Tag Archives: credit

What Credit Score Is Needed to Buy a Car?

A good credit score means that you will have more interest rate options. If your credit score is poor, you can either seek an alternative strategy or try to improve the score first. 

What Credit Score Do You Need to Buy a Car?

In general, you can acquire prime financing from banks and credit unions if you have a credit score of 650 to 660. But the lower your score, the higher the interest rate. 

You will get great financing arrangements if your credit score is anywhere from 680 to 700. And with a score of 720 to 750, you can expect the lowest interest rates. 

People in the subprime category (650/660 range) can end up paying double-digit interest rates. 

A Good Credit Score for Buying a Car

Your credit score doesn’t just determine whether or not your loan will be approved. It affects the interest rate you will be charged. 

A low credit score shows that you are likely to default the loan. So the lender will ask for a high interest rate in an attempt to offset the risk. 

This applies to used cars too. You may not pay as much but the interest rate will still be way too high than you would have paid with a high credit score.

Improving Your Credit Score Before Getting a Car Loan

With a car loan, you will not have a lot of time to improve your credit score. For this reason, you need options that work almost immediately. 

If you plan on buying a car sometime in the future, you have to start working on your credit score now. Here are some steps that may help:

  • Start making all your payments on time and let this be a habit.
  • Have erroneous negative entries removed from your report.
  • Pay off loans and credit cards or pay them down.
  • Pay off any past collections and due balances.

If you act soon, your credit score will improve greatly. Some of these steps require time and they will have a great positive impact. 

Getting Your Loan Approved with Bad Credit

What if you need a car right now and your credit is bad? 

In that case, you have six options.

  • Get your regular bank to pre-approve: they will be more kind to you compared to a new lender. A preapproval will make you a stronger buyer and the dealer can even give you a better deal.
  • Check different lenders: go to several lenders and try to get the best deal. 
  • Purchase a used car: you are more likely to get a better deal with a used car than with a new one.
  • Make a large down payment: this will increase the chances of your loan being approved and you may pay a lower interest.
  • Short loan term: long term loans are riskier. You will get a better deal with a short-term loan.
  • Get a consigner: your co signer’s credit profile will be used to determine the rates.

What Credit Score Is Needed to Buy a House?

Your credit score determines whether or not your loan will be approved. But that is not all. It will also affect the amount you pay for the home every month and the mortgage insurance. 

What Credit Score Is Needed to Buy a House?

The minimum credit score requirement depends on the type of loan you want. 

There are 5 main mortgage programs and each one has a different credit score requirement. 

  • Conventional: the conventional home loan requires a minimum score of 620. If it’s an investment property or vacation home, the required score may be higher. 
  • FHA: the minimum score here is 580. But if your down payment is 10%+, they will allow a lower credit score. 
  • VA: a minimum score is not usually imposed with this type of loan. But most lenders set the minimum at 620. Others may set it lower (even 580). 
  • Jumbo: the absolute minimum for this type of loans is typically 620. The loan amounts are high and offered by private sources. The minimum may be higher, up to 680.
  • USDA: there is no fixed minimum for USDA mortgages. But for a standard approval you will need a minimum score of 640.

HELOCs (home equity lines of credit), home equity loans and second mortgages set their own minimum.

How Your Credit Score Affects the Interest Rate

After meeting the credit score requirements, the next step is knowing how much interest you will pay. Secondary financing, jumbo mortgages and conventional mortgages involve tiered pricing. This means that there are a number of factors that will determine your loan rate. 

The factors include your credit score, type of loan (adjustable or fixed) and loan-to-value ratio. 

With a credit score of 630, you may end up paying interest that is 1.5 points higher than someone with an excellent score. Over the years, the difference could be $50,000+. 

Private Mortgage Insurance Factor

With jumbo and conventional mortgages you will have to pay PMI (private mortgage insurance) if your down payment is less than 20 percent. 

PMI is different from mortgage life insurance. The latter pays off your mortgage in the event of your passing. PMI will pay off the lender in case you default. So if you have a lower credit score, it is assumed that you are at a higher risk of defaulting and your monthly payment will be higher. 

Improve Your Credit Score Before You Apply for a Mortgage

How do you do this?

  • Monitor your credit: get your credit score for free from Credit Sesame or Credit Karma.
  • Request a copy of your report: make sure you get official credit report copies from the three main bureaus: TransUnion, Equifax and Experian. 
  • Dispute negative entries: if there are any negative errors, dispute by filing a formal report. If you have documents that support your point, the entry can be corrected or removed.
  • Lower your credit utilization: this is how much you owe on credit cards and loans. Lower it to improve your score.

Mastering Credit: The Ultimate DIY Credit Repair Guide

Does Closing a Credit Card Hurt Your Credit Score?

When you have decided to start repairing your credit, the first thing you will go for is probably your credit card account(s). For many people, credit card accounts contribute largely to negative entries. And if you pay off the balance or cancel it completely, you figure it will be a big step in the right direction. 

Should You Cancel Your Credit Cards?

No, you shouldn’t. It is a bad idea. One of the biggest determinants of your credit score is your credit history. It is, therefore, better to keep the credit account open. Holding on to the account will help you maintain your current score or improve it. 

Besides, if you cancel the credit card, it will still remain in your credit report. And it will be there for ten years. It is part of your credit history which makes up 15% of your credit score. 

Your Credit Score May Get Hurt If You Close Your Credit Cards

Having open credit card accounts contributes to your credit history, even when it has negative entries. It is better to clear late payments than to close the cards. 

This may be confusing because closing a credit card account may seem logical. But a few months after you close the accounts, your score will most likely drop.

Why does this happen?

How you manage your open credit accounts greatly determines your credit score. If you close the account, the only thing that will matter is the history and it may not be good. 

An exceptional credit score shows that you have well-managed long-term accounts. 

Too many credit accounts are not good for your score. But the solution is not closing them. Rather, you should avoid opening many accounts. 

So if you have an open credit account, don’t close it. 

Credit Utilization Will Fall

If you close your credit cards, your credit utilization will be negatively affected. This is the percentage of available credit used. Lower credit utilization increases your score. In fact, credit utilization makes up for 30% of your credit score. 

Cancelling a card lowers your available credit. And if you spend what you usually spend using your credit cards, the utilization ratio goes up. 

To improve credit utilization ratio, pay off your credit card balance (or most of it) and use credit cards less. 

Closing Your Credit Card Account: Alternatives

Instead of cancelling your credit card, it is better to stop using it or use it less. But there’s something else you can do. Contact your credit card company. See if they can waive your annual fee. 

You can also switch to a no-annual-fee card. Everything will stay the same. The only thing you may lose is the rewards point program. 

How About Reopening Credit Cards Accounts?

If you had already closed the credit card account, talk to the issuer and ask whether they can reopen it. They will definitely take a look at your report first. And they may consider if you have improved. 

Equifax Says Cyberattack May Have Affected 143 Million Customers

Equifax, one of the three major consumer credit reporting agencies, said on Thursday that hackers had gained access to company data that potentially compromised sensitive information for 143 million American consumers, including Social Security numbers and driver’s license numbers.

The attack on the company represents one of the largest risks to personally sensitive information in recent years, and is the third major cybersecurity threat for the agency since 2015.

Equifax, based in Atlanta, is a particularly tempting target for hackers. If identity thieves wanted to hit one place to grab all the data needed to do the most damage, they would go straight to one of the three major credit reporting agencies.

“This is about as bad as it gets,” said Pamela Dixon, executive director of the World Privacy Forum, a nonprofit research group. “If you have a credit report, chances are you may be in this breach. The chances are much better than 50 percent.”

Criminals gained access to certain files in the company’s system from mid-May to July by exploiting a weak point in website software, according to an investigation by Equifax and security consultants. The company said that it discovered the intrusion on July 29 and has since found no evidence of unauthorized activity on its main consumer or commercial credit reporting databases.

In addition to the other material, hackers were also able to retrieve names, birth dates and addresses. Credit card numbers for 209,000 consumers were stolen, while documents with personal information used in disputes for 182,000 people were also taken.

Other cyberattacks, such as the two breaches that Yahoo announced in 2016, have eclipsed the penetration at Equifax in sheer size, but the Equifax attack is worse in terms of severity. Thieves were able to siphon far more personal information — the keys that unlock consumers’ medical histories, bank accounts and employee accounts.

“On a scale of 1 to 10 in terms of risk to consumers, this is a 10,” said Avivah Litan, a fraud analyst at Gartner.

An F.B.I. spokesperson said the agency was aware of the breach and was tracking the situation.

Last year, identity thieves successfully made off with critical W-2 tax and salary data from an Equifax website. And earlier this year, thieves again stole W-2 tax data from an Equifax subsidiary, TALX, which provides online payroll, tax and human resources services to some of the nation’s largest corporations.

Source:

How to Start a Successful Credit Repair Business

What is a credit report?

A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.

Most people have more than one credit report. Credit reporting companies, also known as credit bureaus or consumer reporting agencies, collect and store financial data about you that is submitted to them by creditors, such as lenders, credit card companies, and other financial companies. Creditors are not required to report to every credit reporting company.

Lenders use these reports to help them decide if they will loan you money, what interest rates they will offer you. Lenders also use your credit report to determine whether you continue to meet the terms of an existing credit account. Other businesses might use your credit reports to determine whether to offer you insurance; rent a house or apartment to you; provide you with cable TV, internet, utility, or cell phone service. If you agree to let an employer look at your credit report, it may also be used to make employment decisions about you.

Credit reports often contain the following information:

Personal information

  • Your name and any name you may have used in the past in connection with a credit account, including nicknames
  • Current and former addresses
  • Birth date
  • Social Security number
  • Phone numbers

Credit accounts

  • Current and historical credit accounts, including the type of account (mortgage, installment, revolving, etc.)
  • The credit limit or amount
  • Account balance
  • Account payment history
  • The date the account was opened and closed
  • The name of the creditor

Collection items

Public records

  • Liens
  • Foreclosures
  • Bankruptcies
  • Civil suits and judgments

A credit report may include information on overdue child support provided by a state or local child support agency or verified by any local, state, or federal government agency.

Source:

https://www.consumerfinance.gov/askcfpb/309/what-is-a-credit-report.html

 

That Chip on Your Credit Card Isn’t Stopping Fraud After All

That new chip you have in your credit card may not end up protecting you anymore from fraud than the old strips.

Although the security chips, which have become increasingly ubiquitous at stores across the nation, have made it harder for criminals to counterfeit credit and debit cards, fraud has actually risen over the last year, according to a new study. Thieves, it appears, have figured out new ways to pilfering cash through the plastic in your wallet.

The new study from research firm Javelin Strategy & Research found that incidents of identify fraud rose 16% in 2016, costing individuals $16 billion in loses, which was an all-time high. In all, 15.4 million victims were affected, 2 million more than in 2015, representing 6.15% of all consumers. The study did not look exclusively at credit card, but Javelin said the vast majority of identity theft fraud is linked to credit cards.

The rise in fraud, which totaled $700 million more in loses than the previous year, seems counterintuitive. Many thought the use of electronic chips would derail criminal activity. But as it turns out, the new electronic chips embedded in cards seem to be actually spurring on more fraud than they prevent. The chips have made it harder for thieves walk into a store and purchase goods with a counterfeit card, so the criminals are keeping their illegal activity online, where the new chips do not come into play. The anonymity of the internet also makes fraud less risky than an in-person scam where the criminal’s face is likely on camera, and the possibility of immediate apprehension by authorities exists. So in a way the new chips have helped fraudsters stay out of trouble. Card-not-present fraud, which is when a thief buys something online or by phone, rose 40%.

Another area that saw lots of new activity is account takeovers, which increased 61% over 2015, totaling 1.4 million incidents. Account takeovers occur when thieves gain to access someone’s accounts and change the contact and security information. The criminals are then free to make charges without the victim’s knowledge since any warnings or notifications are sent back to the thieves themselves. Incidents where new accounts were opened in consumers’ names without their knowledge increased 40%, which comes out to 1.8 million victims.

Moving forward, banks, credit card companies, and retailers will need to keep being vigilant in order to keep fraud under control. Online retail sales totaled $22 trillion last year and are expected to top $27.7 trillion in 2020, according to eMarketer. And as is evidenced by the fraudsters’ willingness to adapt to changing security measures, no matter how many new safeguards are created, there will always be some vulnerability they will try to exploit.

Source:

http://fortune.com/2017/02/01/credit-card-chips-fraud/

How to Establish a Good Business Credit Score

It’s no secret that lack of or improper financing can surely kill your business. With plenty of financing options available, it’s often difficult to decide which is the best option for you. That being said, you definitely want the ability to take advantage of every option. A great alternative financing option for small businesses is to extend a line of credit. In order to do so at an affordable rate, you’ll need to follow these steps to establish and maintain a good business credit score.

 

Separate Business and Personal Expenses

 

Most business owners will incorporate their business so they can mitigate liabilities. Even if you’re a sole proprietor, you should still obtain your EIN number and register your business with state agencies so you can obtain proper business licenses.

It’s always best to consult with a tax expert before changing the legal structure of your business. Different legal structures will work better for different types of businesses.

Regardless the size of your business, it’s probably a good idea to open a business bank account and apply for a business credit card. Since card issuers assume you’ll spend more on a business card, you will have access to more enticing rewards than you would see on a personal card. Just make sure you are very disciplined on keeping personal credit card payments separate from business expenses.

 

Keep a Good Standing

 

The majority of credit card scoring models consider payment history as the biggest factor in your overall rating. Try your best to make all of your payments on time. I suggest setting up an auto-pay from your business bank account that will automatically clear your account balance at each closing date. If you are planning on extending a line of credit, make sure you don’t take too long to pay off the interest because it will hurt your credit score as well as your bottom line.

To earn the highest balance, you’ll need to pay your balances early. For example, to earn the highest D&B Paydex Score, you’ll need to consistently make your payments early. Remember, you can always carry a negative balance on your credit card, which ensures that you’re on top of your payments.

 

Stay on Top of Your Scores

 

There’s no limit to how many times you can check your credit scores. In fact, you should check them at least once a month. Most card issuers offer complimentary reporting features that allow business owners to extensively review their credit and payment history. If there are any discrepancies, you can easily identify and fix them before the problem gets worse.

As your credit score goes up, you may also be eligible for better perks and rewards. As your score increases, inquire with your card issuer about newly available rewards packages.

If you’re looking to finance your business with a credit card, you’ll definitely want to stay on top of your credit score. If you follow these three steps to the tee, you should have no problem establishing and maintaining a rock star credit score for your business!

Source:

http://www.blackenterprise.com/small-business/establish-good-business-credit-score-2/