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Why Your Credit Score Matters
among the many innovations that emerged after world war ii, credit use has become a major factor in our entire economic profile. as a result, your credit rating is the most important factor in determining your credit apr when you apply for any type of credit: credit cards, 0% apr transfer offers as well as mortgage and car loans.
what?s a credit score?
credit reporting was created more than 100 years ago, when small retail merchants banded together to trade financial information about their customers. these merchant associations formed small credit bureaus, which later consolidated into larger organizations. by the 1960?s, consumers demanded the right to examine their credit reports and amend false or misleading credit information that had been withheld from them. in 1971, congress enacted the fair credit reporting act, giving consumers the right to view and correct their records, as well as privacy protection as to who had access to these records.
a fair credit scoring system was needed too. in 1989, fair, issac and company, in conjunction with equifax, created a credit scoring system, called ?fico?, this credit rating scoring system creates a summary of your credit history. low scores mean that you may not qualify for a good rate for the credit you want. some lending institutions may use your credit score to set the overall fees for the loan you are requesting. in the end, a good credit score can save you money.
factors that affect your credit score
*your payment history (35%): your score is negatively scored if you have paid bills late, had an account sent to a collection agency or if you have declared bankruptcy--the more recent the problem, the lower the score. for example, a 30-day late credit payment will hurt you more than a bankruptcy five years ago.
*your total outstanding debt (30%): if the amount you owe on your credit card is close to the credit limit amount, the more likely it will affect your credit score negatively. a low balance on two cards is better than a high credit limit balance on just one.
*length of your credit history (15%): the longer your credit accounts have been open, the better your score will be.
*recent inquiries on your credit history (10%): if you have recently applied for several new accounts, it may negatively affect your score. moreover, while you are in the ?wait? period for getting approval for that new home purchase, many loan officers will advise you to delay making any new credit purchases until the loan is approved.
*types of credit used (10%): loans from finance companies generally lower your credit score. this is especially true if you don?t have a lengthy credit history to base upon your credit score determination.
what the numbers mean
credit scores range from 300 to 900, with the national average around 650. according to the fico scoring system, the lower the score, the default risks become higher. they base this rating on historical industry standards, which show a direct correlation between low credit ratings and credit defaults.
the three credit reporting agencies (equifax, experian and transunion) all have different credit rating criteria. it?s not unusual for you to have a different credit score, although they tend to be in a close range. most lenders average out the credit scores between them to arrive at a logical mean credit score number.
how to improve your credit score
*pay your bills on time. (if you can?t make a payment on time, contact your creditor and request a payment schedule. most credit card companies will offer you an option to pay your balance.)
*maintain low balances on the credit cards you use. (determine how you will use your credit card, and what type of credit card works best for you.)
*don?t close unused credit card accounts just because they are inactive. (by keeping a credit card account dormant for some time signifies that you are a responsible credit consumer.)
*finally, get a copy of your credit report annually; it is now free to all consumers nationwide.
your credit card score is the most important factor in determining your credit availability. here are some insights as to what is reported and what you can do to keep a high credit score.
ed vegliante is the owner of http://www.freeroller.net, a well organized credit card directory enabling the user to compare and apply for a credit card. view a variety of credit card offers with links to secure online credit card applications.
article source: http://ezinearticles.com/?expert=ed_vegliante
Buy a Car with Bad Credit
a car is a necessity for most of us. it is difficult to make a living without having a reliable means of transportation. you can take the bus or train, but the convenience of a car allows you to accomplish more in an efficient manner.
people with bad credit, often find it difficult to finance big name purchases such as homes, cars, furniture, appliances, etc. having repossessions, bankruptcies, charge-offs, liens or judgments on your credit report identifies you as a credit risk and creditors are likely to be reserved when, it comes to extending you credit.
these obstacles however should not prevent you from owning what you need. yes, it is true that you will probably have to make your purchase at a higher interest rate than someone with a good fico score and you will have to shop around longer to find reasonable interest rates - but all is doable. if you have bad credit and your are trying to purchase a car, follow these guidelines and will drive off the lot in your own car:
get your credit report
if you suspect that your credit leaves something to be desired, the first thing you should do, is understand your credit situation and how creditors view you. the only way to do this, is to get a copy of your credit report. get your free credit report to find out your credit score.
once you get your credit report, inspect it to ensure that all details are familiar and that they are no red flags. if you find any discrepancies, you will want to immediately fix any errors, as this will probably raise your fico score and help you in your quest to purchase a car.
financing before shopping:
before you start shopping for a car, shop around for financing through companies, who specialize in servicing bad credit auto loan consumers. it is important to do this before you go to the car dealership. the excitement of test driving a nice car and the sweet tongues of smooth car salesmen will have you driving off the when you haven?t even secured financing. this is a big mistake because you should never take possession of a car until everything is in writing. tricky salesmen will sometimes goad you into taking possession of the car before all contracts and financing are finalized. once you have taken possession of the car, they will call you and tell you that the financing did not go through and then slap you with a higher interest rate.
you can shop online and at larger banks or smaller local banks. each of them have their own advantages. online vendors and larger bank may have a whole departments totally decided to people with credit issues and so they will be very familiar with your situation. a smaller bank is likely to consider a car loan on a loan by loan basis. walk into your local bank and sit down with a bank officer and explain your situation face-to-face. they are more likely to give you a loan once they understand your predicament. also a face-to-face meeting will allow you to explain any discrepancies on your credit report.
an online loan or bank loan is preferred because these companies will not take advantage of the fact that you have poor credit by raising the price of the car, giving you a low trade in value or adding unnecessary extras like credit insurance and extended warranties.
dealer financing
if you are not able to secure a bank loan, your only choice is dealer financing. this is not a bad thing. you can still find a decent interest rate. the most important thing to remember here is not to get blinded by the interest rate. some tricky dealerships might give you a low interest rate but hike up the price of the car or give you a low trade in value.
access the list of lenders, who specialize in bad credit car loans and reviews on each lender at www.poorcreditgenie.com
the author is the owner of the free debt management credit counseling advice website: poorcreditgenie.com. the website offers indepth advice on how to improve your fico score and eliminate credit card debt.
the site also features numerous articles and news stories on credit report, credit cards and bankruptcy.
article source: http://ezinearticles.com/?expert=delia_galley
Different Types of Bad Credit
if you have a bad credit history it can still be possible for you to get a loan as long as you can meet the specific guidelines for loan approval by a multitude of lenders specialized bad credit loans. the lending industry uses categories to asess the credit risk of any particular borrower.
this means that you have had a few small credit problems, less than $500, within the last two years. typically a couple of 30 days late payments, or one 60 days late payment on revolving or installment credit.
this means that you have had some credit problems, less than $1000, within the last 18 months. typically less than four 30 days late, or up to two 60 late days payments are allowed on revolving and installment debt.
this means that you have had a few small credit problems, less than $4000, within the last two years. typically up to six 30 days late payments, three 60 days late payments, or two 90 days late payments are allowed on revolving or installment credit.
this category means that you have had serious problems with payments in the past.
whatever one of these bad debt categories you happen to fall into there will be a loan company to help you. research each bad debt credit company fully and take control of your own financial future.
lorna mclaren has an information and resources website at ww.123-debt-consolidation-loans.com where you can find advice on how to consolidate your debt.
article source: http://ezinearticles.com/?expert=lorna_mclaren
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