Ideal Neighbourhood

How To Budget For Your First Home

Your first home is one of the biggest decisions you will make in your life. But don’t let this scare you! There is a simple way to make sure you make the right decision with your first home and budgeting for your first home is not that hard. Know how to budget for your first home?

So, how to budget for a new home? These tips assume that your first home is NOT an investment property, either for cash flow or appreciation. They assume that your first home will be a primary residence and nothing else.

First Tips

Your first home is not going to be your last, so don’t buy your home with your long-in-the-future needs in mind! If you’re buying your first home with your significant other, and you aren’t currently trying to have a child, don’t purchase a 4 bedroom home. Buy something that fits your current or near-future needs. One should know how to budget for your first home.

Ideal Neighbourhood

Choose your ideal neighborhood, then your ideal size. Where you live is usually more important than what you live in! This will affect your commute to work, who you live around, and possibly what you pay in taxes and utilities.

“If you have to ask, you can’t afford it.” That is, you know budgeting for your first home; if you have any questions about whether or not you can afford something, treat it as if you can’t.

Your Down Payment

Before buying your home, you should know how to budget for your first home and decide how much you’re going to spend on a down payment.

If you don’t have much available for a down payment, it’s possible to get a mortgage with as little as 3.5% down with a FHA loan. Read out does credit matter if i’m not applying for a loan?

Down Payment

If you put 20% or more of the purchase price down, you won’t have to purchase private mortgage insurance (PMI), which will save you thousands of dollars over the long run. For this reason, if you don’t have 20% to put down, you may want to save up and hold off on purchasing a home until you have it.

Do not borrow money for a down payment on a primary residence!

Your Mortgage

There are a lot of terms used in mortgage calculation that confuse most people! Many people don’t understand what the difference is between a 30-year fixed 5 year term compounding semi-annually and a 15-year fixed 5 year term compounding monthly.

  • Amortization: the expected life of the total loan.
  • Term: the life of the contract. Once the term ends, the mortgage has to be refinanced at a different interest rate.
  • Principal: the amount of money left on the loan to pay back, not including the added interest. This is NOT the same as the total amount paid or due.
  • Interest rate: the added proportion of a loan that is charged as interest to the borrower. Often expressed as an APR (annual percentage rate).
  • Compounding: how often interest is calculated and added to the principal.

The mortgage you’ll be able to afford will depend on your income and how your income is structured. Subtract your down payment from the purchase price of a home that you want, and you’ll have the mortgage principal that you’ll have to borrow.

Mortgage

Ideally, you can safely afford a mortgage that is 50% of one of your household income sources.

However, you may decide to go up to 50% of your total income. A mortgage payment higher than this exposes you to unnecessary risk.

Read out our previous article on Credit Problems Which Can Ruin Your Mortgage Application

Use an online calculator to figure out your mortgage payments given an APR, amortization term, and compounding. You will get all this information from your mortgage lender. Keep reading how to budget for your first home.

Additional Expenses

Initial Cash Outlay

  • Inspection costs. Usually small in comparison to the down payment, around $500-1000.
  • Closing costs. Expect to pay your agent a percentage (1-4%) of the purchase price in closing cost. These can vary widely and are significant.
  • Renovations, if any.
  • Furnishing. Furniture is often an underestimated expense, and you’re not likely to choose the same furniture for a different space.

Regular Payment Changes

  • Utilities rates. They’re likely to be different from what you were paying before, especially if you rented a much smaller space. If necessary, ask people in the neighborhood what they pay for their utilities as typically, people in one neighborhood use the same companies for their basic utilities.

Payment Charges

  • Property taxes, generally rolled into your mortgage payment.
  • Changes in cost of commuting. You may be moving closer to, or further from, work. This will likely change a significant daily cost.

By taking into account all of these costs, you will be able to effectively figure out what you can afford, budgeting for your first home and how you will be able to pay for it.

The post How To Budget For Your First Home appeared first on The CreditPros.

What To Do If You Are a Victim of Identity Theft

What To Do If You Are a Victim of Identity Theft

What To Do If You Are a Victim of Identity Theft

 

It is never easy to find out that you’re a victim of identity theft. You’ll have feelings of shame and anger, yet the best thing to do once you find out is to begin the process to clean up your credit. Once you catch and dispute errors, the easier the cleanup would be. With that in mind, you’ll require patience as disputing credit report entry take time.

Below are some of the things you must do once you find out you’re a victim of identity theft:

  • Put Credit Freeze and Fraud Alert on Your Credit Reports

For you to safeguard your credit, you have to put either fraud alert or credit freeze around your credit. Once you do fraud alert, expect that it will last for 90 days and if you like to renew it, you could. You may also have an option to do an extended one that lasts 7 years. If you want to do an extended one, you’ll have to get in touch with every 3 credit reporting agencies and request it over the phone. You may also do it online.

If you think fraud alert isn’t enough protection, you may do credit freeze. It would put your credit on lockdown and nobody can access it. See to it that you keep that in mind if you are planning to apply for loans where you know they’ll have to check your credit. If you want to lift credit freeze for some reasons, you may do so.

  • Close Out Any Debit or Credit Cards

Call every card company and debit cards to report about fraudulent charges as well as request that they close your account. You may then have them open new account for you with a new card. The faster you do this, the faster you could put stop to the spending spree of the theft.

  • File a Police Report

For you to complete your Identity Theft report, you will have to get in touch with local police department about your theft. Make particular to ask for a police report’s copy and report number. Your FTC Identity Theft Affidavit and police report make up Identity Theft Report.

  • Provide Your Creditors with an ID Theft Report Copy

Notify every creditor in writing that you’re the victim of fraud and make sure to add a copy of your own Identity theft report. You might also like to ask every creditor to give you and police department with documents that show fraud transactions. They might not just hand it over to you, yet fight for that if you want to. This information will assist you when tracking down the one that stole your identity. At times, although this is a legitimate claim, credit bureau still give you problems so consider hiring a professional credit repair company like us to do this for you.

  • Change Every Account Password

You must go through with your accounts and consider changing the password. Ensure to avoid using some obvious things for your passwords. A password must be a combination of lower and upper case letters with special characters and numbers.

The Bottom Line

Safeguarding personal information must always be at your mind. You have to take note that identity theft is rampant and you have to be aware on how you share your personal information. If you fall victim to this crime, those tips above can help you back on track.

The post What To Do If You Are a Victim of Identity Theft appeared first on Creditmergency.

The Surprising History of the Credit Bureaus - Pinterest graphic

The Surprising History of the Credit Bureaus

The Surprising History of the Credit Bureaus - Pinterest graphic

Most of us have credit reports assembled about us by the credit bureaus, yet few of us know about the surprising history of credit reporting.

The credit bureaus as we know them today grew from small, local organizations that formed as far back as the 1800s. In contrast, modern credit bureaus market themselves as expansive repositories of consumer information that can be used for an ever-growing number of applications.

Unfortunately, the early credit bureaus were known to use unethical tactics to collect information on consumers and sell this information to businesses.

While it may seem that the problems of these early credit bureaus have been addressed by legislation such as the Fair Credit Reporting Act, the credit reporting system still has serious flaws, some of which we highlight in “What Happened to Equal Credit Opportunity for All?

In this article, we will explore the story of how the credit reporting industry came to be, how the credit bureaus evolved into what they are today, and the many controversies that have taken place along the way.

What Is a Credit Report?

A credit report contains information about a consumer’s credit history. This includes a list of current and past credit accounts, along with the age, credit limit, balance, and payment history of each account. It also contains identifying information such as your name, address, and social security number.

This information helps lenders evaluate the creditworthiness of potential borrowers so they can decide whether to extend credit and what the terms of the loan should be.

For more information on credit reports, see our article “Credit Reports: What You Need to Know.”

What Are Credit Bureaus?

Credit bureaus, also known as credit reporting agencies or CRAs, are the companies that gather credit-related information about consumers and distribute it to lenders—and increasingly, other types of businesses who have an interest in checking people’s credit history.

In the United States today, there are three major credit bureaus: Experian, Equifax, and TransUnion. While there are many other credit bureaus, these three companies dominate the industry.

But it wasn’t always this way. The first credit reporting organizations were a far cry from the modern credit bureaus of today, and the unsavory tactics they used to run their businesses may surprise you.

Early Credit Reporting Agencies

The first recorded group that shared credit information about consumers was the colorfully named “Society of Guardians for the Protection of Trade Against Swindlers and Sharpers,” which was founded in London in 1776. The Society produced reports for its members on the credit history of individual customers, which were often full of gossip in addition to credit information.

The earliest credit reporting "agencies" were groups of merchants who would get together to gossip about customers. Painting by Joseph Highmore.

The earliest credit reporting “agencies” were groups of merchants who would get together to gossip about customers. Painting by Joseph Highmore, public domain.

Credit bureaus would check local newspapers for news about consumers.

Credit bureaus would check local newspapers for news about consumers.

Like the Society, the early credit reporting agencies were small, local organizations that were essentially groups of merchants sharing information about consumers. This allowed them to offer credit to more people and avoid lending to high-risk individuals.

These organizations were industry-specific and did not share information with each other. In 1960, it is estimated that about 1,500 independent local credit bureaus were in operation in the United States.

According to the Philadelphia Federal Reserve Board, these bureaus were “working with local lenders with incomplete and often unverifiable information.”

The bureaus didn’t just collect the information you might expect, such as name and loan information. They also gathered sensitive personal information such as marital status, age, gender, race, religion, employment history, and driving records.

The credit bureaus didn’t stop there. They checked the local newspapers for announcements of promotions, marriages, arrests, and deaths, and attached news clippings to consumers’ credit reports. They would even go so far as to ask someone’s neighbors and colleagues for testimonies about that person’s character.

Even the local “Welcome Wagon” was working undercover for the credit bureaus. This organization would surreptitiously gather information on new residents of an area under the guise of welcoming them to the neighborhood.

The "Welcome Wagon" would secretly collect information on new neigbors for the credit bureaus. Photo by John Fowler on flickr, CC BY 2.0.

The “Welcome Wagon” would secretly collect information on new neighbors for the credit bureaus. Photo by John Fowler on flickr, CC BY 2.0.

The credit bureaus were focused solely on serving the local creditors that belonged to their respective organizations. As such, they typically only reported derogatory information.

Furthermore, there was no standardized way to evaluate a person’s creditworthiness. It was all based on the subjective whims and prejudices of the creditor looking at their credit file.

What’s worse is that the credit bureaus did not allow consumers to view the information that was being reported about them. There was no way for consumers to verify whether the information was correct or where it came from.

Modernization of Credit Reporting

According to the Harvard Business School paper, over the course of the 1960s, many of these small, local credit bureaus started to join together, forming networks that spanned the nation.

In 1971, the Fair Credit Reporting Act (FCRA) was passed to ensure the “accuracy, fairness, and privacy of information in the files of consumer reporting agencies.”

By establishing requirements as to the accuracy and of consumer credit files and access to their information, the FCRA was intended to protect consumers from the unfair practices that were rampant in the credit reporting industry.

The Fair Credit Reporting Act

The FCRA enacted the following rights for consumers:

  • Consumers must be notified if negative action is taken against them because of the information in their credit file.
  • Consumers must be able to find out what is in their credit file.
  • Consumers must be able to dispute inaccurate information and have it corrected or deleted.
  • Outdated information (generally more than 7-10 years old for negative information) cannot be reported.
  • Consumers must provide consent for employers to check their credit reports.
  • Consumers must have the option to request to be excluded from lists for unsolicited credit and insurance offers.
  • Consumers who appear on a list of prospects requested by a lender must be extended a firm offer of credit.

As a result of the passing of the FCRA, credit bureaus stopped recording events such as marriages and arrests and started focusing more on verifiable credit history information. They also started reporting positive information in addition to negative information.

In 1996, the FCRA was amended to extend additional protections to consumers, including the following:

  • Consumers have the right to take legal action against anyone who obtains their credit report without a permissible purpose.
  • Credit bureaus can be held liable for knowingly reporting misinformation.
  • Credit bureaus must investigate disputes within a certain period of time, usually 30 days.
  • Banks can share credit information with affiliates, but consumers must be given the opportunity to prohibit this sharing of their information.
The transition to computerized databases allowed some credit bureaus to expand and dominate the industry.

The transition to computerized databases allowed some credit bureaus to expand and dominate the industry.

The advent of computer-powered databases allowed some credit reporting agencies to become more efficient and do more business, while smaller agencies that could not afford to make the change got out of the industry.

This consolidation eventually led to the domination of the market by the three major bureaus we know today.

Experian

While Experian did not officially come about until 1996, according to creditrepair.com, the story of Experian can be traced back almost 200 years.

The Manchester Guardian Society was formed in England in 1826 to share information on customers who didn’t pay their debts. This organization eventually became a part of Experian, as did a group of merchants that later formed in Dallas for a similar purpose.

These groups were both acquired by TRW, an engineering and electronics conglomerate that also launched their consumer credit reporting branch as Experian.

Experian was acquired by the British retail company Great Universal Stores Limited (GUS) and became part of their consumer credit reporting arm. In 2006, it demerged from GUS and began trading on the London Stock Exchange.

Although Experian as we know it today did not come along until after the FCRA was passed, the bureau has certainly not been free of controversy.

In 1991, a TRW investigator incorrectly reported that 1,400 people in Vermont had not paid their property taxes, which ruined the credit of those consumers. Several similar cases were discovered throughout New England.

Experian became infamous for their atrocious customer service and was hit with several lawsuits.

Later, Experian settled with the Federal Trade Commission (FTC) for operating a credit reporting scam in which consumers were led to believe they were signing up for a “free credit report” and were not told that they would automatically be enrolled in Experian’s $80 credit monitoring program.

The offending for-profit website, FreeCreditReport.com, is still in operation. As a reminder, the only site authorized to provide free credit reports as required by federal law is annualcreditreport.com.

They settled with the FTC again in 2005 for violating their previous settlement.

In 2015, Experian announced a data breach that existed for over two years and affected as many as 15 million consumers.

The bureau was then fined $3 million in 2017 for deceiving customers about their credit scores, along with TransUnion and Equifax.

TransUnion

TransUnion originally began as the holding company for a rail transportation equipment company in 1968. One year later, they entered the credit reporting industry by acquiring regional credit bureaus. The bureau has expanded steadily since then, although it is the smallest of the three major credit bureaus.

TransUnion has also been guilty of taking advantage of consumers.

Two consumers have sued TransUnion for refusing to remove inaccurate information on their credit reports.

They have also been accused of scamming consumers by not notifying them that they would be charged $18 a month for having a TransUnion account.

In June 2017, the largest FCRA verdict to date forced TransUnion to pay $60 million in damages to consumers who were erroneously included on a government list of terrorists and security threats.

Later in 2017, one of TransUnion’s websites was hijacked and made to redirect consumers to websites that attempted to download malware onto visitor’s computers.

Equifax

Equifax was started by a grocery store owner as Retail Credit Company.

Equifax was started as Retail Credit Company by a grocery store owner. Photo by Charles Bernhoeft, public domain.

Equifax was started in 1898 by a grocery store owner who created a list of creditworthy customers and sold the list to other businesses. This business grew and became known as the Retail Credit Company.

The company expanded quickly throughout North America, amassing credit files on millions of Americans by the 1960s.

The Retail Credit Company developed a reputation for collecting extensive personal information on consumers and selling it to just about anyone who wanted it.

Critics accused them of reporting “facts, statistics, inaccuracies and rumors’…about virtually every phase of a person’s life; his marital troubles, jobs, school history, childhood, sex life, and political activities.”

Buyers of these reports would use them to judge the morality of individuals and avoid lending to those who they perceived as morally corrupt.

Consumers were not allowed to see their information, and many had no idea that the company had files on them in the first place.

When the company started planning to computerize their records, which would make consumer information more widely available, the U.S. Congress intervened, holding hearings that led to the Fair Credit Reporting Act being passed.

Equifax had to stop scamming consumers by lying about their identity and their motives when collecting information, among many other changes.

The Retail Credit Company changed its name to Equifax in 1975, which many speculate was a move to improve their damaged reputation after the congressional hearings.

Unfortunately for consumers, Equifax’s issues didn’t end with the Fair Credit Reporting Act. In recent years they have betrayed consumers’ trust even more egregiously.

Equifax ruined their reputation again in 2017, when their systems were breached by hackers twice, impacting hundreds of millions of consumers in the United States, Canada, and Britain.

The scam left the names, social security numbers, birth dates, addresses, driver’s license numbers, and credit cards numbers of consumers exposed for months, from May 2017 until July 2017.

Not only that, but Equifax did not disclose the breach until September of that year, giving top executives plenty of time to sell their shares of the company before going public with the announcement.

They continued to bungle their response to the breach by setting up websites that were supposed to allow consumers to determine whether they were affected by the Equifax breach but instead returned random results.

In addition, Equifax was allowed to charge fees for credit freezes in many states, which gave them the opportunity to actually make money off of this breach.

Equifax was allowed to charge fees for credit freezes in many states, which gave them the opportunity to actually make money off of this breach.

Nearly two years later, Equifax has still not been penalized or held accountable for this horrific failure in any way. In fact, they just went back to selling credit monitoring, and they are now making more money than ever.

For a fascinating in-depth investigation of the 2017 Equifax breach, listen to the podcast “Breach.”

There is virtually no end to the list of disastrous errors committed by Equifax, but here are some more of the highlights:

  • The bureau repeatedly tweeted a link to a fake Equifax phishing website, directing consumers to enroll in fraud prevention services at the imposter site.
    Equifax left their systems vulnerable to a series of attacks.

    Equifax left their systems vulnerable to a series of cyberattacks that affected hundreds of millions of people.

  • Equifax left the private data of approximately 14,000 Argentinian consumers and staff members open to anyone who entered “admin” as the username and password for one of its online portals.
  • The company removed its mobile apps from app stores in 2017 because they had security flaws that left them vulnerable to cyber attacks.
  • A website operated by Equifax exposed the salary histories of tens of thousands of people to anyone that had someone’s Social Security number and date of birth, both of which were in the hands of criminals after the security breach.
  • In October 2017, Equifax’s website was hacked and made to serve malware disguised as a software update, leaving visitors to the site at risk of having their computers infected by the malware.
  • The company has been sued hundreds of times and fined millions of dollars by the Federal Trade Commission for violating the FCRA.

Sadly, it seems Equifax has not changed for the better since their early days of selling people’s private information to anyone and everyone, since they have allowed criminals to easily access consumer data on a massive scale.

Innovis: The Fourth Credit Bureau

Many people are completely unaware that there is actually a fourth major credit bureau called Innovis. It was founded as Associated Credit Bureaus in 1970 and changed its name to Innovis in 1997. The company is now owned by CBC companies, which purchased Innovis in 1999.

In contrast to the other consumer reporting agencies (CRAs), credit reporting is not the primary function of Innovis. In fact, Innovis does not even offer credit scores.

Innovis instead serves businesses by providing “consumer data solutions” such as identity verification, fraud prevention, receivables management, and credit information. According to finance writer Sarah Cain, Innovis’ credit reports are used primarily to compile lists of pre-approved consumers to sell to lenders for marketing pre-screened offers.

Innovis also states on their website that as a CRA, they “enable” personal solutions such as credit reports, credit disputes, fraud alerts, active duty alerts for consumers in the military, credit blocks, security freezes, and opt-outs.

What Is In Your Innovis Credit Report?

Your Innovis report, like your other credit reports, contains your personal information as well as your credit history. However, they do not receive credit information from all of the same lenders that report to the other three major credit bureaus. If you pull your Innovis credit report, you may notice that some of your credit accounts are missing, particularly revolving accounts.

Your credit report will also show inquiries if any businesses have pulled your file from Innovis.

While you can’t get your Innovis credit report from annualcreditreport.com, you can order a copy directly from the company for free once a year.

Who Uses Innovis Credit Reports?

While there are some anecdotal reports of credit card companies pulling consumers’ Innovis credit reports for lending decisions, it seems that their reports are used mostly for pre-screened marketing offers. Innovis’ services are also used by companies such as cell phone service providers.

Is CBCInnovis the Same Company?

Confusingly, there is another company owned by the same parent company as Innovis called CBCInnovis. Although CBCInnovis and Innovis share similar names, they are different companies with different functions.

Unlike Innovis and the other credit bureaus, CBCInnovis does not maintain a repository of consumer credit data. Rather, it serves as a third-party company that pulls consumers’ credit reports from Experian, Equifax, and TransUnion and compiles the information into one “tri-merge” credit report. These tri-merge reports are sold to lenders such as banks and mortgage companies.

Discrimination in Credit Reporting

Unfortunately, historical discrimination is still baked into the credit reporting system.

Unfortunately, historical discrimination is still baked into the credit system.

You might think that discrimination in the credit system is a thing of the past, left behind with the shady information-gathering tactics of the earliest credit bureaus.

Unfortunately, although discrimination is officially prohibited by the Equal Credit Opportunity Act, inequality is still rampant in the credit industry today.

Past and present discrimination against minorities in the United States affects consumers in ways that have dramatic effects on credit scores. A study by the Federal Reserve Board revealed that on average, blacks and Hispanics have lower credit scores than non-Hispanic whites and Asians, even after controlling for personal demographic characteristics, location, and income.

The credit system further burdens those who are less privileged and provides very few opportunities for disadvantaged consumers to improve their situation.

Conclusion on the History of Credit Reporting

Credit reporting agencies have a surprisingly long and sordid history. From the 1800s to today, the consumer credit reporting industry has been plagued with bias, inaccuracies, and serious security issues.

While technological advancements have allowed the credit bureaus to expand and improve,  and government regulation has been enacted to protect the rights of consumers, the system is still far from perfect.

Ultimately, the credit bureaus were built to serve lenders, not consumers, and that remains their primary purpose. We are reminded of this every time consumers are harmed by the incompetent or even outright malicious actions of the credit bureaus.

Have you been affected by a credit reporting scam or a security breach? Let us know in the comments, and please share this article if you liked it!

Used Cars Cost More To Maintain

Why A Car Loan Could Be A Great Investment

If you’re in the market for a car, and you really want to buy new, I have good news for you. Getting a car loan for a new car could actually be a solid investment! Know why a car loan could be a great investment, things to know before taking a car loan and how do car loans work?

Most people would agree that buying a cheap used car is more cost-effective in the short term than buying new. Because of this, many people will tell you that in order to save money, you should purchase a used car with cash.

However, used cars have additional costs and greater risks that, for some people, is not worth it at all!

Facts On Why A Car Loan Could Be A Great Investment?

Fact #1: Used Cars Cost More To Maintain.

They’re less fuel efficient. Fuel efficiency standards have increased dramatically over the past 15 years, and they continue to increase as hybrid cars become more and more the norm. Electric vehicles cost even less to fuel up, if you charge your car at home.

Used Cars Cost More To Maintain

Repair costs on average are higher for used cars, if you compare within the same model. Newer cars are less likely to have parts that are worn down and are in need of emergency repair, while used cars have had some wear on them.

Also Read Our Article on How To Budget For Your First Home?

The insurance is lower on used cars, but the savings on insurance is often not worth the added fuel and maintenance cost. Not only that, but after paying off the car, you will likely no longer need full coverage on the car. Keep reading why a car loan could be a great investment?

Fact #2: Buying New Gets You A More Reliable Car.

Because newer cars have less wear and more technologically modern parts, newer cars are, in general, more reliable than older used cars.

Buying New Gets You A More Reliable Car

Caveat: compare within the same model. The truth is, some car models are less reliable than others. There are other things to know before taking a car loan. Keep reading how do car loans work?

Fact #3: You Can Get Low-to-No APR Financing With Good Credit.

People with good credit can take advantage of very favorable financing terms offered by car dealerships. You’ll need to shop around to figure out which terms are the most favorable, though.

However, not everyone benefits greatly from driving new over used. in order to REALLY get the benefits out of a new car, you need to do the following. Also read the gift of good credit for your children.

Do Not #1: Take a Loan For A Used Car

Certified pre-owned cars are cars that were previously driven, likely by people who leased the car. These, especially recent model years, may also be good purchases. Keep reading how do car loans work?

Take a Loan For A Used Car

Do Not #2: Buy A Car You Can’t Afford

One of the biggest mistakes people make when getting a car loan is buying a car they can’t afford. They do this mainly because they don’t know how much they can actually afford to pay for a car every month.

Buy A Car You Can’t Afford

How do you budget for a car?

Cars have several relevant expenses and there are things to know about car loan. These include:

  • Fuel (gas/electricity costs)
  • Insurance (full coverage)
  • Estimated repair costs
  • Finally: Car Payment

Your car payment will be the largest of these expenses. So understand what your budget can and can’t allow! If you’ve budgeted $500/month for your car payment only, you’re going to be getting a different car for someone who has budgeted $500/month for all car related expense!

Best of all, car dealerships are willing to negotiate prices and so should you. Again, shop around: visit other dealerships and make sure the dealerships know you’re visiting other dealerships. Make them believe you’d be an easy sale if they simply had the best price, because ultimately the salesmen just want their commission.

Do #1: Take Care of It

Learn as much as you can about cars, and specifically, YOUR car.

There are cars from the 90s with 200,000+ miles that are in perfectly good condition. These people, however, are not likely to sell them!

Do #2: Drive It For As Long As Possible

Most people keep a car for a few years, then get a newer model because it’s nicer.

Drive It For As Long As Possible
For those people, their car is a source of pride and joy. They will not get the savings you get, simply by being pragmatic about cars. Keep reading things to know before taking a car loan.

Do #3: Get The Best Terms

How do car loans work? Your best bet to getting the best terms is to have a high credit score and understand what you’re getting into. Car dealerships love people who just want to pay a specific monthly payment for their car, because they know those people won’t read the actual terms of the financing nor will they try to get better terms!

Also read out what do people with high credit scores have in common?

READ THE FINE PRINT. Just because the terms of the loan let you get away with 0%, 0% interest for the first 12 months, doesn’t mean that the car is going to cost less in the long run!

Car dealerships make money on financing. Knowing that, you want to shop around for loans. Do some online searches and get quotes for car loans, and be willing to turn down dealer financing if you have to. However, you have the best leverage when it comes to dealer financing. Keep reading things to know before taking a car loan.

How Would I Know If A Car Loan Is Right For Me?

If this is you:

  • Chose a reliable, affordable car
  • Excellent credit score (at least 750), to pay the lowest interest rates
  • Excellent driving record and a responsible driver, to pay the lowest insurance costs + fuel costs,
  • Over 25 years old, to pay the lowest insurance costs
  • Willing to care for your car, to pay less for repairs down the line
  • Willing to drive the same car for over 10 years, to not deal with the effects of depreciation

How Would I Know If A Car Loan Is Right For Me

…then buying would be worth it.

The post Why A Car Loan Could Be A Great Investment appeared first on The CreditPros.

Credit Cards and How to Manage them

Credit Cards and How to Manage them

Credit Cards and How to Manage them

How Many Credit Cards Should You Have Open?

How many credits should you really have open? The truth is there is no such thing as a one size fits all number for the cards you must have open. On average, Americans own 3 to 4 credit cards. However, this number could be higher or lower for you, which depends on your needs.

To get started, it might be best to stick with two credit cards. You will likely require at least this many to maintain your scores high. It is also smart to keep a backup card aside from the primary one you are using. Try to ensure that your cards are from several credit card networks in the event that the merchant you do business with doesn’t accept all of them.

When you own fewer cards, you can save yourself from debt, especially if you have the tendency to spend and not pay off your balance. However, having several extra cards in your wallet helps you reap rewards. Once used strategically, this can even improve your score.

Credit Cards to Help You Achieve the Most Ideal Credit Utilization Ratio

The credit amount you are actively using as compared to the credit amount available to you, according to your credit card limits, is referred to as your credit utilization ratio. This particular ratio plays a significant role in your credit score calculation. Even when you pay off your balance at the end of each month, the amount you will charge will still go in determining your credit utilization ratio.

What is the Best Credit Utilization Ratio?

In general, you would like to have your credit utilization ratio kept below 30% yet lower than this is much better. The one thing which affects your utilization the most is your overall balance as the percentage of the amount of credit available to you. The sweet spot is below 10%. You can keep it between 1 percent and 9 percent for you to get the highest scores.

How to Determine the Number of Credit Cards You Will Need

The specific number of credit cards you have can help you retain low credit utilization ratio. There is a simple formula with only to steps to help you decide on how many cards you really need:

  • Go through your statements then add up your balance every month.

Check the statements you got last year. Add up each month’s statement balance across all your cards then get the average. If you like to maintain your utilization below 10%, the credit amount available to you must be around 10 times the amount of your average balance every month across all your cards.

  • Compare your credit limits and your typical balance.

Check your credit cards’ limits then add these up. When the credit limit is below 10 times your average balance each month, you can open new cards to achieve the necessary level of credit limit. But, there is no way for you to know the credit limit you will be given once you apply for new cards so you will have to undergo a trial and error period. You can request of an increase on the credit limit on your existing card.

 

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