All consumers but especially those with bad credit probably wonder just how FICO determines their credit score.

We know what you’re going through

At Pierre Money Mart, we’ve been helping bad credit car buyers reestablish their car credit by financing a new or recent pre-owned vehicle with a bad credit car loan. During that time, we’ve tried to educate consumers on high to take advantage of the process – since these very same people begin with a distinct disadvantage due to the high interest rates charged by these loans.

Your FICO score

There are 5 factors that FICO (formerly known as Fair Isaac) uses to determine your credit score. Where you fall in this ranking will determine whether you can finance your next car with a traditional lender or whether you will need to apply for a bad credit car loan (there will be more, later, on where and how you should do this). The 5 factors and how they affect auto financing include:

Payment History - Payment history affects approximately 35 % of your score. Making all of your monthly payments on time goes a long way towards being able to secure vehicle financing through traditional lending channels. If you have been a bit remiss in making your payments on time, bad credit car loans could be an alternative.

Balances - How much do you currently owe to creditors? Your current debt load will affect about 30 % of your FICO score. If your credit cards are at their limits and your revolving credit is maxed out, this will have a negative affect on your score. Bad credit car loan buyers, especially, should try and lower their debt load before applying for a loan. The lower your balances (a rule of thumb is to keep your current balances at 30% of your credit limit or lower), the higher your score and the lower the interest rate that you will be charged on a bad credit car loan.

Credit Utilization - The types of credit you are currently using impact your credit score by approximately 15 %. Banks, finance lenders, credit cards, mortgages, and all other financing is included in this category.

Depth of Credit – How long have you been using credit? Your time “in the bureau” accounts for approximately 10% of your credit score. The longer you’ve been using credit, the higher your score will be.

Recent Credit Opened - Recent credit applications impact your score by about 10%. If you are constantly applying for new credit (loans, credit card application, etc.) this will be reflected in a comparatively lower credit score.

When it is time to purchase a new car, many people opt for a used car from a dealership.. However, most people believe that car dealers have a reputation of trying to trick people out of their money. Today’s car buyers need to be extra careful when dealing with them. There are some steps that buyers can take to help them deal with auto dealers without running the risk of over paying for a car.

The first thing car buyers need to do is to assess their own financial situation. This is important as this can help a person know what he can afford, which can help him set a price limit for his purchase. Moreover, doing so can help a car buyer avoid being encouraged to buy a car he cannot afford. In relation to this, car buyers also need to decide on which car they want depending on their price limits. This is also important because it can help narrow down a person’s search for a car. Another important step is to canvass for the auto dealership that would offer the best deals on cars. If possible, people should also bring the ads of other auto dealers to the dealers they go to because this can give them a good leverage when it comes to the price negotiations.

When dealing with auto dealers, car buyers should not just settle for the rate that an auto dealer first gives for the financing of a car, because they can negotiate for the best rate possible. If the dealer cannot offer them a better deal, they can simply move to the next dealership. Car buyers should also avoid being loaded with things that they do not need, like rust proofing or tow packages by their auto dealers because doing so only adds to the price of the car.

Dealing with auto dealers can be tricky, so car buyers should be informed about the car-buying process in order to avoid being duped by some unscrupulous auto dealers. With the right information, car buyers are sure to get a good value for their money

Don’t be taken advantage of because you have bad credit. At pierremoneymart.com we are your friends. We know that having bad credit is the worst financial problem in the lending world. Individuals with bad credit can finally stay in the game and if you are one of those persons, a bad credit refinance car loan may be the answer to your financial crisis. Save money by replacing your existing car loan with a new finance deal and get a bad credit refinance car loan. Here is how it works. Apply today with refinanceitt.com for a bad credit car refinance loan, with better interest rates so you can effectively and efficiently make smaller monthly payments. When approved, refinanceitt.com pays the loans and existing balance to your existing lender. Your high interest debt to them is now repaid and you can breathe easier. Your new lower payments are easier to manage, making them easier repay and saving your credit score from further decline.

There are many benefits of Bad Credit Car Refinancing at Refinanceitt:

1. Lower monthly payments.
2. Extended time to pay off loan.
3. Rebuild your credit and regain a peace of mind.
4. Fix your credit problems as soon as possible, once you take the steps to improve your credit, other auto loan companies will be willing to offer you loans in the future.
5. Bad credit programs can also help to make you eligible for auto insurance.
6. Avoid personal bankruptcy.

Auto sales in the U.S. were anemic through much of 2008, but the first really cataclysmic month was October, when a credit crisis froze consumer lending. “You can’t have an auto industry if you can’t borrow money,” said Michael DiGiovanni, General Motors’ chief sales analyst. “The whole industry is based on credit availability.”

The particularly bad news for DiGiovanni was that GM’s finance arm, GMAC (51 percent of which is actually owned by Chrysler parent Cerberus), was one of the lenders that was most crippled. GMAC had already largely exited lease underwriting and begun restricting loans to only the most credit-worthy customers (with FICO scores of 700 or better) – shutting out more than half of all applicants.

GMAC’s woes have dragged down GM sales recently, but for decades it was a powerful engine of the automaker’s success. When GMAC was founded in 1919, its original mission was not to finance retail new-car sales. It was to lend money to dealers so they could purchase cars from GM’s factories during slow-selling winter months (those being the days before closed cars were commonplace), which allowed them to build up inventory for the warm-weather selling season. This kept GM’s factories humming on a more efficient, year-round cycle.

Soon, though, GMAC expanded its purview to include financing new-car purchases for consumers. But in those early days (the Roaring Twenties), customers first had to be convinced that borrowing for a new car – or buying it “on time,” to use the vernacular of the day – was a good idea.

Odd as it sounds today, back then thrift was seen as a virtue, and debt was something to be avoided. Carmakers, joined by other consumer-goods manufacturers (furniture, sewing machines, pianos), sold the notion of installment plans as wise, convenient, and modern. Once consumer perception began to change, it opened the floodgates to increased sales. Determining how much car one could buy was no longer a question of how much cash you had on hand, but how much you could afford per month.

Before then, the average American family would have to save for five years to purchase a new car, which is why Ford’s ultra-low-priced Model T was such a huge success. Henry Ford, though, disapproved of installment purchasing (although his dealers were happy to arrange financing for customers), and instead Ford in 1923 launched the Ford Weekly Purchasing Plan. But this was essentially just a savings account, in which customers could deposit as little as $5 a week in an attempt to save up for the purchase of a new Ford. The Plan flopped, and Ford wouldn’t launch its own captive finance arm until 1959. Chrysler followed in the 1960s. Meanwhile, by 1925 GMAC was writing almost half of all auto loans, and it helped General Motors power past Ford in sales and gain its dominant position in the automotive marketplace.

Today, just over half of all new vehicles are financed and a further 20 percent are leased; only 27 percent are bought outright with cash. It’s no wonder that a disruption in the credit market can so devastate auto sales. In America, saving for a big-ticket purchase is an idea as old-fashioned as cranking up a Victrola to hear some music. Credit isn’t just the lifeblood of the auto business, it’s the lifeblood of the entire economy.

The U.S. Congress will be seeing a bill this week that, if adopted, would allow automakers the ability to obtain $20 billion in federally backed loan guarantees. The bill is open to any auto manufacturer including foreign-based Toyota and Honda, but it’s clearly targeted at the domestics. As the credit ratings of the Big 3 continue to drop, this bill could potentially save them hundreds of millions of dollars while fomenting the development of clean-air technologies. U.S. Representative Mike Rogers, the bill’s author, says it would “level the cost of investment capital in the United States between domestic and Japanese auto manufacturers.”

The way it would work is that the U.S. Department of Energy would be given the authority to approve loan guarantees to auto manufacturers for alternative-fuel research and development projects. If the auto manufacturer defaults on the loan, the U.S. Treasury would be forced to repay it.

A Ford spokesman said they support the measure while GM spokesman Greg Martin implied they weren’t seeking loan guarantees. He said, “It’s an intriguing idea that merits consideration, but right now our turnaround and our success rests on the advanced technology that we are putting in our cars and trucks today.”

1) Shop Online – Shopping for auto loan online is a great time saver. By comparing from different sites you can get the best deals. Applying also is easy and even some sites will give you information you need within minutes.

2) Know Thyself! – You must know the basic criteria for applying for an auto loan. Basic criteria includes that you must be above 18 years of age. Best if you earn at least $2000 a month. Also needed is residence and employment history.

3) Get Approved First – Don’t have make the mistake of looking for a car before being approved. Get approved first then they will give you a voucher of how much you are allowable to loan. Doing this will save you future frustration and disappointments.

4) Down Payments – This varies from lender to lender, and some don’t even require. But typically its about 10% of the price or $1000 whichever is the lower number.

5) Interest Rate – Interest rate is not fixed as most people think, and yes it can be negotiated. If you have a good credit score and good negotiating skills you can have a lower interest rate. But some factors are way out of you’re control such as the state of the economy.

There you have it. We’ll that’s not all, there’s lot of other things you need to know. But what I’ve enumerated are the vital essentials before applying for that auto loan. One thing also is ask advice from an authorized dealer or loan official. They’re there to help you. If there’s something you don’t understand, ask them now or you’ll might face lots of headaches later.