Your RV Loan Interest Rate Depends On Your Credit Score

Credit Score Q&A

What the heck does FICO stand for anyway?  Well, you will probably be sorry you asked, but here goes.  FICO is an acronym (a word formed from initials or parts of other words) for Fair Isaac and COmpany. 

WHO ARE THESE GUYS?  This is a firm that uses a proprietary (in other words they own it) formula which calculates a three digit number, between 300 and 850. 

When you apply for a loan the lender looks at this score to determine what kind of risk they face by loaning you money.  The higher the risk you are, the higher the interest rate you pay. 

Just a note:  Lenny the Loan Shark down the street does not use this score to give you a RV loan, he just lets you know upfront that failure to pay back the RV loan on a timely basis will cause severe damage to one or more of your body parts.  The higher the RV loan amount the higher the number of body parts at risk (but, we digress).

What Factors do they use to figure out your score?  There are 5 factors they look at to give you a score, these factors are known as The FICO FIVE (not to be confused with the Italian western movie by the same name).  Below are the factors and what percentage they contribute to the overall score.

The FICO FIVE

1.  Your credit payment history 35% (are you making all of your payments on a timely basis or are they always late or in collections)

2.  Your outstanding debt load 30% (How much do you owe to all your creditors compared to how much you have coming in)

3.  Your length of credit history 15% (How long you have been using credit cards or getting loans.)

4.  Your mix of credit 10% (Is all of your debt due to credit cards, home loans, student loans, is your debt balanced)

5.  The number of inquiries to review your Credit Report 10% (if you are in business for yourself, you will have more inquiries than if you are not in business for yourself, or at least that is the way it is suppose to work).

Where does all of this information come from?  There are three companies that track this information in the US they are Equifax, Experian and TransUnion (yes, these companies are watching your credit history and they are taking notes).

I really want an RV Loan but I need a copy of my Credit Report, can I get it for free?  You are quite demanding, but yes, you can get a free report.  The 2003 Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months..

In fact, to comply with the Act Equifax, Experian and TransUnion got together and made a web site so that you can download all of their reports in one location. 

If you would like to get copies of your personal reports at no cost to you they are available at https://www.annualcreditreport.com/ (this link opens in a new window, you may have to disable your popup blocker).   Again, this is not a commercial site it is totally free as mandated by the 2003 Fair Credit Reporting Act.

OK I got my credit reports, now what does the FICO score tell me?  Here is the breakdown and what your number means about what kind of risk you are to the lenders.

• 720-850 Excellent

• 700-719 Very Good

• 675-699 Good

• 620-674 Fair

• 560-619 Bad

• 500-619 Very Bad

If your score was not so good, you may want to move on to the next question.

Repairing Your Credit Report

Payoff the small items that are showing up on your credit report.  Paying off these items will give you a good start on repairing your credit.

Hire a company that is in the business of repairing peoples credit.  There are quite a few reputable companies that help consumers with cleaning up their credit (we are not going to make any recommendations here as we are basically an RVing site and it would be beyond our scope to refer you to one company over another). 

Unfortunately, there are quite a few non-reputable companies that claim that they can give you a perfect credit record.  These non-reputable companies fall into one of two categories. 

The first type takes your money up front and does absolutely nothing to repair your credit and then you have to track them down to get your money back (if it is even possible).  T

he other does do things to clean up your credit, but the methods they use could be illegal and get you in trouble.

 Do it yourself.  You can take the same steps that a reputable credit repair company takes to clear up your credit (we are talking about legal steps not the illegal ones). 

So, instead of paying someone else to take care of your problem, you can invest your own time in cleaning up errors on your credit report.  Word of warning, cleaning up your credit is not an overnight process, it took you a long time to mess it up, so it will take a bit of time to fix it.

The Federal Trade Commission has a free booklet titled Credit Repair Self Help.  It walks you through the steps to fix errors on your credit report.  Just click on the link below to open up this file and save it to your hard drive. 

This file requires the free Adobe Acrobat Reader to view it.  We also have a link to Adobe Reader as well.  Both of these links will open up in new windows, so you may have to disable your popup blocker.

Here is the brochure:  Credit Repair Self-Help

Here is the link to Adobe Reader if you need it:  Download Free Adobe Reader

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