Improving your Credit Score

Your credit score, or FICO score, is that all powerful three-digit number that reigns as king of your financial life. A person’s credit score not only determines if he or she can be approved for a loan, credit card, or even a cell phone contract, it also determines the interest rate that person will pay. A lower FICO score equals a higher interest rate, which translates to paying more money in the long run. The good news is that there are ways to improve your score and broaden your financial options. By understanding the factors that produce your credit score, you have the opportunity to make it better.

Is there a formula to building better credit? Yes. Everyone’s FICO score is calculated the same way, regardless of income. Many people want to do what they deem to be easier: pretending the score does not exist so that they do not have to own up to it. But financial transactions are recorded, no one is exempt and ignorance is not a part of the formula.

The heaviest factor in calculating a FICO score, with a weight of 35 percent, is paying bills on time. That’s right, the credit bureaus know if you historically neglect payment until you see a disconnect notice. The most important action you can take to improve your score is paying every bill on time, every month.

Accounting for 30 percent, the second strongest factor in determining your FICO score is the ratio of your credit card and loan balances to your total credit limit. The credit bureaus simply do not want to see that you have spent to the max. If you have an outstanding credit card balance of $3,000 with a credit limit of $3,300, it is worse than having the same outstanding balance with a $20,000 limit. Use common sense about debt and never miss a credit card payment.

The other three factors determining your all important credit score are the length of your credit history (15 percent), recent applications and new accounts (10 percent), and your combination of loans and credit cards (10 percent). Incorporating financial common sense into your everyday life, starting with the advice above, will increase your credit score over time.

When making a large purchase, such as a home or a car, investigate how the purchase will affect your credit score. For example, do not apply for loans at seven different car dealerships. Multiple credit inquiries in a short time period negatively impact your score, falling into the “recent applications and new accounts” category above. However, by getting the right information, you can make financing a car work to your advantage. Select dealerships provide in-house financing (even for applicants with bad credit), which omits the need for outsourcing your loan. Outsourcing to a bank often means multiple inquiries will be made on your credit, which can hurt your score. Make sure the dealership you choose provides true in-house financing, and reports to at least one of the three credit bureaus. Having your loan and timely payments reported to the credit bureau is crucial to rebuilding your credit.

The biggest mistake many people make is ignoring their credit score. The first step to take is getting a copy of your credit report to see where you stand. By adhering to these simple rules, you will continue to raise your credit score, be eligible for better interest rates, and improve your financial outlook for the future.

About the Author: Greg Chapman, of Greg Chapman Motors, is a leading provider of quality used cars, trucks, and SUVs. Chapman motors is one of the few bad credit car dealers in Austin and the surrounding area that reports to the credit bureau, allowing customers to improve their credit. For more information please visit Greg Chapman Motors.

Know the Car you Buy

With so many used car sellers on the market, buyers can be convinced to purchase impulsively, enticed to take advantage of a limited time offer or to prevent someone from beating them to the vehicle they are eyeing. Buyers, seduced by the prospect of driving home the glossy car of their dreams for a steal, sometimes do not do the homework necessary to protect them from future suffering. Some deceitful car dealers will sell faulty or even totaled cars to unsuspecting buyers to make a profit, regardless of the frustration and problems the buyer will face in the long run. Cars that have fallen victim to flooding suffer major mechanical problems, but too often flooded out cars are still “fixed up” and sold as clean title used cars.

It is always a good idea to read product reviews and owners’ comments about the quality of the vehicle make and model you are considering. Reviews can be tainted by personal opinion and preconceived brand image, so try to rely on objective reports based on facts. If owners across the board are saying that the transmission in a particular vehicle fails around a certain mileage, it is probably best to believe it.

Besides studying the reputation of a vehicle make and model, knowing the history of the particular vehicle you are considering is extremely important. If a car has been totaled, it is supposed to have a salvage title, which would allow a buyer to knowingly still purchase it. Regardless, there is no standard among different states, and cars that have been totaled are still being sold with clean titles.

Even the most reliable car’s longevity is compromised if it is victimized by a flood. Flood waters wreak havoc on a vehicle’s transmission, brakes, electrical system, and overall value. When you are testing a car from a used car dealer, check inside and out for signs of water damage. Cars that are flood victims may have a lingering musty smell, regardless of the replaced upholstery. Any abnormal discoloration or imperfectly fitted carpeting is cause for concern. Inspect the car fully for signs of damage, mold or sand, paying attention to the trunk, glove compartment, engine, and beneath the seats. Also, test for proper operation of all lights, signals, windshield wipers, heat and air conditioner. Follow your instincts, if the deal seems too good to be true, it probably is.

You can learn more about a car by submitting its Vehicle Identification Number (VIN) to a trustworthy company such as CARFAX, which reports information about vehicles from its nationwide database. Reputable used car dealers will likely take this step for you, providing the CARFAX report on the vehicles in their inventory at no cost to you.

Being conscientious in your car search will help ensure that the car you are buying has not been flooded or otherwise totaled, saving you the hassle of costly repairs or a too soon replacement.

About the Author: Greg Chapman of Greg Chapman Motors is a knowledgeable and leading provider of used cars, trucks, and SUV’s. Since 1959, Chapman motors has offered reliable used cars in Austin TX and the surrounding area. For more information please visit Greg Chapman Motors.

Maximizing the Resale Value of your Vehicle

Whether you purchase a new or used car, it will depreciate simply because you take possession. There are precautions you can take to minimize the depreciation of your vehicle, to protect the resale value for when you sell or trade it in. Trading in your car in is an excellent way to minimize the out of pocket down payment when you purchase your next car.

Some vehicle models simply hold their value better than others. The internet is a great resource for learning which manufacturers and models historically retain their values best. Keeping this factor in consideration before you purchase a car will help you make an informed decision that will benefit you now and in the future.
As tempting as it may be, do not ignore the dealer guidelines for the break-in period of a new car. It is typically recommended not to exceed 55 miles per hour for the first thousand miles of your car’s life. It is also suggested not to idle for long periods of time, or haul heavy loads. If the vehicle you are purchasing is used and the break-in period is long past, it is still crucial to treat the car in a manner that will maximize its resale value.

Your driving style and maintenance habits will also affect the value of your car. If you accelerate and brake abruptly, the wear on your car will be worse than if you drive conservatively. For the same reason, maintain the car like it is your job. Regular maintenance impacts your car’s longevity, and will be an important consideration to the person determining its value in the future.

Cleanliness cannot be overlooked either. Eating and smoking in your car are avoidable habits that will drive your resale value down. Eating in your car can result in permanent stains in the floors and seats, which will compromise the resale or trade-in value you would otherwise receive. Smoking cigarettes in your car leaves behind an odor that lingers and is difficult or impossible to eradicate.
Even though you may be inclined to drop thousands of dollars on after-market accessories for your vehicle, it is an investment that will not raise the car’s resale value. In fact, modifications will probably lower the value. The common consumer is not in the market for an orange vehicle with yellow flames and a larger than life, non-functional spoiler, so you are better off investing your money in regular maintenance and cleaning.

It is said that a car is not a good long-term investment. While vehicle depreciation is inevitable, you do have control over its extent and the way you invest your money. By choosing a dealer with in-house financing who reports to the credit bureau, you can turn the purchase into an investment in your financial future by improving your credit at the same time.

About the Author: Greg Chapman, owner of Greg Chapman Motors, is a knowledgeable and leading provider of used cars, trucks, and SUVs. Since 1959, Chapman Motors has offered reliable used cars for sale in Austin, Texas and the surrounding area. For more information please visit www.gregchapmanmotors.com.

Getting the Most from Your Used Car Purchase

Being informed as a used car buyer is the best way to maximize the benefits you receive from your purchase. Like every car buyer, you want a reliable vehicle that meets the demands of your lifestyle, and probably one that looks good doing it. But being a savvy car buyer can give you advantages that far outweigh transportation and status; you just have to do your homework and use the right kind of financing to improve your credit.

Know what to expect. Trading in your current car is a convenient way to reduce the amount you will owe on your used car purchase and to lower your cash down payment amount. Before you step foot on the used car lot, research the approximate value of your trade-in with a reputable company, such as Edmunds or Kelley Blue Book. The trade-in value will be lower than what you would expect by selling the car outright, so make sure to look up the appropriate value. When determining the trade-in value, be realistic about the condition of your vehicle. Are there stains on the seats? Are latches or windows broken? Just because you love the car does not mean it fits the bill for an “excellent” rating.

It helps to be aware of steps you can take to maximize the trade-in value you are offered by the dealer. Ideally, you have already been keeping records of the car’s maintenance history, along with the dates and mileage of each service performed. Providing accurate records shows the appraiser that you have been diligent in maintaining the car, and will positively impact its trade-in value.

Know your lender. Many used car dealerships offer financing to make your purchase more affordable. Even with “bad” credit, you can still get financed by working directly with a dealer who offers true in house financing. It is important to know who is actually financing your car, and to ensure that you are not in fact damaging your credit further by making the purchase. Multiple inquiries on your credit drive your score down. Ask the dealer if the financing is actually in-house, or if it is outsourced to a bank or other lender.

The best decision you can make is to use this opportunity to rebuild your credit at the same time. Predetermine the monthly payment you can afford on your budget, and do not overspend no matter what. All you have to do to raise your credit score is make all of your payments on time, and be sure to only purchase from a dealer who reports to the credit bureau. By following this advice, you are on the road to better credit, in a better set of wheels.

About the Author: Greg Chapman, of Greg Chapman Motors, is a leading provider of used cars, trucks, and SUVs. Chapman motors has offered reliable used cars for sale in Austin and the surrounding area since 1959. For more information please visit www.gregchapmanmotors.com.

Buying with Low Credit

Many people these days have faced situations in their lives which present credit challenges. These situations include such things as missed or slow payments, bankruptcy, defaulted loans or other financial obligations, and civil court judgments to name a few. While these types of credit challenges are not uncommon, it can make it difficult to obtain the financing that you need to procure dependable transportation for yourself or your family.

Second chance financing, also referred to by many as “bad credit financing” is often the best solution in these types of cases. Second chance financing offers the opportunity for the purchaser to obtain a dependable vehicle while at the same time re-establishing his or her credit. However, for the desired effect of credit repair to occur, it is important to make sure of several items.

First off, be sure of your ability to make the payments each month. Do not overextend yourself or overestimate your ability to make payments. Remember, baby steps here. Take baby steps to rebuild your credit, and do not risk further damage by committing yourself to more than you can afford. You do not want to miss or be late on a single payment once you begin to re-establish your credit.

So the effect of this on the person trying to rebuild their credit is twofold: first off, it is disheartening. Secondly, and more important for purposes of rebuilding credit, this type of a credit application usually results in the submission of credit inquiries from multiple sources in an attempt by the dealer to get you financed. Each credit inquiry knocks your score down a few points, whether or not credit is extended to you. So, just one application at a dealership may result in up to five inquiries on your credit report. This hurts.

Therefore it is important to look for a used car dealer with in house financing, such as the “buy here – pay here” type of dealer. This dealer, you know, will individually finance you out of their pocket without repeated submissions to lenders for the purposes of obtaining third party financing. One credit inquiry is much better than five.

However, not all buy here – pay here dealerships are the same. It is absolutely imperative that the dealer offering second chance financing report to at least one of the major credit bureaus. Many of these dealers will not make such monthly reports, and so even if you make your payments on time each month, it does nothing for your credit. Yes, you have a car, but your credit report remains unchanged.

Ask your second chance financing dealer if they report to a credit bureau. Make sure they do. This way, each month when you make your payment you are building a credit history. Over time, your credit score improves and potential lenders can see that you have established a responsible payment history with a reputable lender.

About the Author: Greg Chapman of Greg Chapman Motors is a knowledgable and leading profider of used cars, trucks, and SUV’s. Since 1959, Chapman motors has offered reliable used cars in Austin and the surrounding area. For more information please visit http://www.gregchapmanmotors.com.