Buying New vs. Buying Used: Pros and Cons

Keeping emotion out of the equation can help you land the best deal for the long run.

Keeping emotion out of the equation can help you land the best deal for the long run.

One of the first decisions you’ll make before buying a car is whether you’ll choose to look at new or used vehicles. New cars and used cars both offer certain advantages to buyers, and which is better for you at the time of your search is a unique decision based on both your own desires as well as your financial capability. Your credit can also play a role in determining whether you should buy new or used, since available capital and financing rates depend largely on your credit score.

Financing
Many buyers look to finance the purchase of their vehicle whether new or used, as even used cars typically cost tens of thousands of dollars. If you’re not in a position to pay cash for your car in full, you may need to apply for a car loan from either the dealer or an outside financial institution. As with most loans, the higher your credit score, the lower the interest rate you can generally get on a car loan.

One of the advantages of financing a new vehicle, says Car and Driver, is that you can usually get a lower interest rate than on a used car loan. This is because new vehicles haven’t been hit with depreciation – yet – but the second they leave the lot, the car will start depreciating. However, a new car will also generally cost you more over time simply due to the higher cost hit upfront.

Customization
When you buy a new car, you can potentially get it just the way you want it—it’s a chief advantage of buying a new vehicle. If you’re a patient buyer, you can custom order the vehicle with all factory options to your exact specifications. If you’re in more of a hurry, you can list your desired build and email dealers to see if your desired car already exists on a lot. If not, dealers can often locate a car very similar to your request and secure it for you. With a used car, you’ll have to choose from vehicles that are currently available in the marketplace. This means you may have to compromise on one or more factors that define your ideal vehicle, like color, drivetrain or interior options.

Warranty and Maintenance
According to Kelly Blue Book, the warranty that accompanies many new cars offers peace of mind that you can’t generally match when you buy a used car. Manufacturers offer warranties of between three and 10 years on new cars, during which time you may only be liable only for “wear and tear” items such as tires and brakes. With a used car, you’ll generally have only a short bit of warranty left—or possibly none at all. When the warranty expires you’ll be responsible for all repair costs, which generally grow as a car ages. These expenses can eventually outweigh the lower cost you originally paid for the car.

Depreciation
Depreciation is perhaps the most significant negative factor in buying a new car versus a used one. New cars typically lose 25 to 45 percent of their value in the first few years of ownership—with a major chunk disappearing as soon as they drive off the lot. If you can wait out those first few years and buy used, the first buyer will have absorbed the majority of the car’s depreciation and sorted out any early settling-in service issues. In terms of absolute price, you can often get a good deal on a car that’s just a few years old.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Auto, Budgeting | Leave a comment

When Will My Late Payment Disappear From My Credit Report?

Learning how long late payments stay your credit report in important for understanding your score.

Learning how long late payments stay your credit report in important for understanding your score.

Keeping up with credit card payments can sometimes feel impossible. As just one of many bills to pay, it can be easy to miss getting your payment in exactly on time each month. While your creditor may charge you a late fee as well as some interest, that kind of small misstep doesn’t usually appear on your credit report.

Rather, creditors are more likely to report late payments when you’ve missed the whole billing cycle, sharing that information with the credit bureaus to show up on your credit report for other potential lenders to see. That late payment will appear on your credit report for some time, though its impact can gradually lessen as time goes on.

On your credit report, negative information usually appears for a minimum of seven years. So, your late credit card payment will appear for seven years from the initial date the account was reported delinquent. Also, if the late payment eventually progresses to become a default, the seven year period for the information to appear still starts from initial date the account was reported delinquent.

However if you miss a payment to then get back on track, and later happen to miss a second payment, the seven year term for the second missed payment starts at the date of that second time you missed a payment, since those two are seen as separate events (even though they happened in the same account).

The good news is that during the time a late payment appears on your report, its impact can lessen gradually. If you’ve recently fallen behind in your payments multiple times, now is a good time to reevaluate your habits and find ways to improve your credit behavior.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Cards, Credit Reports | Leave a comment

What Credit Score Do I Need to Qualify for a Mortgage?

credit score is just one factor lenders consider for mortgage approval

Mortgage approval criteria vary from lender to lender; however, there are several factors that could help you get a lower interest rate.

Making the decision to buy a home is a significant life event, and if you’re like most people, you’ll have to take out a mortgage to make it happen. When you apply for a mortgage, one of the items most often looked at before signing off on your loan is your credit. So, it’s important to know what makes up your score and what it can do to your credit standing.

Mortgage Score

It’s hard to give the precise score you need to qualify for a mortgage because each lender has different scoring models and criteria for approving mortgages. According to the Los Angeles Times, you can technically qualify for a mortgage backed by the Federal Housing Administration with a score as low as 580, but other lenders will likely require higher scores.

Other Factors

Regardless of how good your score is, it’s not the only thing lenders look at. Lenders may also look at the size of your down payment and your employment history, how much money you make and debt you have. So, in addition to monitoring your credit report and credit score, having a stable job history, a sizeable down payment and minimal debt may also be considered during the home loan approval process.

Application Factors

Before you apply for a mortgage, consider reviewing your credit report and score to better understand what lenders may see. Knowing what’s behind your score can help with determining how much you can afford.

In addition, each time you apply for a mortgage, an inquiry may be placed on your credit report, which can impact your score slightly. However, if you do all your inquires in a short period of time your mortgage applications submitted during that time frame may count as a single inquiry when calculating your credit score, depending on the scoring model used.

 

About the Author
Mark Kennan is a freelance writer specializing in finance-related articles. Kennan holds a Bachelor of Arts in history and politics from Washington and Lee University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Home | Leave a comment

How to Help a Spouse Build Better Credit Habits

credit when married

Credit discussions require care and empathy, not accusations. Discover how to work with your spouse to help him or her create better credit habits.

Mixing and mingling finances can be quite challenging – especially when one spouse could use some help getting on the right track. In fact, according to a recent survey from Experian Consumer Services, credit scores were reported as a source of stress for 21 percent of married participants. However, couples who communicate monthly about their financial goals are more likely to agree on financial decisions, including how to use credit as a couple.

Helping your spouse kick their bad habits can improve their life and help the two of you come closer to achieving your financial goals. Doing it requires not only good habits and advice, but also sensitivity to the fact that your spouse might be uncomfortable with his or her situation.

Here are some tips on how to approach talking with your spouse about credit.

  • Perform a credit report check on yourself and your spouse. Doing it together may help to prevent your spouse from feeling singled out. Reviewing the information in each other’s credit report is also a way to assess both of your credit situations so you will be able to see the impact of any changes that you make moving forward.
  • Build a budget for your household together. A personal budget can help plan spending and also ensure that you have enough money left to pay down any existing debts. A qualified financial advisor may be able to help with this process, either by providing finance-related ideas or by helping to manage your spouse’s feelings or perceptions.
  • Define which habits you want worked on. For instance, a goal might be for your spouse to pay on time or to use only a certain percentage of available credit every month. Another goal could be to reduce balances so that less interest is paid, or to hit a certain credit score target.
  • Establish positive payment history. Consider adding your spouse to one of your accounts as an “authorized user” to help him or her add positive items, such as on-time payment history, to your spouse’s credit report. Gradually open joint credit accounts with your spouse as his credit habits improve and his credit reaches a point where he or she can be approved for accounts on favorable terms.
  • Continue monitoring both of your credit reports. This allows you to see improvements in credit, while also enabling you to minimize the impact of identity theft by ensuring that any new accounts, increased balances, or other problems that you’re not aware of don’t linger.

Remember that your marriage is about more than money. While helping your spouse with his or her credit is part of building a strong foundation, it’s only one of many parts of your relationship.

 

 

About the Author
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Lander holds a Bachelor of Arts in political science from Columbia University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Scores | Leave a comment

Can Making Credit Card Charges Impact my Credit Score

strategies for credit use

Using credit the right way may just help your scores. Learn the impact of your credit utilization ratio & how your charges may affect your score.

Your credit score is used to evaluate you as a prospective borrower. One of the most important factors is how good you are at making your payments on time, every time. However, it isn’t the only factor. Another important consideration for your credit score is how much of your existing credit that you use. Generally, less is best, but in some scoring models, not using your credit at all can end up slightly reducing your score.

Credit Utilization

Credit scoring models calculate your credit utilization by dividing the credit card balance that shows on your credit report by your credit limit. If you have one credit card with a $2,000 limit and you owe $1,200, you’d have 60 percent utilization. Cutting your balance down by either paying off the balance or using your card less would give you a lower utilization rate.

How Much Utilization

Experian’s Maxine Sweet suggests that the lower your utilization ratio, the better for your credit scores. Other experts agree that by keeping your total utilization under 30 percent of your limit, you’re usually safe from doing damage to your score. This is because it could be assumed that having high balances is a sign that you could be on your way into financial trouble, so the less you use, the better you generally look.

The Problem with Zero

Sometimes, it’s possible to go too low. A zero utilization rate may actually hurt your credit scores when calculated using some credit scoring models. Often times, lenders check your credit report to predict how you will do if they give you a credit card based on what you’ve already done. If you don’t have any utilization, there isn’t any behavior to use to judge you.

It may also indicate that you might take out a credit card and not use it, not generating an opportunity for the lender to make any money. With this in mind, making a very small charge every month and paying it off when you get your statement could prevent this from happening.

 

 

About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Cards, Credit Scores | Leave a comment

Defending Yourself Against Online Fraud

protection against online fraud

Online fraud is the perfect medium for thieves using deception for financial gain. Don’t become a victim.

Online fraud is similar to other types of fraud in that it can result from thieves using deception for financial gain. The primary difference is the medium. Online fraudsters use techniques such as phishing, malware and tab nabbing to convince you to reveal your essential financial information electronically. Fighting online fraud is important because online fraud can result in significant financial losses and damage to your credit, which can take time and effort to recover.

Types of Online Fraud

While no one anticipates being a victim of identity theft, the fraudsters’ methods to get information have become increasingly sophisticated. Phishing is one of the most common methods of online fraud. In a phishing attack, criminals send out phony emails that look similar to communications from legitimate entities, such as your bank or insurance company. The email will “fish” for information by asking you to confirm your personal data, such as your Social Security number or bank account number.

Another tool for fraud is malware, a type of malicious software that criminals can install on your computer when you click on a pop-up window or other Internet link that may seem legitimate. Tab nabbing occurs when fraudsters gain access to one or more of the tabs open on your Internet browser and fool you into providing login information to various websites.

Damage from Online Fraud

If you’re scammed into providing information about your bank account or debit card, criminals can use that information to tap into your account and take whatever you have there. With credit card information, fraudsters can run up charges until either you or your credit card company gets wise to it. You could also face black marks on your credit report if thieves open accounts in your name or run up your cards over your credit limit.

Protection against Online Fraud

One of the best ways to protect yourself against online fraud is to avoid providing information to unknown sources. If you can’t tell whether a site is legitimate, don’t hesitate to call your bank or credit card company for verification.

Many banks will allow you to set up alerts notifying you of any suspicious transactions, such as charges out of your typical spending pattern or over a certain dollar amount. Taking advantage of these systems can be an excellent defense. Regularly checking your financial statements and credit reports can also help detect unauthorized activity. You can generally check your financial accounts online to get real-time updates on any activity.

Actions to Take After Online Fraud

If you’ve fallen victim to online fraud, you should take immediate action can help prevent long-term damage. According to FTC.gov, an important first step to take is to place an initial fraud alert on your accounts. This will last for 90 days and will notify potential creditors that your identity must be verified before an account can be opened in your name.

Another option is to review your credit report and see if there’s any suspicious activity listed. In identity theft cases, you may also want to file an identity theft report, which includes a police report. An identity theft report can help prevent debt collectors from pursuing unlawful debts in your name, help you correct inaccurate information on your credit report, and place an extended fraud alert on your credit report.

 

About the Author
John Csiszar began writing in 1989 and his work appears in various online publications, including The Huffington Post. Csiszar earned a B.A. in English from UCLA and served 18 years as an investment adviser and certified financial planner.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Identity Theft | Leave a comment

What You Should Know about Healthcare Scams

Using a range of ploys, identity thieves can steal your personal information. Protect yourself from new healthcare fraud scams with these steps.

Using a range of ploys, identity thieves can steal your personal information. Protect yourself from new healthcare fraud scams with these steps.

Medical identity theft and healthcare scams have been around a long time, and unfortunately they can lead to an impact on your credit score, financial well-being and even your health. The newest -scams surrounding the Affordable Care Act are particularly insidious. Scammers are playing on both the optimism of people who hope to protect their families with affordable health insurance, and the confusion that’s developed around how to obtain that insurance.

Using a range of ploys, identity thieves can steal or cheat you out of your personal information. Once they have it, they can use it to open new lines of credit. This type of fraud can cause a drop in your credit score.

Protect yourself from new healthcare fraud scams with these steps:

  • Never give out your personal information over the phone to anyone claiming to be from the government or an insurance company. Contact should always occur through the U.S. Postal Service.
  • That’s not to say every “official” piece of mail claiming to be from the government is not legitimate. Evaluate such mailings carefully and use common sense. For example, if a contact is actually from a government agency, they won’t need to ask for your Social Security or Medicare numbers; they will already have it.
  • Don’t buy insurance from a company that solicits you through phone or email, and don’t deal with people who come door-to-door claiming to sell insurance.
  • Remember, the only official website for Affordable Care Act information and buying decisions is www.healthcare.gov. Other sites may be bogus ones set up to scam you out of personal information.
  • If you are on Medicare, you shouldn’t need to buy supplemental coverage. Be wary of anyone who tells you that you do, or tries to tell you that you must provide personal information in order to obtain a new Medicare card. Under the act, you can keep your current Medicare card.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Identity Theft | Leave a comment

The Role Your Credit Score Plays in Your Life

Learn how your credit scores can influence many aspects of your life beyond your ability to secure credit at favorable rates.

Learn how your credit scores can influence many aspects of your life beyond your ability to secure credit at favorable rates.

Many people don’t even think about their credit scores until they’re ready to apply for new credit – and some don’t consider them even then! But credit scores can play a big role in your life, even if you’re not planning to buy a car or house or rarely use your credit cards. It’s important to understand who has access to your credit score, who’s looking at it and how they’re using it to make decisions about you.

  • Lenders rely on a credit score and report for their lending decisions. Your past credit behavior is generally considered to be the best predictor of how likely you are to repay new credit. A good score indicates you’ve managed your credit usage well in the past, and you may be more likely to be approved for credit. So lenders from auto loan and mortgage companies, to credit card issuers and student loan agencies, will usually consider your credit score when you ask them for credit.
  • Employers are reviewing credit scores. Some employers might check the information included in the credit reports of candidates before offering them a job. For example, a potential employer may ask for permission to review your credit report as one part of the application process. Generally, however, this is only one of many factors that may be considered in deciding to extend you a job offer.
  • Landlords consider credit. They want to ensure you’ll pay your rent on time, and past behavior is considered a good indicator of well you will meet the financial obligation of paying rent on the due date and in full.
  • Mobile service providers and utility companies check credit. While a good score doesn’t mean you’ll get a better deal from these companies, a poor one might mean your application won’t be approved without a co-signer or you may need to pay a deposit.

Your credit scores can influence many aspects of your life beyond your ability to secure credit at favorable rates. Understanding how it affects your life – and what credit factors can impact your score – can inform you how to manage your finances in general.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Scores | Leave a comment

Three Things to Know Before Sitting Down with an Auto Dealer

good credit scores

Before you sit down with an auto dealer, check your credit score. Knowing your credit score can help ensure you get fair terms for your auto loan.

Summer is just around the corner and like many, you might be dreaming of cruising in a new car. Many dealers are motivated to move inventory as new-year models debut but they’re still likely to be concerned about making a profit. And of course you want to pay as little as possible for your new vehicle. Before you head out to a dealership to begin negotiations, you should know these three key pieces of information:

1. What you really want.

Your budget and your head may tell you to buy that gas-sipping sub-compact. But if you don’t have a specific make and model in mind, budget and list of priorities, it will be much easier for a salesman to sway you toward that continent-sized, costlier SUV he’s trying to get off his lot. Know what you want, need and can afford before you leave home and try and stick to your guns at the dealership.

2. The actual cost of the car you’re buying.

Every car has the potential for more than one price. There’s what the dealer paid to the manufacturer for the privilege of selling the car, there’s what the dealer may put on the sticker as a starting point for negotiations, and then there’s what the vehicle might really be worth. Arriving at that last number can take some research on your part, but it’s important that you know that price before you go shopping. Also keep in mind, there may be associated costs such as taxes, registration and car insurance. Understanding the true cost of a vehicle can help you possibly avoid overpaying.

3. Your credit score and credit status.

Even if you plan to wait until you get to the dealership to arrange financing (and we strongly recommend you don’t), knowing what your credit score says about you in advance can help ensure you get fair terms for your auto loan. Understand your credit score and report before you begin shopping. If possible, line up financing options before you go to the dealership. You can always consider the dealer’s financing offer, but knowing your credit and having a backup plan can help ensure you don’t have to rely on the dealership to fund your purchase.  Good credit scores can also lead to higher credit limits and lower interest rates.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Credit Scores | Leave a comment

How to Rent a House with the Option to Buy

lease purchase options

A rent-to-buy agreement lets you get control of a house today and buy it tomorrow. Learn more.

Renting a house with the option to buy can be a way to secure a house and lock in a price before you’re ready to buy. When you do a rent-to-buy transaction you typically pay some money upfront in addition to paying rent every month. The upfront money is usually applied to the purchase price, which helps you build equity and be able to afford the house when the time to buy it comes.

The drawback to a rent-to-buy contract can be that you usually have a limited period during which to buy, and you will usually lose the extra money you’ve spent if you don’t purchase the house. This means that it’s best to rent-to-buy only if you’re sure you’ll eventually be able to buy the home. There are several steps to deciding whether or not to rent a home with an option to buy.

Step 1

The first step is the most obvious – find a rent-to-buy home. A real estate agent may be able to help you find one. Another strategy could be to ask the owners of homes that are available for rent if they’re open to a rent-to-buy contract while also asking the owners of homes that are for sale if they’d be willing to let you rent-to-buy the house.

Step 2

The second step is to negotiate the up-front and monthly costs of the rent-to-buy agreement so that payments will fit within your budget. You can start by establishing a monthly rent for the property. Since rent-to-buy rent usually includes both a fair-market rent and additional money for the purchase of the property, it will be more than what it would cost to simply rent the house. You will also need to determine how much the up-front option fee will be. This money can be applied towards your purchase or, if you don’t buy, it may stay with the current owner.

Step 3

Finally, the contract should specify how long your option lasts. For instance, if you rent a $125,000 house in a market where the typical rent is $1,000 per month, you might put $3,750 down as an option fee and pay $1,200 per month with $200 getting applied to the purchase price as long as you buy within three years.

Make your payments on time every month and while you’re doing that, monitor your credit reports to see if your financial situation will allow you to get a mortgage. A mortgage broker might be able to help you with strategies for managing your credit, if necessary. He can also give you guidance as to what kind of score you will need to get a mortgage and how much it will cost you.

Warnings

When you buy a rent-to-own house, consider having an attorney or real estate agent look over your contract to ensure that your interests are protected, especially if the seller still has a mortgage.

Depending on the terms of your agreement, it’s possible that you will lose the money you put down if you aren’t able to buy, so it’s usually best to rent to buy only if you’re sure you will be able to eventually purchase the house. Otherwise, you could simply rent and save money toward someday buying a house.

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc., an Experian company.   © 2014 ConsumerInfo.com, Inc.  All rights reserved.

Posted in Budgeting, Home, Saving | Leave a comment