BUYER TIP #1
The preparation for buying a vehicle should start long before the purchase itself. Most people nowadays aren’t able to save up and pay cash for an automobile, so financing is the primary way to fund a vehicle purchase.
In order to qualify for the most competitive and lower annual percentage rates (APR) one must be low risk. Individual credit risk is typically determined by FICO score in today’s market, as calculated and provided by one of the three primary credit bureaus: Equifax, Transunion and Experian. FICO stands for the Fair Isaac Corporation who originally created the formula used for credit risk calculation and ranges from 350 – 850. The break down of what is evaluated and the percentage of consideration during calculation is provided in the graphic. The two most important aspects of any credit profile are the repayment history and credit utilization rate, or how much of available credit an individual uses on a regular basis.
Knowing where your credit score currently stands is critical to being a more informed consumer and getting the most for every dollar spent. Other websites such as www.creditkarma.com offer not only a credit report, but also an actual credit score for free. By simply creating a user account and verifying information you can be on your way to improving your credit. Stay tuned for future articles informing you on everything related to vehicle purchases and thanks for reading.
BUYER TIP #2
CREDIT MAINTENANCE & REPAIR
In an ideal world, we would be able to make all of our monthly payment obligations without difficulty. For many, life’s challenges can cause a cash crunch to arise when only one of two bills can be paid. In the long run, your credit is what suffers. From a late payment to collections issues, repossessions to foreclosure and bankruptcy, all these negatively impact an individuals credit increasing the interest rate and cost to borrow money. But not to worry, there is always the opportunity make improvements.
Maintenance is rather simple; pay all your obligations on time, every time, in full. If you must pay a bill late at least reach out and let the creditor know, and always pay the mortgage first. Another way is to not exceed using more than 30% of your available credit limit. Having a high credit card balance will keep credit down or kill it quickly so try and pay it down to 30% or less. Keeping your debt to a limit and having the least amount of installment payments due monthly will help to reduce the risk of being late. Finally do not close accounts that are in good standing as this contributes to the longevity of your credit profile even if you don’t use them.
One way to repair one’s credit is to hire a “credit doctor” who can usually make significant improvements to a clients FICO within just a couple of months. (There is one in Las Cruces that I know of and I will be happy to provide his contact information if you come down to the dealership.) While this can be accomplished by anyone on their own behalf, it is rather daunting taking on one of the only three credit bureaus. If an individual has time to craft correspondence they can start at the U.S. Federal Trade Commission website. Just remember; the higher your credit score, the lower your interest rates are and vice versa.