Car shoppers who purchased new vehicles in January had an overall lower FICO score compared to new car shoppers a year ago. According to CNW Research, the average FICO score for new car buyers in January was 697.5, which is the lowest it’s been since January 2006, when the average score was 694.9. In January 2010, the average score was above 725.
This means that auto lenders are opening their doors to more shoppers with a wider array of credit scores. During the recession, it was difficult to be considered for a new car loan without a credit score of at least 700.
CNW says its preliminary February data shows that the average FICO score for new car buyers will continue to decline to 692.5, which is the lowest since December 2005.
As more car shoppers with lower credit scores are able to buy new vehicles, the percent of those with lower scores getting approved also increases. CNW found that January buyers with FICO scores less than 670 increased to 12.7 percent, which was the highest share since October 2009.
Although auto lenders are approving more consumers with lower credit scores, which is good news for shoppers who may have a blemish on their credit report, the economy hasn’t recovered to the point where consumers can get an auto loan with just a steady job and a social security number. Lenders are still going to look at your credit score, monthly income, prior auto loan payment history, debt-to-income ratio and payment-to-income ratio.