What's going on with GMAC's car loan standards?
Filed under: Transportation
Flush with capital from taxpayers, GMAC is lowering its underwriting standards. The credit crunch and a shortage of cash had pushed the company's minimum FICO score for car loans up to 700. Now credit scores as low as 621 will qualify for some form of GMAC finanncing.In its press release announcing the return to less responsible lending, GMAC made it sounds like a FICO score requirement of 700 was unreasonably high: "The actions of the federal government to support GMAC are having an immediate and meaningful effect on our ability to provide credit to automotive customers."
Here's the truth about a 700 FICO score: It puts your right around the middle. According to Equifax, this is an approximate breakdown of Americans' credit scores;
- 15% of the U.S. population is below 600
- 35% of the U.S. population is below 670
- 50% of the U.S. population is below 710
- 70% of the U.S. population is below 755
- 90% of the U.S. population is below 790
Looking at the dismal state of so many Americans' finances, I find this unconscionable. If your credit history is worse than 70% of the population, what business do you have taking out a loan to buy a new car? I know, it's your choice, but is that really something that the federal government should be subsidizing?
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Reader Comments (Page 1 of 1)
1-03-2009 @ 2:25AM
kbrown said...
Blah, blah, blah. One thing is for certain, no matter how bad things get, the bills people will keep paying are car payments, cell phones, utilities, etc. I don't have to have a NEW car, but it would be nice to be buy any car and not have to pay ridiculous interest rates just because you have some late payments of some sort on your credit report. It's about time there is some sort of break. I have a good paying job but made stupid decisions about money in college. Should I pay forever for that? Remember, most people can't work without transportation......why should it be unafforadable for most? If the auto industry needs to be revived, this is a good way to do it.......
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1-03-2009 @ 6:35PM
viicki68 said...
Hey kbrown, save yourself some money and buy a used car. Instead of paying all those payments, save up money and pay cash for the thing.
1-03-2009 @ 5:12AM
Van said...
I agree with kbrown. People conveniently forget that life does not always deal you a fair hand. Stuff happens and you're forced to make choices like, do I eat this week or pay my credit card bill. The out of control gas prices pinched a lot of middle class American's wallets who had to make some tough choices too. I'm glad to see the "little guy or girl" get a break. Perhaps with this new deal people who have to have transportation to commute to work (I drive an hour each way) can get a reasonable interest rate.
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1-03-2009 @ 10:26AM
SMRTNUP said...
For all the years which cars have been made and sold in America the Financing end of that trade has been "ONE BIG RIP-OFF" . . . For many years folks didn't even know that they could negotiate on the interest rate they were initially asked to pay. . . . And, . . If someone asked for a lower rate the F & I guy or girl would say, . . "OH, . . I CAN'T CHANGE THAT, . . IT'S CONTROLED BY THE BANK " !!! . . . And, . . THEN, . . . They would tack on the " Choke and Croak " . . ( Life & Health ) insurance for the balance of the loan.and the "EXTENDED WARRANTY" that you "just can't live without" !!! . . .
Unknown to the buyer, . . . MOST TIMES, . . the dealer made far more profit on the "BACK SIDE" ( Financing and insurance ) than they did on the "front side" ( The sale of the car ). . . .
I don't like " PRICE FIXING " per say, . . . but, . . .
'Bout time for some Consumer Protection in this area.
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1-04-2009 @ 10:04AM
Nate said...
Good questions, Zac. Maybe government has decided to expand the rationale behind CRA from houses to include cars?
The siren song "Just because you're poor is no reason you shouldn't have a nice house" got us bank examiners forcing lenders to make no-doc loans to illegal aliens, backed by Fannie and Freddie. Went along swimmingly until some green eyeshade types started enforcing realistic valuation rules last Spring and the whole house of cards tumbled down.
I remember when the slogan "Bad Credit? No Problem!" belonged to the used car dealer in the loud plaid jacket. Now it belongs to GMAC, backed by you and me. Can't see how that scheme will work out any better for rolling stock than it did for housing stock.
Keep up the great work, Zac. Glad to see the family name in print.
Nathan Bissonette
Saint Paul, Minnesota
.
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2-17-2009 @ 2:34AM
Dave said...
My credit score is fairly high and I didnt have a problem getting a leased car from GMAC. However they are monitoring my account activity closely and gave me a really hard time when i was late with my payment last month. This month i was referred to chargesmart to pay my gmac bill and it atleast kept me from being late on my payment. I wouldve rather paid gmac direct but there isnt a way to use a credit card besides chargesmart that ive found. Is there any other way to do this?
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