Improving Your Credit For A Car Loan

Time For A New Car?

I remember when I was broken down on the side of the interstate in my 92 Jeep Cherokee I thought to myself “My next car is going to be brand new!”  I new that I would need to finance as I was just a twenty something with a low end painting job, but I was hopeful that I would be approved. Flash forward to sitting in the Nissan dealership attempting to find anyone who would finance this twenty some with no credit…spoiler… there was absolutely no one who would accept. At this point I knew that I would have to go about this a different way if I ever wanted to be able to get accepted for financing but had no idea how to begin. I knew I needed to have better credit and luckily I was able to get a consultation from a credit adviser to assist me in the process!  

 

Understanding Your Credit

First off I had to get a hold of my credit report and see just exactly what was going on. My credit adviser directed me to Free Credit Hub where I was able to sign up for credit monitoring and finally see what was dragging my credit! I was greeted with a cacophony of different numbers, phrases and names that filled the pages and made my stomach drop. My adviser walked me through each  line on the report and explained that there were multiple categories that made up the report. Those categories were:

1. Payment History-  35% of your credit score is based on your past bills and how they were paid.

2. Amounts Owed- 30% of your credit score is based on the available credit card limit you’re using and the amount you owe across your accounts.

3. Length of credit history – 15% of your credit score is determined by the credit history you have built. This is based on the average age of your accounts  along with a few other factors. The longer the history, the better the results!

4. Credit mix – 10% of your score is from the mix of revolving credit (credit cards) and installment credit (car loans, mortgages, etc.) you have.

5. New credit – 10% of your credit score comes from new credit accounts that you have established.

 

Time To Build!

Alright, now that I know what exactly makes up my credit, it is time to start building it up! I took 3 easy steps to start building positive credit and the foundation for a strong credit score.

  1. Lowering My Card Utilization– When I got my first credit card I was told to never use more than 50% of the allowed credit and I would be fine. If we look at our credit utilization like a grade card, a 50% utilization rate is a solid F. 30% is about a C rating and the lower you go the better your rating. Keeping your utilization under 10% is an A rating and is sure to build your credit the fastest.
  2. Becoming An Authorized User– Becoming an authorized user is by far one of the easiest ways to build credit and is kind of like passive income. If you are listed as an authorized user on a trusted family members card, their history is listed on your report as well and you don’t even have to use the card! Be sure you work with someone you trust because the negative history will be placed on your report as well.
  3. Pay Your Bills On Time-  Paying off those balances on time is extremely important when building credit as it provides positive credit history and establishes a exceptional trade line. Late payments are one of the largest discrepancies on most Americans credit report!

 

Your Car Loan Will Help Build Credit.

After about 6 months of building up my credit, I was able to acquire financing toward a new vehicle. You don’t need to have perfect credit to acquire a car loan, but it will affect your financing options and future payments. The wonderful thing about this loan is that it establishes another line of installment credit to your account. As long as you are making your payments on time, this installment credit will soon become a wonderful trade line that builds a long credit history. In the end it is all bout finding the right lender for you and managing a positive ascending credit score. If done correctly, you will be on the road that that fabled 800 credit score!

 

 

Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors  and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.

If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.

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Low Fico Scores│Too Many Inquiries On My Report

How Do Inquiries Impact My Score?

One of the common misconceptions about a credit score is that inquiries have a major role in the score. If you have looked at your credit score recently and feel that there are not many dings to the report that would cause your score to be low, take a few things into consideration first:

  1. Do you have two or more revolving lines of credit? If so, are these accounts at or below 30% of the limit?
  2. Now, are there any collections, charge-offs or other accounts that are in a negative standing? You’ll want to have these removed from the report.
  3. Lastly, do you have incorrect or inaccurate contact information on your credit report i.e addresses, names, etc?

All of the above scenarios should be looked at before jumping to what your inquiries look like.

One Too Many Inquiries

If you have been credit card or car shopping lately, you may notice a multitude of inquiries on your credit report. It is very common for a dealership to throw your information into their system to see if they can find you a low interest rate at a great loan term so they can sell you the car on their lot.

Understanding how this impacts your score allows you to walk into each situation prepared and knowledgeable. Whether you are applying for a new credit card or a car note a few things.

  • When shopping for a car, research a Credit Union you could get a loan through, rather than the dealership financing option
  • Know your credit score
  • Don’t apply for credit when you don’t need it

Each time you apply or allow someone to check your credit score, you are allowing them to apply another hit to your credit profile.

The best rule of thumb for inquiries is no more than 10 “pulls” on your credit over a 12 month period.

Once you start running into more inquiries than this, your credit score will start to be impacted by them. Again, applying for unnecessary credit lines will start to impact you in a negative way.

I Have Been Denied Credit

If you have run into issues of hoping to start building credit, but have been denied credit cards over and over, there are a few options you have. Applying or inquiring for more and more credit is not helping your scores. You can try a few other options such as:

  • Applying for a  Secured Credit Card
  • CD Builder Loans
  • Second Chance Checking

You can look for other options for credit cards here

free credit repair consultation

What My Credit Score Says

Your credit score tells a lender the likelihood of you to default on a loan in the next 12 months. Credit demonstrates your trustworthiness to pay your bills and loans on time. Keeping this in mind, it is easier to understand what your credit report says about you as a borrower.

If you have late payments, this impacts your score significantly.

Facts on Fico

If you look at the chart above, you notice that your payment history makes up 35% of the FICO score. Therefore a late payment will tank your score! Another large portion of the FICO score rating, is the amount you owe. If your credit card balances are high, the easiest and quickest way to start improving your score is to pay your cards down as low as you can, rather than making the minimum payments.

In order to have a healthy credit profile, it is recommended to have two lines of revolving credit, and two personal (like home and auto) loans. If you have questions about other reasons your scores may be low or would like to speak with an attorney today, please call 1-800-994-3070. We would be happy to assist you further or answering any questions you have concerning your score.

A Note From The Author: The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.

Article by Breana Washington

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Manage Your Accounts Better Today With These Easy Steps!

Credit Alerts Worth Setting Up Now

In order to maintain great credit scores, keeping track of all the activity on your accounts is key! Smart phones are attempting to make our lives easier with a multitude of applications. All major banking institutions now have online banking or apps to make life easier on their customers. These apps have the ability to “control” what comes and goes out of your bank. Gone are the days of driving to the bank to make a deposit. You can now take a screenshot and deposit through mobile banking. The possibilities are endless! We’ve made a list of several other ways to get the most out of your banking apps, most of which are free! Here are a few other ways to use those apps:

Maintenance Notifications:

Statement Notification: Many times it feels like the month flies by and bills are  due once again. ‘Payment due’ is now one of the most used alerts on mobile apps. When the payment is due, an alert pops up, reminding you ahead of time when to make a payment and what the balance is. You can set it up to notify you as soon as you would like! While auto pay or auto draft is great, it is still important to double check that the payment was taken on time. For many families with many different bills due at a time, this is a great way to reduce the headache of having to remember one more thing on that laundry list of “to-do’s” for the week.

Payment Received: Having this notification can ensure that the payment successfully went through and will notify  you immediately on your mobile device.  One of the worst things that can happen is  falling late on a credit card or payment.  Many times if something happens with a card on file and the payment is not processed, consumers don’t catch it. This will ensure that you know those payments are made on time and for the correct amount. To set these up, you will want to download the credit card or bank app you use and turn the notifications on for all purchases and payments made.

Balance Notification: This is a great notification to have set up, as it is very important piece of the puzzle for your credit score. A great rule of thumb is to keep the balances below 30%. The best thing for your credit score is two revolving accounts and two installments in order to have a healthy credit profile. The lower the balance, the better the score is! So, if you’ve noticed your credit card keeps creeping out of your wallet, you can set up notifications at a certain balance so overspending is combated. It is almost like an accountability partner and is great if you find yourself overspending often!

 

credit apps

 

Preventative Notifications:

  1. Suspicious activity- Your bank or credit card company will now send a text message to you if you would like if  there is suspicious activity on the account. The message may sound similar to this: Please verify activity on ____ card ending in ___ at this Location. You can then confirm or deny this text.  If you reply deny, a text follows up with a message that you will receive a phone call in the morning to go over the details. Easy enough, right?
  2. Card not present-Purchases made online will notify you with an alert. Online shopping has seen a dramatic spike in identity theft. For this reason, a feature such as this is a great to keep in mind.
  3. Gas-Any purchase made at a convenient store or gas station will alert you, if you wish. Unfortunately not every station requires a pin to make purchases.
  4. International Purchases-This is not a new feature but is great to keep in mind. If you are traveling, always notify your institution of the activity. Some will automatically turn the card off on you in order to protect the cardholder.
  5. Over limit-This notification is set up by the cardholder and notifies them any time a purchase is made over a certain price.

For more information about your credit score, please give Credit Law Center a call at 1-800-994-3070.

A note from the author:The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.

Article by Breana Washington