Toyota Financial

Understanding Credit

Credit History

When you apply to finance or lease a Toyota at the dealership, the dealer will take a look at your credit history.

Your credit history contains two important elements: Credit Report and Credit Score.

Credit Report

Your credit report helps creditors decide if they want to extend credit to you. It includes:
  • Personal information: Your name, current and previous addresses, Social Security number, date of birth, telephone number and current and previous employers.
  • Credit information: Your creditors and account details such as date opened, account number, amount borrowed, payment terms, credit limits, account balances and payment history
  • Public records: Tax liens, bankruptcies and court awarded judgments.
  • Inquiries: A listing of all parties that have requested a copy of your credit report. This includes formal inquiries (a list of all creditors who have accessed your credit report), promotional inquiries (this is where all those pre-approved offers come from) and account management inquiries by your current creditors (they have the right to review your credit report periodically). Promotional and account management inquiries are not shown to other creditors and do not impact your credit score.
How is your Credit Report generated?

Each of the three major credit-reporting agencies (or credit bureaus) keeps a running tab on your credit history, based on the information it receives from creditors and public records, among other sources. When you apply for credit, creditors will request a copy of your report from one or more of these bureaus.

The contents of your credit report are used to compute your Credit Score. We'll go over that in the Credit Score section.

Keep in mind that the more you know, the better (and faster) your visit at the dealership will be.

Credit Score

Your credit score can be your best friend or your nemesis. Your goal is to maintain a good credit score, as these scores are used by creditors when they're deciding whether or not to extend credit to you.

The credit scores generated by the credit bureaus are often referred to as "FICOŽ scores", even though each of the three major credit bureaus has its own name for these scores. FICOŽ stands for Fair Isaac and Company, the company that produces the software used by many credit bureaus to calculate your credit score. These scores range from 250 to 900 - the higher, the better.

Over the years, this three-digit scoring system emerged as a way to compare how the information on your credit report compares with each bureau's credit history on hundreds of thousands of other consumers.

Basically, your credit score informs creditors how likely you are to repay your debt.

Because your credit score is such an important aspect of obtaining credit, multiple factors are used to compute your credit score: (Remember the credit rating guide in the Rate Your Credit section?)

  • Past payment history - Have you paid your credit accounts on time?
  • Amounts owed - How much credit you have available vs. how much you owe.
  • Length of credit history - How long have you had your credit accounts?
  • New credit and credit inquiries - Have you recently taken on more debt?
  • Types of credit established - May include credit cards, home mortgages, and car loans.
Not just one score

Until now, we've painted a picture of your credit score being one number that is used to determine whether or not you're worthy of receiving credit. The truth is, there is no one score. Every bureau has its own scores for different purposes and each bureau uses its own method of calculating your credit score based on all of the criteria listed above.

Additionally, it's quite probable that at any given time, each credit bureau will report a different credit score for you. They all attempt to remain as current as possible, but the resulting score is only as accurate as the information that they have available. This is why you should check your credit scores from time-to-time.

Creditors use the scores they obtain from the bureaus in their own formulas to determine a credit score of their own. While we can't identify the factors used by every creditor in identifying your credit score, it's safe to assume that these formulas incorporate your credit bureau score as it fluctuates from time to time. Fluctuations can be used as a guide to understanding your financial behavior (how likely you are to repay a debt).

You're not alone

It's a tough job trying to keep track of everyone's credit. While the credit bureaus try to stay on top of your credit history, sometimes things are missed. Therefore, your score from any given credit bureau is a reflection of the most recent information they have on you, so it's possible for your credit score to change by the day. Here's where you come in.

To always remain in good credit standing, you must take a proactive approach to guard your credit. There are various ways to do this, and among these are the tips you'll find in the next section. Right now this may all sound like more trouble than it's worth, but we wouldn't steer you the wrong way (getting you where you want to go is what we do, after all).

So that's it for your credit history. You now know the basics of what credit is and how it affects you.

The next and final section of this credit tour will focus on where we left off here: how to maintain good credit. It's a lot quicker to get through, so don't quit on us now!

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