GMAC limits loans to buyers with 700+ FICO rating
If you're in the market for a new car, you'd better get your credit score in order first. Auto lending units are looking for top tier customers right now, and GM's captive credit arm is going so far as to mandate a FICO rating of 700 or higher. GMAC is requiring this measure in response to the instability in the global capital and credit markets. The move is likely to cost GM some sales, but according to credit information services company Experian, 74.3% of all auto loans went to consumers with a credit score of over 700. That number is up from the 71% average of 2007, and the number is likely to increase again next year as a result of our country's current economic calamity. Mandating near perfect credit may sound like one of the best possible ways to ensure GM will see even lower sales totals at the end of October, but that's likely the only way GMAC can get loans from banks. The question isn't whether GM will be the only automaker to look for FICO ratings of 700+, it's whether any other automaker won't follow suit.
[Source: Automotive News - Sub. Req.]
Reader Comments (Page 1 of 3)
ASEVENSEE4 8:40AM (10/14/2008)
Sucks that FICO scores aren't the end all to an approval, your history and other things matter (DTI).
But limiting to 700+ is cutting out a lot of worthy people in the 600 range.
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From My Cube 9:50AM (10/14/2008)
whats not mentioned is that if you have a 600+ credit rating and want a loan your down payment will need to be 20%+
BrianFL 10:44AM (10/14/2008)
Agree. Only 700+ is a huge mistake. Gmac and a few other car creditors have a given lots of loans to lower FICA scores simply because they have always made that car payment on time every time. They may be bad about credit cards, utilities, and phone but they have always been able to get car loan because they never miss a payment.
One big problem right now in this crunch is everyones FICA score has been downgraded without there knowledge because of this crisis.
Temple 11:21AM (10/14/2008)
The problem isn't just the FICO score cut-off, people that do have 700+ are going to have to put more money down and have a shorter finance period.
inteller 8:44AM (10/14/2008)
this is a great idea. Now maybe people won't piss away their credit scores.
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Shawn 8:46AM (10/14/2008)
Pay your bills on time and have a job and you'll be well above 700. That's is what they should have done in the first place
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Ayatollah Rodriguez 9:01AM (10/14/2008)
Agree 100%.
My score is 741...............but i will never buy a GM hahaha
Mel. R 8:50AM (10/14/2008)
Not entirely surprised here. Infiniti has been been doing this since March, at least.
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gslippy 8:50AM (10/14/2008)
And what is GM's credit score? (... sound of crickets ensues...) I thought so.
GM couldn't get a car loan if it walked into a dealership.
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MajorGeek 8:52AM (10/14/2008)
GM does not need a loan, they are on welfare and just got paid.
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TJ 9:29AM (10/14/2008)
How is GM's loan different than Obama's 'tax credit' for all us normal folk?
Now is not the time to talk about welfare. There is a difference between welfare and creeping socialism.
MajorGeek 9:45AM (10/14/2008)
Speak for yourself, I am not eligible for the tax credit. Good point though.
TJ 9:52AM (10/14/2008)
If you haven't heard the rhetoric, unless you are in the top 5% you get the welf...'credit'. If you are in the top 5%, give me a job!
Dude 8:54AM (10/14/2008)
Good move by GMAC. Getting above a 700 is not very hard to do. I would hardly call it "near perfect credit".
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LaughingTooHard 9:24AM (10/14/2008)
700 is the minimum for a loan from GMAC, not the type of Loan Company that will give a loan to anyone for any reason.
Those companies would be the ones behind the current credit crisis and mortgage implosion.
If GMAC was asking for 750+, that would exclude a lot of people. 700 is just good business and makes sense. Most loan/credit cards have required a 720+ to get the best rates for um, oh, about 10 years or so - a fact lost of most AutoBlog posters since they were still in diapers 10 years ago. The people approved at GMAC will more than likely get great rates, so how is this bad?
Awww, some people won't be be able to lease cars they can't afford to buy and NOW won't be able to buy the cars can actually afford? Wah. Ride the bus or get a overpriced used Honda or Toyota. Those shady little shack USED CAR dealers are known for great prices, no down payment and low, low, low rate!
And glsippy, I am pretty sure GM doesn't forget to pay their bills, at least not yet.
Once again, AutoBlog shows that people will just type anything to get their screen name up on the board.
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TJ 9:38AM (10/14/2008)
Auto ABS, credit cards, student loans are all structured the same as mortgage backed securities, with swap payments and derivatives, tranches, etc. The same market factors tanking MBS markets are tanking the securities here.
gslippy 11:02AM (10/14/2008)
Actually, GM just recently told its vendors they will be paid in 60 days instead of 30. So, in a sense they are not paying their bills - at least not on time. I wouldn't want to be one of their vendors right now.
Bonita 9:45AM (10/14/2008)
Now who's going to be buyin' all dem Caddys and Beerwicks?
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don 9:46AM (10/14/2008)
Well, I've seen it all now.
Having worked for fifteen years at the largest Chevy store in the nation, I can attest to the fact that only about twenty percent of the folks who walk through the front doors carries an average of +700 beacon score.
Most folks (who pay their bills like clockwork I might add) run anywhere between 620 - 680, with a good portion more having lessor scores.
Unless GM can get the Feds to prop them up on a permanent basis, they pretty much just signed their own death warrant.
Hope they meltdown and go under forever.
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AZMike 10:02AM (10/14/2008)
what a crock, and a sure sign that GMAC is running very short of cash.
first issue: is this the normal FICO score, or the AUTO score? the AUTO score is just for auto loans; the regular score covers everything. these scores are very different, and can vary as much as 100 points.
a high score is absolutely useless if it doesn't have comparable high credit on it. I've seen people with 800+ FICO scores who had no credit higher than $500 department store cards. do you think someone would give them a car loan based on how they paid their $300 Target card, or their $500 WalMart card? don't count on it.
second issue: far less than 10% of the population has this credit score, and that number is dropping by the day. at the present time, the average credit score is about 651. also keep in mind that just one 30 day late can drop your score over 100 points.
it's interesting to see how many folks are "so sure" your credit score is high.
I bought a new Nissan Titan in July, and traded in a vehicle that was leased thru GMAC. the general manager of the Nissan dealership is a good friend of mine, and I made sure that the GMAC lease was paid off quickly. the payoff was $15,032; the dealer sent a check for $17,000, to cover any extra payoff issues, or if GMAC made a payoff error.
GMAC noted my account for the receipt of the $17K, (and cashed the check) but did not post the money, or pay off the account. I continued to receive statements into September, showing increasing delinquencies. my credit score dropped from 667 to 497.
this finally was corrected yesterday, after over 30 calls to GMAC.
a credit score of 700 is NOT easy to achieve, or more than 10% of the population would have one. every time there is an inquiry, it drops. when you add a new account, it drops. if a lender summarily cuts your credit card limit (which is happening quite often now), it drops. in many states, home equity lines of credit have been closed by lenders. this will drop your score 50-100 points, as your credit report will now state "credit line closed by lender", which insinuates there were problems. again, guilty until (if ever) proved innocent. and we haven't even discussed what a few late payments will do. when credit scores get over 800, it's a sure sign you don't owe any money at all.
I've talked to a lot of dealer friends, and many have said they are getting less than 20% of the customers who walk in the door financed. this runs the gamut from highline European and Japanese dealers, as well as domestics.
what isn't mentioned about GMAC (or any other lender) has to do with down payment requirements. they are now looking at 20-30% down, regardless of credit. very few (if any) have this kind of money, especially considering that over 80% of vehicles traded are upside down at least $3,000. if you buy a $25,000 vehicle, that could be $8,000-$10,000 down if you are $3K buried in your trade. it could be even more.
can't speak for anyone else here, but I haven't made a down payment on a car in over 20 years, and I don't plan on starting now.
AZMike
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