Not sure what FICO score you need to qualify for an RV loan? And if you don’t qualify, how do you improve your FICO score? Here we break down the basics of FICO scores and obtaining an RV loan.
Most consumers purchasing an RV require financing, and how much interest they pay on a loan greatly influences how much they pay for the RV overall. Even a few percentage points could mean a difference of tens of thousands of dollars in interest on some longer-term, larger loans.
For borrowers, their best chance at achieving a lower Annual Percentage Rate (APR) is by proving their creditworthiness. A FICO score is an industry-standard tool for assessing a borrower's credit capability. While your FICO score isn’t the only consideration, the higher your FICO score, the better your chances of securing a good APR. Here we break down what all goes into a FICO score, what lenders expect, and how to improve yours.
Keep in mind, there are several different types of credit reports that can be run, and the results will vary depending on the bureau and how they weigh your credit — but almost all of these credit reports include the FICO score as an important, telling factor. So it’s a good place to start when taking stock of your creditworthiness.
What is a FICO score?
The FICO is the original credit score, created in 1956 by Fair Isaac and Company (where we get the acronym). This three-digit number ranges from 300 to 850 points, and it’s determined by measuring a number of factors in your financial history, including things like your existing debt, length of credit history, and more. A high score indicates you are more likely to pay back your loan, while a lower score indicates you are more likely to default on your loan. For obvious reasons, lenders refuse to offer loans to borrowers who score beneath a certain number.
The more you know about how a FICO score is generated, the more prepared you are to improve your score and know the likelihood of earning a loan through an RV lender. The breakdown of your FICO score is as follows:
Payment history (35%) - Have you paid all of your bills on time? As the heaviest weighted factor in your FICO score, your payment history shows lenders that you have proof of responsibly paying back your debt.
Unfortunately, if you have a bad track record of paying your bills on time, you’ll be hard-pressed to improve this portion of your score anytime soon. But the new slate starts now.
Outstanding debt (35%) - Also referred to as “Amounts owed,” this refers to how many lines of credit you have open and how much you owe on each. Logically, the more you owe to other places, the less likely you’ll be able to responsibly take on additional debt.
This is the second most important portion to determine your overall FICO score. And it’s one easy way to slowly build up your FICO score by eliminating what debt you owe.
Length of credit history (15%) - This measures your experience as a borrower. How long have you been borrowing? Are you considered a veteran responsible for paying back loans on time? Or are you a novice, unpredictable and possibly unreliable because you’ve never had to repay a loan?
It’s important to display your understanding of how to pay back debt. That’s why some debt is encouraged — to prove your comprehension.
New credit (15%) - Lastly, lenders want to know how many lines of credit you’ve recently opened. New credit indicates more risk because the more lines of credit you have to repay, the greater the chance of you faltering on any given loan.
What FICO score do I need to get a loan from lenders?
So what baseline FICO score do RV loan lenders require to qualify for a loan? Remember, your FICO score isn’t the only lender requirement, so take these recommendations with a grain of salt. Also, some lenders will be more willing to take riskier loans than others — especially if you’re willing to pay a higher APR. There are a number of factors included in a loan, and the FICO score a lender requires will be based on all contributing factors.
Below are the general ratings of FICO scores not specific to RVs:
- Exceptional: 800 to 850
- Very Good: 760 to 799
- Good: 700 to 759
- Poor: 600 to 699
- Very Poor: 300 to 579
Most RV lenders favor a score that is at or above 700, but some lenders will approve for as low as 600. Keep in mind if your FICO score is at that lower range, you will likely be entering into a loan situation with a high APR, which increases the likelihood of having difficulty paying off your loans, which could further diminish your FICO score. The better bet, often, is to hold off and build up your credit score first.
For a clear visualization of how the Good Sam Finance Center qualifies FICO scores, check out this grid view of their FICO scores as they pertain to the length of the loan, loan amount, FICO score, and interest rate. This information should give you a good understanding of what to expect given your current FICO score.