Car buying tips from Trevor, Share this post and be entered in my monthly Tim’s card give away. Tip #5 Credit issues: The good, the bad, and the ugly. So here’s an issue I’ve been dealing with a lot lately, Bad Credit. So here’s the run down for those of you that don’t understand how your credit score is evaluated. THE BASICS: First of all your score, isn’t the be all and end all. It can fluctuate wildly in weeks or months. The score is a risk predictor that is calculated by a computer at Equifax, and only gives a quick snap shot of your total credit history, and what the predicted risk level would be for granting you a loan right now. The basic idea is that the score is marked on a continuum between 300 and 900. A perfect score, (which doesn’t really exist) is a 900, and the worst possible score (which I’ve never seen either) is a 300. The vast majority of people fall between 500 and 700, the worst if ever seen is 314, and the best I’ve seen is 875. If you are below a 650 it makes getting a prime rate loan difficult, but not impossible. Being bellow 600 pretty much guarantees you are subprime. The score is based on your credit utilization over time. Often when applying for credit the banks will look at more than just the score, they look at the full story your credit report tells. For instance I’ve seen a guy with a 680 get declined for a loan because he paid everything well except his car loan. ADVANCED CLASS: So here are the things that most affect your credit rating and can make the difference between looking at your score one month, and being a 680, and going to 550 the next month. Utilization: Use some, but not all of your available credit. Nothing the average person will do hurts their score more than being over their limit on credit cards. But if you never carry a balance you’re not using the credit and it’s difficult to gauge how you will make payments based on you never actually making payments. Keep you balances between 30% and 60% of your limit and always make sure there is room on the card to cover the monthly or annual fees. Number of trade lines: If your credit is thin (not much reporting) It can fluctuate wildly just from looking at the wrong way. Or even worse you have no credit. When applying for a loan no credit is often worse than bad credit. For instance if you have a 540 score you might be able to get a car loan as low as 14.9%, if you have no credit score you will automatically get a 29.9% interest rate. If you want to improve this, get more loans from more people. I recommend a Capital one credit card to start off with. Late payments: Your credit report has a column on it called 30/60/90 this shows the number of times your payment was over 30 days late, 60 days late, and 90 days late. One or two late payments isn’t the end of the world. What is going to kill your score is, multiple 30 day lates, and lates in the 60 and 90 days columns. So, just like mom taught you, pay your bills, and pay them on time. And at all cost avoid being more that 29 days late on any payment. Collections, write offs, and repossessions: When your creditors have decided that it is unlikely they will ever collect a debt they will write the debt off and most of the time send it to a collection agencies. In the event you can’t pay your loan on a secured debt the collateral (example: car, house, boat, furniture) may be repossessed to help cover the cost of the debt. This is bad, VERY BAD, especially if the collection is over $250 or you’ve been repossessed. Want to improve this part of your credit report? It’s simple, pay your debts. Even pay the ones they have stopped calling you about, and never allow anything to get repo’ed. It will stink up your credit like, yesterday’s garbage. Happy shopping everyone. Stayed tuned for more tips, and my upcoming undergraduate level credit class.
Posted on: Mon, 12 Aug 2013 18:18:23 +0000
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