with a lower or bad score.
FICO is short for Fair Isaac and Company. They are the originator of the idea of a credit score so that lenders and creditors can assess the risk of lending you money or extending a new line of credit.
Your credit score tells a lender how likely you are to pay back what you owe responsibly. A high score means that you are very likely to pay everything on time, while a low score indicates that you are a high-risk debtor who may be in default.
In 1956, when Fair Isaac started calculating credit scores, they were the only ones to do it. However, now you have the top three credit bureaus in the US: Equifax, Experian, and TransUnion. There are also other credit reporting agencies worldwide, and creditors themselves now have their formulas for calculating risk for their specific type of loan. Each of these credit scores may be different to address the specific needs of that business or lender, but almost all of them are based on FICO.
Why does the FICO score matter when financing an RV?
Since all other scores are generally based, at least to some extent, on FICO, that means understanding your FICO credit score can help you understand how to improve your credit, in general. The steps you take to improve your FICO will also improve your credit scores with the three major bureaus and other scores you may have around the world. Create a path forward to improve your credit.
How is the FICO credit score calculated?
The calculation of the FICO credit score is based on five (5) factors. Each factor has a certain “weight” assigned to it: some factors have a significant impact on your credit, while others are not as important.
- Payment history (35%): As the most important factor used to determine your FICO score, payment history can make a big difference to your credit score. With this in mind, creating a positive payment history by paying all your bills on time is one of the easiest ways to improve your credit.
- Outstanding debt (30%): This factor considers your total debt in relation to the amount of credit you have available, in other words, your credit utilization ratio. Since it is another major factor in calculating your credit scores that are completely under your control, eliminating credit card debt can go a long way toward improving your credit score.
- Length of credit history (15%): An established borrower is less risky than one who is just starting out, which is why the FICO credit scoring system takes into account how long they have been a debtor. This also takes into account how long each of your accounts has been open, so it is a good idea to leave old accounts open with zero balances, even if you are not using them.
- New credit (15%): If you have multiple new accounts opened in the recent past, you will offer a higher risk as a debtor because you will show many new obligations. With this in mind, creditors want to know how many new accounts you have recently opened.
They also take into account the number of credit inquiries made in the recent past, as this indicates that a debtor is searching for several new accounts at the same time. Please note that only “difficult queries” count toward your score. “Soft inquiries” like checking your credit report yourself don’t count.
- Types of credit used (10%): The types of credit you use also come into play when determining your credit risk. Some types of debt are more attractive to you than other types of debt with lenders and creditors because they assess your risk. A mortgage and a car loan are good types of debt.
Credit cards are considered better than store cards or retail accounts. This factor also takes into account how often you use different lines of credit that you have open.
How to maintain a strong FICO Credit Score
Your FICO credit score ranges from 300 to 850 points. Fair Isaac uses a median credit score value as a measure of what a good credit score is – according to Fair Isaac and Company a good FICO credit score is 723.
To maintain a good FICO credit score, you can use the following tips:
- Never have a credit card balance that is more than 50% of your available credit line. If your credit card limit is $ 10,000 on a particular line of credit, never owe more than $ 5,000 on that card.
- Try to maintain a total balance of 10% -15% of your total available credit.
- Always make your payments on time, every time.
- Don’t constantly apply for new credit, as too many credit inquiries can hurt your score, even if you don’t open accounts.
- Leave old lines of credit open, even if you don’t use them.
- Use credit regularly to continue building a positive credit history.
- Check your credit report at least once a year to make sure it is free of errors.
- If you find errors, repair your credit.
- If you are taking steps to improve your credit score, then you need to know that the steps you are taking are really working. This is where credit monitoring comes in. You can pay for a service to monitor your credit, for at least a limited time, until you have your score where you want it.
How should you finance an RV even with a low FICO score?
Our suggestion for successfully financing an RV is to see what the dealership offers and what your bank will give you, and then go with the best financing deal. When an RV dealer realizes that they are not going to finance through them and that they are looking at other offers, they get more generous.
One of the best things you can do is get pre-approved through your bank and take this paperwork with you to the dealership. Oftentimes, a dealer would like you to finance them so that you can use this as your bargaining power. The most important thing is to leave yourself with several options, so you can cherry-pick the best deal and buy the RV of your dreams.
Before financing an RV:
- Consider federal and state laws: Review the federal and state laws that affect the vehicle financing and leasing process. These laws provide you with important information that can help you negotiate a better deal or better understand the process. They also give you certain rights.
- Determine how much you can afford: Before financing or leasing a vehicle, analyze your financial situation to make sure you have enough income to cover your monthly expenses.
Then, if you want to finance the purchase of a vehicle, know that the amount you will pay in total is going to depend on several factors, including the price you negotiate for the vehicle, the annual percentage rate or APR, which can also be negotiable, and the duration of the credit agreement.
Decide to finance or lease an RV when you know you are ready to take on a new obligation. Review the overall cost of the purchase or lease!
FAQ on What FICO score do RV lenders use?
Can you finance an older RV?
It is not that easy to finance an RV older than 15 years. If this is your case, you will have to either get a personal loan or a loan from a credit union. The score credit for an RV loan should be at least 700, and few lenders finance an older RV or someone with a low credit score.
What is the term of most RV loans?
RV loans can last from two to seven years, but the average is 60 months (five years).
Is it important to get pre-approved for financing before I start buying?
Pre-approval gives you the confidence to negotiate with a seller or private broker knowing you have a pre-approved limit.
How can interest rates vary from lender to lender?
Interest rates can vary widely. A rate of 5.99% for a specialized secured trailer loan for new utilities and those less than six years old could be increased to 12.95% by an unsecured bank loan for the same vehicle, or to 17.95% by a non-bank lender for a personal loan.
How much can you negotiate on a used RV?
With most used RVs, you can negotiate a discount of 20% to 30%, depending on the circumstances: your negotiation skills, supply and demand, the RV type and whether you are buying from a dealership.
- What Credit Score Do I Need for an RV Loan? – R1CU
- RV Loans: How To Finance An RV | Bankrate
- FICO Score Definition – Investopedia