Understanding Your Credit Report

Understanding Your Credit Report

Understanding Your Credit Report

Learn More About Your Credit Report And What It Means To You.

Understanding Your Credit Report and Credit History
School report cards contain numbers or letters summarizing and evaluating students’ performance. As they get older, these report cards may be used to help determine students’ eligibility and acceptance into colleges or other programs.
Your relationship with your Equifax credit report isn’t much different. It tells a detailed story about you, and includes information about your financial accounts, and your payment history. Those who can access this information, including third parties with “permissible purpose”, may accept or deny your applications for credit based in part on the information in your credit reports, as well as their own lending criteria. With your permission, potential employers and landlords may access your credit reports. Simply stated, your credit report is made up of:
Personal information such as your full name, address, etc.
Account information from lenders and creditors who report it to the three major credit bureaus

Debts you have failed to pay, or accounts turned over to a collection agency
Why Credit Report Inquiries Are Important
Inquiries on credit reports show which third parties have asked to check out your credit report and when their request was made.  When a lender or company makes this request, it is recorded as a “hard inquiry,” and it may impact your credit score.
Examples of “soft inquiries” would include checking your own credit or when a company checks your credit report to prescreen you for unsolicited offers such as credit cards or insurance. These do not impact your credit score.
It’s important to know that checking your credit report regularly is not a “hard” inquiry and will not impact your credit score. In fact, familiarizing yourself with the information in your credit report can help you more closely monitor your other financial accounts. Being able to recognize inaccurate or incomplete information or suspicious inquiries may also help you detect an early warning sign of potential identity theft.

Do Your Credit Homework

The more you know about your financial accounts and credit history before making a big decision like buying a house or a car, the more prepared you will be to take on the financial obligations that may happen as a result. Here are some things to consider as you take steps to proactively plan your finances:
 Check your credit reports and credit scores before getting quotes to understand what information potential lenders and creditors are evaluating. (You can get one free annual credit report from Equifax, Experian and TransUnion at www.annualcreditreport.com.)
 When shopping around for a loan, consider: if you apply for a loan with different lenders to see different interest rates they can offer you, the inquiries may impact your credit score.
How Are Credit Scores Calculated?
Many people are surprised to find out they don’t have just one credit score. Credit scores will vary for several reasons, including the company providing the score, the data on which the score is based, and the method of calculating the score.
Credit scores provided by the three major credit bureaus — Equifax, Experian and TransUnion — may also vary because not all lenders and creditors report information to all three major credit bureaus. While many do, others may report to two, one or none at all. In addition, the credit scoring models among the three major credit bureaus are different, as well as those used by other companies that provide credit scores, such as FICO or VantageScore.
The types of credit scores used by lenders and creditors may vary based on their industry. For example, if you’re buying a car, an auto lender might use a credit score that places more emphasis on your payment history when it comes to auto loans. In addition, lenders may also use a blended credit score from the three major credit bureaus.
In general, here are the factors considered in credit scoring calculations. Depending on the scoring model used, the weight each factor carries as far as impacting a credit score may vary.

  • The number of accounts you have
  • The types of accounts
  • Your used credit vs. your available credit
  • The length of your credit history
  • Your payment history

Here is a general breakdown of the factors credit scoring models consider, keeping in mind there are many different credit scoring models.

Payment history

When a lender or creditor looks at your credit report, a key question they are trying to answer is, “If I extend this person credit, will they pay it back on time?” One of the things they will take into consideration is your payment history – how you’ve repaid your credit in the past. Your payment history may include credit cards, retail department store accounts, installment loans, auto loans, student loans, finance company accounts, home equity loans and mortgage loans.
Payment history will also show a lender or creditor details on late or missed payments, bankruptcies, and collection information. Credit scoring models generally look at how late your payments were, how much was owed, and how recently and how often you missed a payment. Your credit history  will also detail how many of your credit accounts have been delinquent in relation to all of your accounts on file. So, if you have 10 credit accounts, and you’ve had a late payment on 5 of those accounts, that ratio may impact credit scores.
Your payment history also includes details on bankruptcies, foreclosures, wage attachments and any accounts that have been reported to collection agencies.
Generally speaking, credit scoring models will consider all of this information, which is why the payment history section may have a big impact in determining some credit scores.

Used credit vs. available credit

Another factor lenders and creditors are looking at is how much of your available credit – the “credit limit” – you are using. Lenders and creditors like to see that you are responsibly able to use credit and pay it off, regularly. If you have a mix of credit accounts that are “maxed out” or at their limit, that may impact credit scores.

Type of credit used

Credit score calculations may also consider the different types of credit accounts you have, including revolving debt (such as credit cards) and installment loans (such as mortgages, home equity loans, auto loans, student loans and personal loans).
Another factor is how many of each type of account you have. Lenders and creditors like to see that you’re able to manage multiple accounts of different types and credit scoring models may reflect this.
New credit

Credit score calculations may also consider how many new credit accounts you have opened recently. New accounts may impact the length of your credit history.
Length of credit history

This section of your credit history details how long different credit accounts have been active. Credit score calculations may consider both how long your oldest and most recent accounts have been open. Generally speaking, creditors like to see that you have a history of responsibly paying off your credit accounts.
Hard inquiries

“Hard inquiries” occur when lenders and creditors check your credit in response to a credit application. A large number of hard inquiries can impact your credit score. However, if you are shopping for a new auto or mortgage loan or a new utility provider, the multiple inquiries are generally counted as one inquiry for a given period of time. That period of time may vary depending on the credit scoring model, but it’s typically from 14 to 45 days.
Credit score calculations do not consider requests a creditor has made for your credit report for a preapproved credit offer, or periodic reviews of your credit report by lenders and creditors you have an existing account with. Checking your own credit also doesn’t affect credit scores. These are known as “soft inquiries.”

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About Interest Rates

About Interest Rates

About Interest Rates

If you’re looking at buying a new car and getting a car loan, it pays to be prepared. We look at some of the factors that can influence what sort of interest rate you can get on a car loan.
The first thing a lender will want to see when determining your car loan interest rate is evidence of your financial status such as your current income, other loans or credit.
What is a car loan interest rate?
When applying for a car loan (or any type of loan for that matter), it’s important to look at interest rates. An interest rate is essentially a fee you’re charged for borrowing money from a lender. It is expressed as a percentage of the total loan amount per annum (or year).
There are a number factors that can influence the potential car loan interest rate you can get – such as your personal finances, credit history, deposits and not to mention the amount of shopping around that you do. Let’s have a closer look at some of these.
Financial Status
The first thing a lender will want to see when determining your car loan interest rate is evidence of your financial status. Factors like your current income, your credit score, other loans or credit you might be paying off and your spending habits also have a big influence on your potential interest rate. A way to help reduce this process is to sit down and calculate how much you can realistically afford each month.
Vehicle age
Vehicle age is another thing that lenders will take into consideration, with some lenders refusing to loan if the car is older than five years, and some older than 9 years, however there are lenders that will look at cars that are up to 25 years old, but one important thing to keep in mind is that the older the car the higher the rate will be due to the increased risk on older cars. This is because cars are one of the common purchases that lose value (depreciate) over time. If you default on a payment and the lender has to seize your car and sell it, they may not get the full amount they’re owed back from the sale, which creates a high risk, so the older the car the higher the risk and the higher the interest rate.
Credit history
Your credit score indicates to a lender how much of a ‘risk’ you are as a borrower. Many people think that by applying to multiple lenders at the same time, they can get the best interest rate possible. However, each time you apply for credit, your score can be negatively impacted, each time you apply for credit your credit score reduces – so making multiple applications could backfire and end up impacting your credit score which will impact your interest rate and also reduce your chances of getting a loan at all if your credit score is too low. Make sure you’re aware of your credit rating before applying for a loan because if your application is rejected by the lender, this could also impact your credit history.
The other items looked at from your credit report is, do you have defaults, judgments, basically any bad credit you have had will also place you in the high risk category and will have a major impact on 2 things, one is, can you get credit at all, the other is, if you can get credit then due to the high risk you fall into because of the bad credit history you have the rate would be high as well, the interest rate is then calculated on how high of a credit risk you are, the higher the risk category you fall into the higher the interest rate would be, however keep in mind that you can still get reasonable interest rates if you have had bad credit and you fall into a low credit risk category.
Applying for a car loan through a licenced broker
When applying for a car loan with a licenced broker, our credit check will never appear on your personal credit report, therefor it doesn’t impact your credit score and will never reduce your chances of getting a car loan, applying though a licenced finance broker is always a better choice when you are wanting to know if you can get a car loan, and what car loan packages/options are available to you based on your overall profile. A licenced financed broker has access to many lenders and can place you with the correct lender the first time based on your personal circumstances and credit profile.
At Auto Link Finance we provide a free credit assessment that provides this service for you, during this process we are able to tell you if you can get a car loan, what options are available to you, what the interest rate would be, what loan amount you can get, what the actual repayments would be, and finally what the fees associated to your car loan are as well, this is a very comprehensive accurate assessment conducted by our Senior finance consultants with over 30 years’ experience in bad credit car finance & good credit car finance,
Want to know what we can do for you, apply now for our free credit assessment, its free, has fast results, its very accurate and provides you with everything you need to know in order to make an informed decision before proceeding to get your car loan.

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