When dealing with the current credit situation, many F&I professionals say it is best to be up-front and honest with your customers about the expectations of lenders, notes the Recreation Vehicle Dealers Association (RVDA) in the current online issue of RV Executive Today.
It is true that it is tougher to find financing in today’s market. However ,there is still credit available. Dealers must work with the customers and set them up for approval. The days of zero-down financing are over, and many lenders now want to see at least a 10% to 20% down payment on the purchase of a vehicle.
What makes up a credit score? RVDA offers the following estimates:
- 35%, payment history.
- 30%, amounts owed.
- 15%, length of credit history.
- 10%, new credit accounts.
- 10% types of credit used.
And lenders have raised their standards for extending credit. For example:
- The old standard credit score for best credit was 680 and up; now it’s 720 and up.
- Old down payment was 0% to 10%; now it’s 10% to 20%
- While documentation used to be minimal, now it’s maximum.
- Total debt-to-income ratio was 55% to 60%; now it’s less than 41%.
Meanwhile, here are some tips that dealers can pass along to prospective buyers in preparation for lenders’ scrutiny:
Check Your Credit Report
The quality of your credit and FICO credit score help determine the terms of a loan. Go to the official website for getting your free credit report, www.annualcreditreport.com, or call (877) 322-8228. While your report is free, you’ll have to purchase your score for about $8 from each credit bureau on www.annualcreditreport.com.
Fix Errors in Your Report
It can take six months or so to get an error fixed. The consumer reporting company must investigate legitimate disputes and respond within 30 days.
Improve Your Score
Boost your score sooner rather than later by reducing what you owe and never missing a due date. Stop applying for credit cards you don’t need.
Eliminate credit card debt. Or stay well below your limit, pay at least the minimum due, and pay on time.
Lenders want pay stubs, proof of rent or mortgage payments, copies of bills and other documents.
To accumulate a serious down payment, 10% to 20%, live below your means and save. That’s non-negotiable.
For more information on getting customers financed, visit RVDA’s Lenders Toolbox on www.rvda.org.