GMAC sets credit score level

By Don Shilling

Car dealers say they have other lenders who will provide financing.

If your credit rating isn’t high enough, don’t expect GMAC Financial Services to finance your car.

The company told General Motors dealers this week that it will lend money only to borrowers with a credit score of at least 700. Automotive News, a trade publication, reported that one in four U.S. auto loans in the first seven months of this year were to borrowers with scores under 700.

Local GM dealers said Tuesday that they have banks and credit unions that will provide financing in place of GMAC.

“Will it slow down our business? No,” said Mike Hudock, general manager at Stadium GM Superstore in Salem. “We’ll use other sources.”

He said the biggest change for customers will be that those with lower credit scores will not be able to participate in zero-percent or cut-rate financing offered by GM.

He said he has seen people with credit scores under 600 be approved for those deals in the past.

Now, those customers will have to take higher interest rates from other lenders, but they still will be able to take rebates that are offered from GM, he said. The automaker requires that customers choose either the low interest rate or the rebate.

Often, the rebates will be enough to lower the payments to about the same as the cut-rate financing, Hudock said.

Chris Sammartino, general sales manager at Sweeney Buick Pontiac GMC in Boardman, said he didn’t expect the change to affect many customers.

Most customers who didn’t have good credit scores didn’t qualify for GMAC’s financing deals anyway, he said.

The dealership has plenty of national and local lenders who are willing to lend money, he said.

The Consumer Federation of America said the most commonly used credit score is the FICO score developed by Fair Isaac Corp. Scores range from 300 to 850, and most people score in the 600s and 700s.

In the eyes of most lenders, FICO credit scores above 700 are very good and a sign of good financial health. FICO scores below 600 indicate high risk to lenders.

Both Hudock and Sammartino said they expected the GMAC financing change to be temporary.

Hudock said the tight credit market caused the change because GMAC’s cost of obtaining money to lend is high. If the federal rescue plan succeeds in loosening up the credit markets, those costs should go down and GMAC should return to dealing with more customers, he said.

GM retains a 49 percent ownership interest in GMAC, having sold off the rest to an investment company.

Also, GMAC last month stopped making car leases, and dealers said they were working with customers on traditional financing deals.

But Sammartino said the Sweeney dealership has found national lenders who are willing to provide leases for new and used vehicles.

“Our phones have been ringing off the hook,” he said.

Many customers like having a car for three to four years at a relatively low lease payment and then turning it in, he said.

In the first eight months of this year, leases made up 42 percent of deals on new vehicles in Mahoning, Trumbull and Columbiana counties, the local auto dealers association said.

Sammartino said the banks involved in the leasing will take back the vehicles after the lease expires and sell them at auction.

shilling@vindy.com