What is a credit bureau? What are credit reporting agencies?
Credit reporting agencies are companies that collect data about you, including payment history, public filings, bankruptcy records, tax liens, court judgments and the like. They compile this information and summarize it using a proprietary version of the Fair Isaac (FICO) score - an empirical number ranging from 300 to 900 (theoretically). Generally speaking credit under 620 is considered subprime, with 620-670 considered near prime. However, these are not rigid guidelines - each bank has its own lending criteria. The three main credit reporting agencies are TransUnion, Equifax and Experian. Each receives data from various sources, including the lenders themselves, and report balances, payment histories and account statuses.
It is possible that information regarding your credit is not fully reflected on all three bureaus. In fact there are often cases where an account is only reported to one of the three bureaus. Often there is a small variation in the score among the bureaus. Sometimes the variation can exceed 100 points - that can have a major impact on the terms of the car loan or mortgage that you are applying for!
You should run each of the three bureaus at least once a year to check that the information contained therein is correct. If you find a mistake, have it corrected. You have to be persistant! Sometimes its worth engaging the services of a credit repair company - they may charge fees but they do most of the legwork - it depends on your financial position and the number of incorrect accounts.
Have a credit question? Ask the doctor!
Once upon a time you had great credit and then....... Fill in the blanks. Something happened. Divorce, repossession, bankruptcy, medical bills, layoffs....you name it - bad things happen to good people and good credit all of the time. That doesn't mean you are helpless. Here at OnlineCreditMagic our job is to help arrange auto loans for people with problematic credit. But our job doesn't end there! We also want to be a resource for you to help improve your credit and answer your credit questions.
So, your credit has fallen and it can't get up? Here are a few tips to help you improve your credit rating.
1) Limit Inquiries: Limit credit inquiries to only those credit lines that are necessary. Don't apply for unnecessary credit or for credit that you know will not happen. Do you really need a credit card from "Bob's Discount Furniture"?
2) Pay Down Debt: Pay down your debt as quickly as you can with the highest interest bearing debt first. If possibly, consolidate your debt and close down inactive accounts.
3) Secured Credit Cards: Get a secured credit card (i.e. you make a deposit and they then extend you deposit around that amount) to re-establish your credit.
4) Pay Your Auto Loan: Auto loans count for alot of your credit score - recognize that fact and act on it!
5) Avoid Multiple Bankruptcies: One bankruptcy can usually be overcome easily. Multiple bankruptcies become much more difficult to manage.
6) Eliminate Mistaken Credit Reporting: Notify the credit bureaus of any mistakes on your credit and have them corrected. It may be time consuming but worth it in the end.
7) Subscribe to a Credit Watch Service: There are a number of vendors who offer credit watch services that let you know when there has been a change to your credit rating or someone has made an inquiry. You can catch potential credit fraud earlier and possibly deal with collection issues upfront.
Lets get that credit back up and walking around!
Very often when a person with problem credit is asked if there is a co-signer (also known as a co-maker) or someone who can help the application, the applicant will respond "no, I want to do this by myself." While independence is a great concept, we all need a little help from time to tme. Why might you need a co-signer? Here are a few reasons:
1) Income: you may not "budget" (based on the bank's payment to income or debt to income formula) for the vehicle you want or you may not be able to prove your income to the bank's satisfaction (but maybe your co-signer can!).
2) Light Credit: perhaps your time on the credit bureau is limited so that you have limited or light credit. In that situation, many banks want the strength of a co-signer to help strengthen the application.
3) Derogatory Credit: your credit may be so problematic that the bank might require someone to sign with you as an alternate means of collection if you should default on your loan because of your prior payment history.
4) Rate Reduction: very often a co-signer with better credit than you can result in a lower interest rate than if you financed the vehicle alone.
Does this mean you will always need a co-signer? Of course not! But it may help you get the vehicle you want at the payment you can afford. Bankruptcies, divorces, medical chargeoffs and the like all happen from time to time. Some times a co-signer is a way to help get past prior credit difficulties and re-establish your good credit rating!
Who might make a good co-signer? Almost anyone - though usually spouses or relatives are the easiest. Someone at the same address, or at least in the same state, usually helps even more.
One of the common misconceptions about co-signers is that somehow you don't get credit for the auto loan or that the auto loan counts for less in your credit history. This is just not true! The co-signed auto loan will show up on both your credit bureau and your co-signer's credit bureau and you both get credit! The only difference is that the account is reported as joint instead of individual.
We all want to do things on our own. But sometimes we need a little help from our friends.
In the spirit of July 4th I thought I would provide you all with some tips on how to achieve credit independence. Not every tip here is applicable to every situation but they are great things to keep in mind when you are seeking an automobile loan (or any other type of loan for that matter).
1) Be Selective: When considering sources for a car loan, make sure that you do not apply to multiple places at once. If you are serious about working with one of OnlineCreditMagic's affiliate partners, please do not spam the world wide web with applications - you will only hurt yourself! One aspect of your credit score is recent credit inquiries - if you have too many of them in a short period of time your credit score may be adversely affected. Additionally, some lenders will automatically disqualify applicants with too many inquiries over a short period of time. Once you've applied through OnlineCreditMagic, let us do the magic! Give us some time to work with our partners and lenders to get you the vehicle you want. Once your application has been forwarded to one of our partners in your area, please do not hesitate to contact them for status updates. However, understand that placing subprime auto loans is a time consuming and sometimes difficult process and that you may need to be patient for a few days as we work with lenders to place your loan. Very often we have an approval but are working for the right approval with the right conditions.
2) Be Realistic: Ferrari....Porsche....Bentley...they are all wonderful, aspirational vehicles. But...can you make the payment? Remember, if you are here at OnlineCreditMagic its because you've had some credit issues in the past. Don't make the same mistakes of the past. Pick out a vehicle that you like but more importantly one that you can afford. One bad auto loan can hurt - multiple poor auto loans can be devastating to your credit. Your income also has a lot to do with what type of vehicle you can afford and the bank will approve you for.
3) Be Honest: You need to be honest with yourself and the partner you are working with. We can usually overcome most issues if we know about them upfront. However, if we've placed your loan with a lender under the premise that you can prove your income only to fnd out at funding that you get paid "under the table" we've soured that lender. Perhaps if we would have dealt with that issue up front the lender would have approved it anyway - people hate surprises. Be straightforward and honest and we will go to work for you!
4) Be Committed: Yes, you can probably get approved with little or no money down. But does that make sense? With past credit problems banks like to see some level of commitment from you. The more money you put down, the lower your unpaid balance, the lower your payment and the less interest you pay!
That's all for now. Again, please feel free to use this forum to ask any questions.
Ladies and Gentlemen:
The Credit Doctor is now seeing patients. That's right, this is a forum for you to discuss any credit issues or problems you may have encountered. Our panel of experts will provide answers and feedback to your questions and issues. From time to time we will also post helpful hints about how to maximize your credit score and get the most out of your credit.
Online Credit Magic