January 18th, 2010
Monday Jumpstart to Personal Finance & Credit Report News
In addition to keeping up with a trendy diet or a promise to kick your smoking habit, did you make money resolutions this year? CNN Money suggests five resolutions to keep you on a healthy financial track, such as earning a new credential to be more competitive in the job market or shopping around for a better bank account to build up your savings. With some advice from our following roundup, resolve to commit to good personal finance habits and positive credit behavior now.
Personal Finance News
- The Wall Street Journal asks, “How steady is your paycheck?“
- 9 sneaky expenses that eat away at your income blogged by Get Rich Slowly, reminds you to avoid traps like time and stress that let money fall through the cracks.
- Gather Little By Little rounds up 12 frugal tips from readers for 2010. One of my favorites that will likely cut down expenses is #2: Shop with a calculator.
Great advice for car owners and prospective car buyers:
- How to buy a used car tips suggested by Moolanomy Personal Finance.
- FrugalDad helps you navigate upside-down car loans: eight simple steps to get out fast.
- 9 steps to getting a car loan on damaged credit reports Bankrate.com.
Credit Report & Credit Scores News
- Credit standards have changed as Yahoo! Finance reports that good credit score of past not so good now.
- “Does carrying a card balance improve my rating?” and more common questions answered on credit scores, answered by The Chicago Tribune.
- Still have some questions on credit, credit scores, and credit cards? The Atlanta-Journal constitution answers more of your credit questions.
- If you’re worried about carrying bad credit into the new year, Bankrate.com offers 3 tips for repairing your credit score.
- Newly-enforced legislation is protecting mortgage applicants from bad credit reports, reports the Washington Post. Lenders will be required to alert consumers whenever derogatory data on credit reports leads to higher interest rates for consumers.
January 5th, 2010
Dear Credit Karma – All About Auto Loans
Dear Credit Karma,
I was recently divorced and my ex-husband has an auto loan and my name is still on the debt, how do I go about that debt NOT affecting my credit score anymore?
The only way to remove yourself as a co-signer on this loan is for your husband to refinance the car under his name alone. This new loan will replace the old loan and you will no longer be liable as a co-signer. But in the meantime, any actions– including default or missed payments– taken on the account by you or your ex-husband will damage both of your credit scores. The debt will remain on your credit report as long as you are a co-signer, so have him refinance the loan as soon as possible to protect your credit score.
Dear Credit Karma,
My husband and I share a car – I really need to get my own, but we filed for bankruptcy a year and a half ago. I have poor credit because of that (and struggle with making payments on time). How likely am I to get an auto loan?
While bankruptcy is a tough financial pitfall to recover from, take heart: it won’t haunt your credit forever, and you can get an auto loan, but at a steep cost. If you are set on buying a car now, you will likely resort to a subprime or high risk lender, who cater to borrowers with poor credit, who will likely approve your loan. The real question is not “how likely are you to get an auto loan?”, but “can afford the exorbitantly high interest rate those types of lenders typically charge?”. Check out difference in payments between a poor credit and good credit borrower for a $25,000 loan on a 48-month payment plan:
|
Credit Score
|
Interest Rate
|
Monthly Payment
|
|
|
Poor Credit Borrower
|
620-659
|
13.2%
|
$673.17
|
|
Good Credit Borrower
|
720-850
|
5.7%
|
$583.69
|
*interest rates from Five Cent Nickel
That’s a difference of about $89 a month, which adds up to $4,295 difference in payments over the life of the loan. To see what kind of interest rate you’ll be offered and if you can afford it, look up your credit score and compare it to Five Cent Nickel’s auto loan interest rates.
The lesson here is that while you might need the car right now, the extra cost in interest rates over time may be reason enough to hold off on purchasing a car until you have better credit. Tacking an extra car loan payment may worsen your credit and overwhelm you with debt, especially if you are already struggling to make payments on time. Consider alternatives like carpooling, public transportation, or a system of sharing the car with your husband. In the meantime, take the next few months to improve your credit score with healthy credit habits like making on-time payments, using a secured card, and using the money you would have used on a new car to pay off existing debts. Within a year or so, you will have a higher credit score and be able to receive better financing options from lenders.
Submit a question now, and maybe Credit Karma will answer your question on our next Q & A blog post!
December 2nd, 2008
Is a Credit Union Right For You?
As loans from traditional banks become harder to get, more consumers are looking into credit unions in hopes of getting the loans that they need. There are a few pluses and minuses that come with joining a credit union and it is important to know what you are getting into before you sign up. Let’s take a look at credit unions and see what you can expect.
1. Loans are easier to get.
This is probably the main reason that many people do decide to become members of a credit union. As the name implies, their main purpose is to offer credit to their members. If you have reasonably good credit, or have only made a few mistakes and your credit score is still decent, you should not have any difficulty getting a loan from a credit union. If this is a high priority for you, then joining would be a good idea.
2. No businesses allowed.
Credit unions are typically only for consumers. There may be a few exceptions to the rule, but generally, if you have a business, you’ll have to set up a separate account for it somewhere else. This isn’t that big of a hassle, but if you like to keep your money in one bank, it can be annoying. The primary purpose of a credit union is to serve consumers individually, not as companies. In addition, getting a business loan from a credit union is next to impossible, even if you are applying as an individual.
3. Loan amounts will be small.
Credit unions typically only lend out on smaller loans, usually in the $10k range. You may find a few that are willing to go over that, but this is a general guide to the type of funding that you can expect. That basically means that while they may be good for a small personal loan or a used car loan, anything over that will be tough to finance through a credit union. These loans are definitely not suited for home purchases.
4. One on one help.
Credit unions typically limit their members and they do offer additional services to those that they accept. For example, many will offer free credit counseling or other services that can help you find your financial footing, or keep it on solid ground. For those that are looking for a little extra attention and help with their money, a credit union can be a very good choice.
5. Limited membership.
The downside to credit unions is that they do have limited memberships available. Some may only accept specific kinds of people, such as fireman, military members or similar professions. If you are applying to join a credit union, make sure that their charter is broad so that you have a better chance of being accepted.
At the end of the day, the choice to join a credit union can be beneficial, especially for consumers that need easy access to loans and financial advice.
Photo Credits: 1
November 13th, 2008
What is a Good Credit Score?
Most people know what a credit score is, but not really what it means or is all about. What qualifies as a good credit score? Some people consider a good credit score to be 720+, but this is classified as above average credit, or “very good credit”. Most people do not have a credit score that is this high, but with some time and some effort, you can achieve a higher credit score.
So what does a good credit score mean for you?
Good credit can get you lower percentage rates on your purchases and loans, and bonuses like miles and gifts. You can get department store credit cards, and you can get better loans. People with good credit can buy cars and homes with the financing that they need. If your credit score is not high enough, then you will either be denied outright for these types of financing and lending, or you will be forced to accept much higher interest rates, which really isn’t fair but is unfortunately up to the lender to decide.
When you have a good credit score, you can get approved for any type of financing that you need. Most credit scores reach as high as 850, and with a credit score this high, no one is going to have an issue lending to you. However, what is considered good credit is different to everyone, and some lenders are perfectly satisfied with lower credit scores as long as your credit report does not show anything really terrible. What some people may consider to be “so so” credit may actually be decent credit to a lender when it comes to getting a car loan or a home repair loan.
Generally speaking, a credit score below 600 is considered to be poor, and anything between 600 and 700 is continued good or fair. Having a good credit score is important, because it allows you to get the financing that you need, no matter what it is that you need it for. Because you never know when you are going to need money fast, having a good credit score is vital. If you suddenly have medical bills to contend with or an issue with your vehicle that needs to be repaired, then you need to be able to get a loan or a line of credit fast, which is much easier when you have a good credit score. Having a good credit score is a good way to make sure that you can get the lending you require whenever you require is, so start building a healthy credit report and score now, and take advantage of the results over time and you will surely be glad that you put effort into keeping your credit score high and your credit report in good standing with all three credit bureaus.
Credit Karma provides free credit scores along with national averages. Read more about what is a good credit score on Credit Karma.
Photo Credit: 1
October 28th, 2008
What is the Biggest Obstacle For Your Credit Score?
If you are struggling with a low credit score and can’t seem to make any progress, it is important to identify what obstacles you are facing. Once you have this in hand, you can start to make changes that will help you get your credit rating back on track. Here is a brief guide to assist you in determining what obstacles may be keeping you from success.
1. Lack of money.
If you simply don’t have enough money to pay off your debts, this is definitely going to impact your credit score. Whether you lost a job, or just spent too much, this is an overwhelming problem for many. The first reaction is typically to just give up and let those late notices turn into collection filings, but this doesn’t have to be the case. (more…)
