Archive for September, 2017
Are you looking for a new vehicle? Would you love to get into your dream vehicle? Then let’s talk a little bit about credit! Making an investment into your future on a new vehicle often brings up the question of credit! In light of the recent Equifax breach that lasted from mid-May through July. Hackers were able to accessed people’s names, Social Security numbers, birth dates, addresses and, in some instances, driver’s license numbers. Go to www.equifaxsecurity2017.com to check whether you are one of the 143 million people whose data may have been compromised.
What are credit scores versus credit reports and how do these two things play a part in your future? These three little words you’ll probably hear time and time again as you approach major financial milestones in life: “You need credit.” Interested in a credit card so you don’t have to carry around a lot of cash? “You need credit.” Looking to buy a car? “You need credit.” Want to own a house? “You need credit.” And, while most people probably have a base understanding of what that means — you’ll need to borrow money, of course — they may not understand the ins and outs of credit and why their credit reports and credit scores are so important. Well, we’re here to break it all down.
What Is Credit? Simply put, when you pay “by credit,” you are borrowing the money you need to make purchases. In exchange for that financing, you generally agree to pay the lender back the amount you spend or borrow, plus interest. Here are a few of the most common ways we use credit:
– You are using credit when you make purchases with a credit card or charge card at a retailer and pay your credit card or charge card bill later.
-You are using credit when you borrow money to buy a home or car and pay back the amount you borrow, plus interest, in monthly payments to the lender.
-You are using credit when you take out a personal loan to consolidate debt.
While all of these examples involve using credit, their borrowing terms aren’t exactly the same. Here is a closer look at three major types of credit accounts.
- Revolving Credit: With a revolving credit account, you are not required to pay the bill in full each month. A revolving account enables you to revolve the spending that you make from month to month. You are charged for the money you borrowed to make purchases you didn’t pay back in full, plus finance charges for rolling over the debt from month to month. Credit cards are revolving credit accounts: You are given a credit limit for your spending, but you are only required to pay the minimum back at the end of the month. If you carry a balance, you will pay interest. If you pay that balance down, the credit that you were using will become available to you again.
- Charge Cards: Charge cards are similar to credit cards, in that you borrow money (up to a pre-set credit limit) to make the purchases and pay a bill to your lender or creditor later. The key difference is that with a charge card you must pay the account in full each month.
- Installment Loans: These loans have a fixed number of payments over a fixed number of months at a set interest rate. With an installment loan, you borrow a certain dollar amount from a lender and agree to pay the loan back, plus interest, in a series of monthly payments. Auto loans, mortgages, student loans and home equity loans are all examples of installment loans.
Do the Types of Credit Matter? Yes, for two major reasons. First, it’s important to know what you’re signing yourself up for. You’ll want to understand the terms and conditions of each loan you apply for. You’ll want to pay particular attention to how that loan is to be repaid, since payment history is the most important factor among credit scores. Speaking of credit scores, it’s important to have a mix of revolving accounts and installment accounts on your credit reports in order to show creditors that you can handle both types of credit. The types of accounts in your credit file make up 10% of your credit score. You can learn more about what goes into your credit score by doing a little research.
What Is My Credit? There’s a good chance you’ve been asked, “How’s your credit?” at some point in time. And, while the answer technically involves the money you’re borrowing and all your different credit lines, the inquisitor is most likely referencing the information on your credit report. Your credit report is a complete compilation of all the loans your currently have or have had in the past. They’re compiled by the credit reporting agencies, and are used primarily by lenders to assess the likelihood that you’ll pay back the money you’re asking to borrow as agreed. Your credit reports are also used when a lender wants to calculate your credit score. That score can determine whether you get a loan and, if so, what interest rate you’ll be offered.
Why Is Credit Important? In addition to affecting your ability to secure affordable financing for all those major milestones we mentioned, your credit report and/or credit scores are also pulled by service providers, like insurers and cell phone companies, landlords, and even employers — meaning, subsequently, that information can affect the price you pay for a service, the ability to rent a home or even secure certain jobs. Basically, credit permeates all aspects of your life, so it’s important to know where you stand. Luckily, federal law entitles you to one free credit report with each major consumer credit reporting agencie a year. You can request these reports at AnnualCreditReport.com, Creditkarma.com and you can also contact each of the three credit bureau’s separately and request your free credit report. Those three bureau’s are — Experian, TransUnion and Equifax.
What Is a Good Credit Score? The answer to this question is a little complex since there are many different credit scores out there. Most scoring models, however, utilize a range between 300 and 850. The higher your score, the better, but you don’t need to be perfect to have good credit. Scores between 700 and 749 are generally considered good, while scores of 750 or higher are considered excellent. You may have heard that credit inquiries can hurt your credit score. But you may not be sure what that means — what is a basic inquiry, a soft inquiry or a hard inquiry? An inquiry is created when your credit report is accessed by a business. Let’s say you apply for a car loan, and the lender requests your credit report and score from Experian. The fact that your credit information was used by a particular company will be noted on your Experian report with the date, name of the company that requested it and the type of inquiry.
Before we get into the specifics of how inquiries work, it’s important to put them in perspective. Unless you have been shopping heavily for credit (more on that in a moment), they shouldn’t have a huge impact on your credit scores. New credit, which includes inquiries as well as new credit accounts, makes up just 10% of yoru FICO score. As a result, a single inquiry is likely to drop your score by less than five points, but only if it’s a hard inquiry and with the limits described below. While inquiries remain on your credit reports for two years, only those within the past year count, at least with the majority of score models used these days. Older ones are ignored. Hard inquiries can affect your credit scores. They show you’ve applied somewhere to get credit, whether that’s a car loan, mortgage, student loan or credit card. Each of these credit checks counts as an inquiry and indicate a lender has reviewed your credit because you’ve applied to borrow from them. Hard inquiries are created when you apply for credit. They can potentially drop your credit score which can result in higher interest rates when you borrow. On large loans, like those for a car or home, a drop of even a few points can mean a higher interest rate. And that may mean you’ll pay more over the life of the loan. Soft inquiries aren’t generated by shopping for credit and do not affect your scores. For example a lender sending you a preapproved credit offer without you applying is a soft inquiry. Checking your own credit score is also a soft inquiry. Similarly, if you already have a credit card or loan with a lender, they may review your account from time to time. The resulting account review inquiry will not show up when lenders request your reports or scores. As an aside, inquiries generated by an employer or an insurance company are ignored for the purposes of calculating your scores.
How Can I Keep My Credit Scores From Dropping? There are several ways to minimize the likelihood that your scores will drop due to hard inquiries. Here are a couple of them:
Looking for a mortgage, car loan or student loan. It’s a good idea to limit your shopping to a two-week period.. If you do, it’s likely those applications will only count as a single inquiry. That’s because most scoring models count all inquiries of one of those types as one, provided they take place within a 14- or 45-day period (depending on the model being used).
Monitor Your Credit
It’s wise to check your credit report and credit scores before you shop for credit. Then do your homework and try to apply for loans for which you are likely to qualify. If you review your credit reports and see an inquiry listed but don’t recognize the name of the company, make sure it’s not a promotional inquiry. If it is, you were probably sent an offer for preapproved credit, and have nothing to worry about. (You can opt out of preapproved offers on the Federal Trade Commission website.) If that’s not the case, the contact information for that company should be listed on your report so you can get in touch. If that information isn’t provided, be sure to ask the credit reporting agency for it.
One in Five Americans Are Shocked to Find Errors on Their Credit Report
Credit report mistakes can lead to disqualification for mortgages and car loans, as well as increased insurance premiums and interest rates. In some cases, those mistakes can even prevent you from getting a job. Some consumers have started enlisting law firms to dispute negative items on their credit reports. Although I personally do not endorse one law firm over another you can research different ones and make appointments to learn about the strategies they can use to help you fix your credit if possible.
Getting to the point
There is so much more that a person can learn about their credit, what it is and how it can affect your life and future. It’s important that you do your own research for yourself on how you can establish credit, build your credit, keep good credit, protect yourself, repair your credit and make sure you as the consumer are aware of all the ways your credit and credit score can lead you on a path to a bright credit future!
Summer is almost over! Vacations have been fun and you’ve played in the sun. Kids are going back to school and fall weather will soon set in leading to winter. Now is the perfect time to do some preventative maintenance on your vehicle because we all know in the winter how a vehicle breaking down can be so inconvenient and at times deadly if you are in the wrong place at the wrong time. Lack of regular maintenance can jeopardize the investment you have made in your vehicle as well.
The following tips can give drivers a road map to fall car care.
- Check all fluid levels. If the fluid levels in your car are low, there is usually a reason behind the low level. A hose could have a small hole that could cause fluids to leak out. Talk to your local mechanic about the frequency in changing your oil.
- Check tread and air pressure on tires. Low tire pressure can be very dangerous and just as bad as having a bad tire. New tires not only give you better gas mileage but will be much safer as well.
- Check spark plugs and wires to ensure they are firing correctly. One spark plug that is not firing can be problematic.
- Apply high-grade car wax to your vehicle’s exterior to help protect it from the possible onslaught of snow, ice, sleet and freezing rain.
Our weather here in the Yakima valley can be so unpredictable. Last year’s winter season seemed unexpectedly endless. There were numerous school closures including some small businesses. If you didn’t have a decent set of tires on a rear wheel drive vehicle, you weren’t going anywhere! Whether it was for reasons of a long heavy winter being unexpected or simply procrastination, tire stores were definitely busy. Sales here at Steve Hahn’s Auto Group went up significantly, customers were flooding in, trading in and swooping up deals on all wheel drive vehicles. Our service department was equally busy with customers needing studded tires, battery checks, changing out the washer fluid to prevent freezing and cracking of the reservoirs and coolant flushes.
Here’s another helpful piece of advice. For all of us that travel over the passes, it’s also wise to put together a winter car survival kit. Jumper cables, flares, ice scrapers, road salt, flashlights, flares, blankets, first aid materials and snacks are all good to include in your kit. It is also beneficial not just for yourself but to potentially help others stranded and unprepared. Making sure to tell others where you are traveling to, when you are planning on taking a road trip during winter, is also another very important step in staying safe during the traitorous winter conditions. This way, if something were to happen to your or your vehicle, the person you communicated with can trace your trip plan to find you.