Credit Help

When you work in the auto sales industry, it’s second nature to become a credit expert to help your customers. And now we are here to help you.

Credit Help

When you work in the auto sales industry, it’s second nature to become a credit expert to help your customers. And now we are here to help you.

Credit is crucial to a good life in the modern age so let’s explore how to get and keep good credit.

If you would like to check your credit click Here

How Credit Works

People still often get confused with credit reports and credit scores. When these same people want financing for a new car, they tend to focus on the best (lowest interest rates) deals advertised without knowing the facts of their credit reports. Since there are only three national credit reporting agencies (Trans Union, Experian, and Equifax) on one hand, it’s relatively easy to check out your report. However, these agencies process so much information, they do not have the time to verify all the data they receive from lenders, leading to numerous errors.

Credit Reporting

Whether you use credit cards (revolving accounts) or installment loans (e.g., auto, student, or personal loans), the three credit reporting agencies receive data from lenders based on five criteria. Here is a list of the information they consider.

  • Your payment history.

    Are your payments on time or do you frequently make late payments? Making payments by the due dates increases your credit score.
  • How you use and manage your debt.

    Your credit score will lower if you are overloaded with credit card debt and you are consistently at the maximum of your credit lines. You can increase your credit score if you use around 20 to 25 percent of your credit maximum. Your score lowers when you’re regularly at (or above your maximum credit limit, even if you pay on time).
  • The age of your credit accounts.

    Long-term, mature credit accounts can increase your credit score, while many new accounts will lower your score, since you have not established a good “track record.”
  • The types of accounts in your mix of lenders reporting.

    You should avoid overloading your report with unsecured or revolving, e.g., credit cards, credit lines and/or loans. Installment loans, such as an auto loan, carry more weight and, if you make payments on time, will increase your credit score.
  • Your volume (number) of recent inquiries.

    When you constantly seek new credit accounts, lenders pull your credit report for decision making. These inquiries indicate you may have new credit accounts that have yet to be reported. An excessive number of inquiries will lower your credit score, as they could forecast a future problem.

How Credit Reporting Works

Lenders report to the three national credit bureaus (and, possibly, local bureaus) once per month. These are electronic reports, as lenders prepare digital reports which are transferred to the bureaus. Lenders and insurance companies can examine your credit report when you apply for new credit or insurance policies. These businesses evaluate the risk you pose to lenders.

If you have a low credit score (the 500s), lenders may reject your application or approve it, but charge you higher interest rates to improve and lessen the perceived risk. When you apply for a mortgage, lenders typically order a tri-merge credit report, which displays your credit scores at all three bureaus.

Since national credit agencies don’t share their information – and so much erroneous data is recorded – there could be a rather wide variance in your credit score with each bureau. Hence, you should monitor each of the three bureaus. You are entitled to one free credit report per year from each of the national bureaus, use it.

If you note an error, dispute it properly with the bureau reporting it. Each bureau has a slightly different procedure, although most of their policies conform to federal laws regarding timing of settling dispute claims.

  • The age of your credit accounts.Long-term, mature credit accounts can increase your credit score, while many new accounts will lower your score since you have not established a good “track record.”

 

  • The types of accounts in your mix of lenders reporting.You should avoid overloading your report with unsecured or revolving, e.g., credit cards, credit lines and/or loans. Installment loans, such as an auto loan, carry more weight and, if you make payments on time, will increase your credit score.

Credit Explained

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