Why Are There Differences in Credit Scores?
by AOPA Aviation Finance Company President Adam Meredith
There are three types of credit scores in the eyes of an airplane lender: really good credit, good credit and bad credit.
How lenders analyze credit scores depends on what the three major credit reporting agencies-Equifax, Experian and TransUnion-provide them. There are other entities-banks, credit card companies and even identity protection services like LifeLock-that will offer you a complimentary credit score. Be aware. Those scores might not encompass your full credit story and therefore might paint a rosier picture.
For example, a credit card company or a bank might provide a very high credit score, say 850. So you find a way to submit that number with the loan package. However, when the lender pulls your credit in conjunction with the loan, the score might be 50-100 points lower, much to the chagrin of the loan applicant.
The cause of the difference may be that the financial entity is basing your credit score only on variables it’s privy to, such as any credit cards or mortgages you have with it. In other words, it’s a largely superficial representation, not your full financial picture. In general for the scores they provide to you at no cost, credit card and credit service companies have negotiated a deal in bulk for a less costly FICO model from the credit bureau(s). The FICO model they use to aid in decisioning credit is often more comprehensive and not the same as the model they provide free of charge for utilizing their services.
To be clear: despite popular opinion, unless a potential buyer is shopping rates with many different lenders, and thus having their credit profile pulled many, many times in a short span of time, AOPA Aviation Finance or one of its partners pulling your credit once will not materially affect your credit score.
For the most part, in the aircraft finance world, there’s not a big difference between credit scores. If a person has got really bad credit-a score below 650-they probably won’t find financing. A person is considered to have good credit with a score that falls between 680 and 700. Options like term, amortization and rates may depend on where you fall in that range. There are also other factors outside of the score itself – prior bankruptcies, foreclosures, charge-offs, delinquencies – how long ago and for what type of credit, that factor into the lenders decision making process.
It’s important to remember that a credit score is only one part of the entire financial picture. That said, a good credit is typically a score above 700 points. There are lenders that will lend to applicants with a sub 700 credit score, however they may have shorter terms, higher rates, etc.
AOPA Aviation Finance can be reached at 800.62.PLANE (800.627.5263)