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The Relationship
between Auto Loans and Credit Scores
Released August 2004
The Experian auto study was based on a nationwide
sampling of three million consumer profiles.
Findings:
- The average Experian PLUS ScoreSM for consumers
with no late auto payments is 689
versus 596 for consumers with at least one
late auto payment. When a payment is late
by 90 or more days, the average score dropped
to 574..
- 1.5 percent of consumers who have an auto
have a repossession noted on their credit
file. The average PLUS Score for those with
a repossession dropped even further to 566.
The states with the highest repossession rate
are Arizona, New Mexico, Texas, South Carolina,
and Nevada.
- The average U.S. auto financing amount
is $23,143 and the average U.S. monthly auto
payment is $383.
- 11 percent of consumers have a monthly
auto payment of $400 or more.
Consumer information on credit scores and mortgages:
Americans love automobiles. In fact, according
to a recent survey by the Bureau of Transportation,
the number of cars, trucks, and sports utility
vehicles have surpassed the number of licensed
drivers (204 million vehicles as opposed to 191
million drivers). New and used passenger car sales
and leases reached over 51 million in 2001, according
to the bureau's statistics. The automobile
business has become a huge industry. And when
U.S. consumers look to a car purchase or lease,
their credit score becomes a big part of their
financing plans.
Credit scoring is used to help potential lenders
quickly measure an applicant's credit worthiness.
The score is based on the information found on
the individual's credit report and calculated
using a statistical formula. The scoring system
awards or deducts points for each factor that
helps predict debt payment behavior. The sum of
these points gives you a credit score. Lenders
review credit scores along with the additional
applicant information to decide whether or not
they want to extend credit to borrowers who represent
a particular level of risk. Typically, credit
scores can range from 330 to 830 with a higher
score indicating a lower credit risk. Individuals
with higher credit scores are generally offered
more favorable loan rates and terms.
Many car shoppers claim there are two main car-purchasing
"seasons" where you can get the best
price on a car: mid- to late summer, and the end
of the year. Yet according to a study by Experian,
although a higher number of credit inquiries for
autos occurred in April in comparison to the rest
of the year, auto loans were opened relatively
evenly throughout the year, with August showing
a slightly higher percentage. So how much is the
average U.S. consumer financing for the auto loan
or lease? Experian research also shows that the
average U.S. auto financing amount is $23,143,
with average monthly payments of $383.
One of the best ways to maintain one's credit
score is to make payments on time, every time.
In fact, the Experian study shows that the average
U.S. consumer's PLUS Score with at least
one open auto loan or lease on their credit report
is 683. With just one delinquent auto payment,
the average score dropped to 596. When payment
on their auto loan was late by 90 or more days,
the average score dropped further to 574. And
when a repossession of the auto was reflected
on the credit report, the average score is 566.
America's obsession with autos dates back
to the early 1900s, when the first mass-produced
automobiles rolled off the assembly line. Today,
autos are a multi-billion dollar industry. 38%
of the population have at least one auto loan
or lease on file, with 22% of these accounts opened
within the last 12 months. The popularity of autos,
and the significant relationship between auto
financing and credit reflect the major role credit
scoring plays for many consumers.
For more information about this and other credit
score studies, please contact Experian Media Relations
at (714) 830-5300. |
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