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"Improve your credit score
If your credit report is less than squeaky clean, don't despair. Regardless of how creditors may make you feel, it is not a judgment on you as a person, but simply a report on how you've handled your credit related financial obligations. You will need to take a few active steps to set the record straight for the future. Here are a few ways that may help you improve your credit standing.
Improve your credit: Tip 1
Pay your bills on time.
Many creditors will consider lending to someone with some late payments, if recent records show that you've mended your ways. However, apart from extreme circumstances like bankruptcy or tax liens, nothing has a greater negative impact than late payments. The due date for a payment is when it has to be in the hands of the creditor, not postmarked. Anything more than 30 days late will hurt your credit standing, often seriously. Never let a payment of any kind get 90 days past due. Keep in mind that one day past the due date is considered 30 days late.
Improve your credit: Tip 2
Fewer credit cards is generally better.
When it comes to the number of credit cards you should have, fewer is generally better. However, lenders usually prefer you to have at least 3 credit cards. Having a few clean, active credit card accounts will also boost your credit score.
Improve your credit: Tip 3
Minimize your outstanding debt.
Even if your debt is relatively small and your monthly payments are manageable, having outstanding debt is always a negative score factor. Try to pay down your existing debt as quickly as possible within your budget limitations.
Improve your credit: Tip 4
Time is sometimes your best ally.
Although you may have late payments or other derogatory information on your credit report, the more time you can put between such negative information and a better record of on-time payments and low debt, the more favorable your credit profile will appear in the eyes of lenders. Although negative information can stay on your credit report between seven and ten years, every month that passes where you exhibit responsible credit behavior is a positive step toward improving your credit.
Improve your credit: Tip 5
Correct any inaccuracies on your credit report.
Credit reporting companies rely on the accuracy of the reports they receive from creditors and public records. Credit bureaus are committed to reporting accurate information and must resolve any mistakes on your credit report. However, with more than 190 million individual credit files, even a small percentage of errors can mean thousands of files that contain mistakes. Make sure to write legibly when filling out credit applications.
People who have a common name, move, change jobs often or have many different credit lines are more likely to have errors on their credit reports because there are so many details that might be misreported. If you have a common name or share a similar name with someone in your family, get in the habit of using your middle initial on credit applications. It is absolutely essential for you to check your credit report at least once a year to be sure all the information on it is accurate, particularly before you expect it to be reviewed as part of a mortgage loan, refinancing, auto loan, or employment application."
Here are a couple of links to other articles on this subject as well: CNN Money - Improve Your Credit Score and MyFICO.com - Improving Your Score.
Car_man
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- TransUnion
- Experian
- Equifax
For more information about what credit scores mean and how they are calculated, make sure to check out the following article that is available right here at Edmunds.com: Credit Scores Demystified.
Car_man
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Remember, your credit rating affects the lending rate you qualify for. True, there are some good rates out there, but not everyone qualifies for them. To get the best rates, you need to have a good credit rating. What you can do right now is make do with the car you have for now and work on improving your credit rating. When it IS improved, as long as you maintain your good rating it will serve you well for your next purchase and long into your future.
Be patient, it will pay off.
A family member tried teaching about credit to his high school life-skills class. Most of them didn't realize at the time how important it is, and probably got nothing out of it.
Hey, you know where most kids' heads are at that age!
I am hoping someone will be kind enough to shed a bit of light on our situation and how we should proceed. First a bit of backstory. My wife and I are filmmakers with sporadic income. We went through a MAJOR bankruptcy which was discharged in Nov. of 2002. We are also in the process of paying off our two cars, a 1999 Ford Explorer XLT, and a 1999 Ford Escort ZX2 Hot Coupe. Finally, we just came through a year-long ordeal with cancer which left us financially destroyed and forced to move in wiht relatives to avoid becoming homeless. We are both working, teaching theater arts, but the work is not steady and currently is not covering our expenses.
That said, we owe approximately $9000 on the two cars (total, not each), but the payments and gas are eating us alive. We are contemplating trading them both in on a hybrid. We are both bright people but have never truly understood the whole car buying thing. So, I guess, for starters, does it make sense for us to trade the cars in to the dealer with what we owe on them? According to the Kelly Blue Book, the Explorer is valued around $6000-$8000 and the Escort around $3000-$4500.
Does trading in a vehicle that still has money owed on it make a difference? What can we expect to get for them if we trade them in?
Basically, we are looking at a Toyota Prius, which runs around $20,500. We were hoping to have < $300/mo. payments. We are not at all sure if this is realistic, and not sure where to turn for info. Pretty sure the dealership will give us a skewed version of the info.
So, if someone could illuminate the path a bit for us, we would be incredibly grateful!
Cheers,
Chris
1. When you trade in a car that still has money owed on it, you'll get trade-in value minus the amount owed back. Using your numbers, it looks like the Explorer and Escort combined are worth about $9k, which is about what you owe, so you probably won't get much out of them (I'd go to the Real-World Trade-In Values board and ask Terry (rroyce10) what you can really expect to get for those cars). Bottom line: you may be able to walk away from the Explorer and Escort clean, but it's unlikely you'll generate much cash to pay for the Prius.
2. With a bankruptcy less than 2 years ago and no steady income, it's going to be _very_ tough for you to get a car loan at anything less than extortionate rates. Even if you had great credit, and could get top-tier loan rates, the payment on a base Prius with _no_ options ($20.5k MSRP, which is what they're going for) is $415 a month or thereabouts (60 month loan, 4% rate).
3. Frankly, I'd recommend sticking with the cars you have (maybe selling the Explorer?), making the payments, and improving your credit over time. The gas savings between a Prius and an Escort isn't that huge, it'll take a lot of driving to make the difference in cost pay off for you.
Thanks for the input. I guess what you say is pretty much what we had figured, but were hoping the answers would be different.
We will probably opt for selling the Explorer and keeping the Escort.
Cheers,
Chris
Car_man
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my suggestion would be similar...sell the explorer privately for $8k-$9k, pay off both, and enjoy the 35 MPG of the free-and-clear zx2.
in the future, with your sporadic income, i would consider doing one of 2 things:
1) save enough money to buy a 1 or 2 year old domestic without payments
2) make films more like matrix or lord of the rings.
;-)
sorry...i couldnt resist.
Thanks for your input.
BTW, my financial situation changing also means my income may decrease by $8,000 to $7,000.
Thank you.
take the cash you have and buy 2 cheap cars, or one almost cheap car. if you try to trade it in, you will do one of two things:
1) you MIGHT break even on the camry, but you will have no money with which to buy another vehicle.
2)if you buy a cheap car, you will only be able to finance about 12-24 months, and the interest will be AT LEAST 3-5% more than you have now. your payments probably wont go down enough to justify giving up a 2003 camry that is under warranty.
i see people try this very same thing all the time, and it almost never happens.
You also may want to think about using some of the $6,000 that you mentioned in your post to pay off your Camry earlier than you normally would have. By doing so you will be less upside down if you do eventually trade and will be that much closer to not having to make any more payments on this car.
Car_man
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Car_man
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When they "wash" the deal, whether it be this week or next, they will catch the $1,500 swing ..
** I am a good person and I have been feeling guilty, But I know the BMW dealership will not be going out of business because of this what would be the worst that could happen? **
I bet if they made a $50 mistake you would be ALL over these boards calling them low lifes and how you got cheated ... people - it's amazing, the more you meet, the more they stay the same ....
Terry
i realize that you think you are getting one over on the evil dealer, but try and consider exactly WHO you got over on.
It will be caught and if you step up and do the right thing now I just think you'll feel better.
Just my .02
Duncan
assuming you need your cash to make up the difference, how will you buy your daughter a car?
Put as much down as your bank needs to do the deal.
Put the rest of the $6 (if any) down on a 99-2001 Chevy Prizm. Get the 4sp auto (or the stick), a simple one with power stuff but no LSi should be no more then $6,000 with 40k miles.
Finance the rest, maintain the car, life should be good.
Good luck,
-Mathias
my point was that he wont have anything left unless he finances a car for her.
also, financing $15k still keeps it a little over $300/mo. if he does it this way, there will be nothing left for another car. nothing in cash OR payment.
do a short-term lease on 2 cars. a honda civic VP can be done for under $200/mo. with nothing down.
a nissan sentra would be about $200/mo.
you can get 2 of these for under $400/mo, both brand new, under full warranty, AND your daughter gets a car too.
so instead of a slightly used car for $460, you have 2 brand new ones for under $400.
use your $6k as cap-cost reduction, and you can get both cars for inder $350/mo. total.
also, the focus carries a 5 yr/100k mile powertrain warranty....just in case.
Ever since Bowke fell off that ride at the State Fair he's never been right .. $6,0 big ones on a lease ..?!? .. if they will approve you, maybe a few security payments upfront, but $6 large is throwing your $$ in the street and $6,000 is alot of scratch ...
Terry.
this is a way to do that. i never said this was the best way to buy a car, but in his situation, its a good solution.
also, put the $6k away and keep the camry. make your payments out of income whenever possible, and when things get tight, dip into the savings to make a payment or two.
BTW, terry...i dont think i mentioned it, but so far, my dealership has paid half of my payments through a bonus structure.
Car_man
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....l.o.l.. I love that one, can I use it .?
Terry
looking towards the ultimate goal:
under $450/mo. for 2 cars.
to do this, one must either finance 2 $8-$9k used cars (using the 12% rate), or lease 2 new cars. my contention is that this can be done with little or nothing down, but based on the stated rate and credit history, one may be requested by the lending institution to provide some capital investment.
i never said it was smart...as a matter of fact, i agree with you in most cases. but this is just a POSSIBLE solution that i came up with. there may be others, but none of them will land 2 cars for under $450 a month.
kcram
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i agree that $450 can be done with little or nothing in cap cost reduction.
Car_man
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however...
they offered you the same rate as your credit union, so this is obviously the best you have gotten so far. dont overthink it. enjoy your new car.
Car_man
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My idea was to offer the dealership the opportunity to finance me at an above-market rate in exchange for a discount on the sales prices. Then, when I get the cash from the sale of the house, I'll pay off the loan in full, paying only a couple of months of interest.
Any thoughts on whether or not this strategy is likely to go over well with the dealership? What could I expect in terms of a trade-off? If market is 4.5%, and I pay 7.5%, is that worth $2000 off the sales prices? $3000? $2.50?
Thanks.
People use this technique to get a good price and then they go over to their credit union and refinance the car at the going rate to save a little money.
The money that a loan gets for a mark-up is, of course, dependant on the loan amount.
You can ball park the mark up value as follows:
1) subtract the mark-up interest rate from the best rate that you can get from your bank
2) Multiply the interest rate differential by half of the loan amount(the average loan principle over the loan term) . Then multiply this amount by the loan term in years. You'll need a financial calculator to compute the exact amount but this little formula is really close to the true amount.
So if you buy a $20k car and you can get a 5 percent loan over 5 years (60 months) and they mark-up the loan to 8 percent. Their (ballpark) additional profit is ($20k/2)*(.08-.05)*5 = $1500 (or so).
Keep in mind that a dealership will have to share some of that mark-up profit with the bank. So any negotiating discount that you are expecting will be less than that amount.
Yes, the dealer can make a little more money via the the points .. but as a rule the dealer has to split the points with the lender depending on the loan and the advance .. also, dealers weren't born yesterday and they can be charged-back in 30/60/90/120 days depending on the lender and the loan .. the point is, front-end profit lasts forever, finance money can be lost on a phone call and they know it .............
Terry.