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Which Credit Scoring Model Do Car Loan Companies Use?

04/02/2019 @ 7:30 am

For anyone looking to apply for a bad credit car loan in Oakville, one of the big questions you might have on your mind is which credit score should you be concerned about.

Many people don’t actually know that they have more than one credit score. This is because there are several different credit scoring models used by the credit bureaus, which are then used by credit providers, lenders, landlords, and employers. Having a good score in one does not necessarily mean you will have a good score in another.

So which credit scoring model is used by car loan companies?

While it is generally not possible to know for certain which score will be used to determine your eligibility for a bad credit car loan in Oakville, you can make some educated guesses. We explain everything you need to know right here. Read on for more!

Graph showing credit score for bad credit car loan oakville

What is a Credit Scoring Model?

First, we need to understand what a credit scoring model actually is before we can determine how it affects you.

A credit scoring model is a framework around which a credit bureau builds a credit score. It consists of a set of rules and criteria that take into account various aspects about a consumer’s finances, compares them to aggregated statistics, and then culminates in a single score. This score is then used to categorise potential borrowers into different classes of credit trustworthiness, from poor to excellent.

The two main credit scoring models used globally are the FICO scoring model and the VantageScore model.

FICO Model

The FICO model is a very popular model worldwide and is used as Equifax’s primary credit scoring model.
The FICO model was originally developed in 1989 by the FICO company (formally Fair, Issac, and Company) to create a working credit score system in the United States. While it has undergone several updates over the past 30 years, the main elements it takes into consideration have remained relatively constant. These include:

  • Payment history – This makes up 35% of the score and refers to the regularity and punctuality of payments made on credit accounts. For example, repayments made to credit cards, personal loans, and bad credit car loans in Oakville.
  • Debt burden – This makes up 30% of the score and actually consists of several different metrics. These include credit utilization ratio, number of open credit accounts, total amount of debt, and how much has been paid down on installment loans.
  • Length of credit history – Accounting for 15% of the score is how long a consumer has been a credit user. Credit history will start from the time the first credit account is opened, typically a first credit card or cell phone account.
  • Types of credit – 10% of the score is calculated by the types of credit accounts used. A range of different credit accounts is a good sign for many lenders, such as mortgages, credit cards, personal loans, and bad credit car loans in Oakville.
  • Recent credit enquiries – the final 10% is calculated based on the number and frequency of recent credit enquiries. If lenders see a cluster of credit checks in a small period of time, it can be a warning sign that the borrower is in dire need of credit and could present a risky investment.

The FICO scoring model is popular all over the world and is used by many lenders during their application process. Thus, it is important to know your FICO score and what is being reported to credit providers. You can check your score directly with Equifax, or you can use a free service such as Mogo.

VantageScore Model

The main competing credit scoring model is the VantageScore model. Originally developed in 2006 as a joint venture between the world’s three biggest credit bureaus (Equifax, TransUnion, and Experian). Much like FICO, VantageScore takes into account several different elements of a consumer’s finances including:

  • Payment history – The largest contributor to a VantageScore is the payment history, coming in at 40%. Much like the FICO model, this will take into account regular, on time repayments on various credit accounts.
  • Age & type of credit – 21% of the score is made up of the age and type of credit accounts held. This will look at the various accounts such as mortgages and bad credit car loans in Oakville and compare them with how old they are.
  • Credit utilization – About 20% of the score comes from the credit utilization ratio. This is a comparison of the amount of credit actually used divided by the total amount of credit a consumer has been approved for.
  • Outstanding balances – How much money you have outstanding on your credit accounts will make up 11% of your score. This refers to how much you still owe on a mortgage, credit card, or bad credit car loan in Oakville.
  • Credit enquiries – 5% of the score will come from any recent hard credit checks appearing on the credit file. These happen when applying for any kind of credit, like a credit card or personal loan.
  • Available credit – The final 3% comes from how much credit is unused and available for use. This is seen as an indication of financial stability, as if there is plenty of unused credit, it implies that the consumer doesn’t need to use it, suggesting well managed finances.

One of the biggest differences between FICO and VantageScore is consistency across different credit bureaus. FICO scoring models need to be custom built for each credit bureau to account for the different ways in which their databases are set up. This results in differences in scores between credit bureaus using the same scoring model. VantageScore was built to avoid this scenario by being able to process different data structures without affecting score. This results in the same credit score across different credit bureaus even if their databases are different.

Who Uses Which Credit Scoring Model?

Now that we know what a credit scoring model is, it’s time to delve into which credit scoring model is used by whom.

Generally speaking, it’s pretty difficult to know which credit scoring model a particular business uses, as they are not required to disclose that information. You might get lucky asking them which model they’re using, but they are not legally obliged to answer. However, based on general statistics and trends, we can make some educated guesses.

Couple getting bad credit car loan in oakville

Car Loan Companies

Auto loan companies are one of the main types of lenders that will utilise credit scoring models to determine eligibility and the interest rate they will offer to potential borrowers.

Both FICO and VantageScore offer industry specific credit scoring models to assist credit providers with making their decisions. They offer a specific credit score for car loans, which takes into account any similar kinds of loans the customer might have had in the past and weighs them more heavily as an indicator of future performance. Equifax’s FICO score remains the most popular credit score used by most industries, so you could probably make a safe bet that your bad credit car loan in Oakville was being assessed using this metric.

However, it’s not a sure thing, so you should know your VantageScore as well.


Especially in a rental market as competitive as Toronto, many landlords are now requesting credit scores from potential rental applicants.

This is used not only to weed out non serious or illegitimate applications, and also to give landlords more predictive information on whether their new tenants will be able to meet their financial obligations. Some landlords request that you provide them with the credit score, and some will check themselves as part of the application process. If it is the former situation, you will be able to select the credit scoring model used to generate your score (unless the landlord specifies which credit bureau they want you to use). If it is the latter scenario, the landlord will choose which model to use.

Again, Equifax tends to be the standard many landlords use, however, it is always prudent to know your VantageScore as well.


While this certainly won’t apply to every job, there are some industries in which it is relatively common to be asked to provide a credit history to your potential employer.

This occurs primarily in the financial industry, which makes sense. Financial institutions want to know that the people they are hiring can manage their own finances properly before they employ them to manage other people’s money. Something to note here is that employers are not legally allowed to actually get your credit score, they are only allowed to access your credit history. This means they can see a list of open credit accounts, debts, instances of bankruptcy declaration, and so on. Thus, employers do not actually use a credit scoring model.

What Do I Do If My FICO and VantageScore Scores Are Different?

After doing enough research and finding out what both your FICO and VantageScore scores are, you might be wondering why the two scores are different and what you can do about it.

FICO and VantageScore not only weigh different aspects of your finances differently, they also vary between credit bureaus. FICO needs to be custom built for each bureau, leading to some discrepancies in the final score. VantageScore was designed to be applicable to all databases, theoretically eliminating variation between credit bureaus. In practice, you will likely still see some differences, based purely on how each credit bureau operates.

Generally speaking, you can expect your FICO score and VantageScore to be fairly similar, as in the end they are looking at the same data and just interpreting it slightly differently. However, in some instances, you might notice that while your FICO score is in the good range, your VantageScore might only be in the fair range. This has the potential to make applying for a bad credit car loan in Oakville more difficult, as your lender might favour the lower score over the better one.

There are plenty of things you can do to improve both your scores. These include:

  • Paying down debts – easier said than done, but lowering the outstanding balances on your credit accounts can only improve your credit score.
  • Keep unused credit cards open – while it may sound counterintuitive, keeping your zero balance credit cards open can help you modulate your credit utilization ratio, which is a key metric in calculating your credit score.
  • Have a mix of credit accounts – People with the best credit scores often have a diverse mix of credit accounts, including mortgages, credit cards, and bad credit car loans in Oakville.
  • Make regular, on time repayments – the single greatest thing you can do for your credit score is to make consistent, on time repayments for your various credit accounts. This metric is the heaviest weighted in both credit scoring models, and has the potential to boost your score significantly over time.

Are you looking to get into a new car but your credit score is less than ideal? Oakville Bad Credit Car Loans is the leading auto loan provider specialising in getting bad credit applications approved by Canada’s largest banks. We negotiate on your behalf to get the lowest possible interest rates, and once we have approval, we will even deliver your new car anywhere in Ontario for free. Contact us today and find out how we can help you!