Interview with a Car Broker

Buying a car with bad credit is possible—it’s just going to cost you. You’ll probably have a higher interest rate and require a bigger down payment, and you may have a much smaller selection to choose from than someone with a better credit history.

Here’s how to go about buying a car with bad credit and what you’ll need to be aware of to avoid being overcharged.

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1. Check Your Credit
2. Improve Your Score
3. Fix Credit Errors
4. Know What You Can Pay
5. Make a Bigger Down Payment
6. Get a Shorter Loan
7. Work with a Bad Credit Car Dealer
8. Get Preapproved
9. Get a Co-signer
10. Comparison Shop
11. Read the Fine Print
12. Refinance

Buying a Car With Bad Credit

If you have poor or bad credit, buying a vehicle requires some common steps that people with good credit don’t necessarily need to worry about. Consider taking these steps when buying a car with bad credit.

1. Check Your Credit

If your credit is poor, you may be stuck paying a higher interest rate until you can improve your credit scores. Your credit score is a huge factor when it comes to the interest rate and credit financing you will receive for your auto loan—or if you’ll be approved at all. You’ll want to go into this process knowing what your score is and what your options are.

Check your credit from all three major credit bureaus several months before you begin your car shopping journey so you have time to rebuild your credit if possible. Track your credit history to determine the areas where you can most improve before applying for a car loan.

2. Improve Your Score

There is no official minimum credit score you need to buy a car, but a higher score will open up more options and better rates. According to Experian, the average credit score for used car purchases at the end of 2018 was 659.

If your score is below 660, look for ways to improve your score before applying for a car loan. Your free Credit Report Card from Credit.com will help you determine the most efficient ways to improve your score: paying off debt, clearing up errors or taking care of old collection accounts could bump you over that coveted 700 threshold. Delaying the car finance process to improve your poor credit score and rebuild your credit can save you money in the long run.

3. Fix Credit Errors

If you find mistakes on your credit reports, fixing those errors could bring your score up quite a bit. If possible, give yourself at least 30 days to dispute credit report mistakes before you start car shopping and looking for an auto finance company or submit a loan application. If you think this is your best option, you can try DIY credit repair, or work with a credit repair service such as those from Lexington Law.

4. Know What You Can Pay

Whether or not you’re able to improve your credit score, you should know what you can afford to pay before you start shopping—and stay committed to your budget. Auto loan calculators are helpful tools to use when you are trying to determine how much car you can afford. These calculators can also provide you with an estimate of what you will be paying for the entire term of the auto loan, interest included.

〉 Try it now: Auto Loan Calculator

5. Make a Bigger Down Payment

If your score is still on the low side and you don’t have more time to rebuild your credit before purchasing a car, be prepared to put a large chunk of money down. If you’re able to put down more money, you can borrow less money—which will usually mean more savings overall. How much you have to put down on a car with bad credit depends on how low your score is (and why) as well as the price of the car and the dealer you’re working with. In general, at least $1,000 or 10% of the purchase price is recommended.

If you’re unable to put any money down, your options will be severely limited. You may be able to buy a car from a private seller who is willing to take payments, but this scenario is unlikely.

6. Get a Shorter Loan

Longer loans are generally considered a higher risk: there’s more time for you to potentially default on the loan, so the interest rates tend to be higher. The monthly payments will be higher for shorter loans, however, so make sure you are able to fit this into your budget with some room to spare.

7. Work with a Bad Credit Car Dealer

If you need a car now and have a credit score that falls below the 600 range, you may need to go to bad credit car dealerships that specialize in no-credit or poor-credit buyers. These dealerships will work with your credit history to get approval, but interest rates will likely be high and terms may be unfavorable.

8. Get Preapproved

Getting preapproval for auto financing from a bank or credit union could better prepare you for the car shopping process. This preapproval process analyzes your income, expenses, credit score and credit report and determines if you qualify for an auto loan from the lender and how much the lender would be willing to lend. Submitting your paperwork early and learning what obstacles you face could spare you a lot of headaches later when going through the loan approval process.

9. Get a Co-signer

If you have a poor credit score, it may be helpful to get a co-signer for your loan application. Not all lenders offer this option, so consider this carefully before moving forward.

10. Comparison Shop

Always shop around for your loan. You never know what options are available until you look. Look for the best possible terms and make sure that you can actually afford the payments so you don’t end up negatively affecting your credit even more. It’s also a good idea to compare rates from other lenders like banks or credit unions before settling on a loan straight from the dealership.

11. Read the Fine Print

The fine print can make a big difference in the overall purchase price of the vehicle, especially if your credit means a high interest rate. Make sure there’s no prepayment penalty so you’re not fined for paying off a loan quicker than agreed, and avoid pricey add-ons that increase the sales price.

12. Refinance

Auto loan refinancing could help lower your auto loan rates and your monthly payment, which could end up saving you hundreds over the life of the loan. For loan refinancing, you typically want a strong history of making on-time payments for at least 12 months. However, keep in mind that the loan refinancing will also take your credit history and current credit scores into account as well. So, as always, continue working diligently to improve and rebuild your credit rating.

Key Takeaways

Whether or not you can get a car loan with bad credit depends on many factors. If you follow these tips, you may be able to get an auto loan and save money even with poor credit scores.

You can view your credit score and get an easy-to-understand Credit Report Card for free at Credit.com or via the mobile app for iPhone and Android. Start by taking a look at what factors are having the most impact on your scores and credit rating so you know what to address first.

Source: credit.com

Do You Need Renters Insurance for Your Apartment? Pros & Cons

It’s increasingly common for landlords to require tenants to carry renters insurance coverage. That’s understandable, as renters insurance limits landlords’ liability for potentially costly mishaps, like a building visitor landing in the hospital after sustaining an injury on the premises. It may absolve them of any financial responsibility for tenant possessions damaged or lost to fire, water leaks, vandalism, and certain other events covered by the policy.

Even when it’s not mandatory, renters insurance has direct benefits for tenants. But it isn’t free. A starter policy with high deductibles and relatively low coverage limits costs in the neighborhood of $150 to $200 per year. Higher-end coverage costs $300 to $500 or more per year, according to Insurance.com. For frugal, careful renters whose landlords don’t demand coverage, that cost might be too much to bear.

Before rushing to purchase a policy you might not need or writing off renters insurance as unnecessary, take a few minutes to consider the benefits and drawbacks.

Pros of Renters Insurance

Renters insurance has some clear advantages, including possible protection from liability, discounts for bundling it with other types of insurance policies, and limited protection from negligent landlords.

1. It’s Not Limited to the Possessions in Your Apartment

When you hear the term “renters insurance,” you probably envision a policy that reimburses you for personal belongings that are lost, damaged, destroyed, or stolen within the confines of your apartment.

This is a key function of renters insurance, but it’s not all it entails. Renters insurance has three distinct components:

  1. Content Coverage. Virtually all renters who carry insurance hold a content insurance policy (also known as personal property coverage) that covers TVs, stereos, computers, furniture, and other valuable items that stay in the rental unit. Content insurance also covers items you keep in your car, provided the vehicle is registered in your name and at your address. If your car is burglarized overnight or while you’re out of town, your policy may reimburse you for the theft of any covered items within it.
  2. Liability Coverage. Renters insurance also protects you from liability issues that may arise in the course of your tenancy. If a guest sustains an injury during a fall or as a result of an accident at your home, your renters insurance policy’s liability coverage may cover the cost of a potential lawsuit, associated legal fees, and/or the guest’s medical bills. Likewise, your policy may cover the cost of fire or water damage sustained by other tenants in your building due to faulty plumbing, outdated wiring, leaky floorboards, and other hazards that originate in your unit.
  3. Loss of Use Coverage. Finally, your policy should cover (or at least provide you with the option to cover) temporary relocation and living expenses you may incur if your apartment becomes unlivable due to fire, flood, or structural damage. This is known as “loss of use” coverage.

Comprehensive renters insurance policies typically include all of these components, while lower-cost policies may exclude relocation coverage.

2. You Can Save by Bundling It With Other Insurance Policies

Your apartment likely isn’t the only thing you’d like to protect. For example, if you own a car, you’re legally obligated to carry auto insurance on it. These days, you’re also required to hold a health insurance policy. Depending on your age and family situation, you may have life insurance as well. And if you own particularly valuable items, like precious jewelry or original artwork, you may need customized policies to cover them.

The good news is that a renters insurance policy can be (and often is) bundled with other insurance types at a significant discount. Virtually every major insurer offers a multipolicy discount, or a premium discount for carrying more than one insurance policy with the same company. Since many renters also own cars, bundling rental and car insurance policies is common.

The discounts can be impressive. For instance, Liberty Mutual claims applicants can save upward of $800 when they bundle home and auto insurance policies. Other insurers offer similar discounts on a case-by-case basis.

3. It Protects You From Landlord Negligence

Imagine this: You head home from work, looking forward to a relaxing evening of eating takeout and binge-watching Netflix. But as you approach your apartment building, you realize something isn’t right. Fire trucks and cop cars surround the entrance, and a thin cloud of smoke rises from the roof.

Eventually, investigators determine that a decades-old circuit shorted out, triggering a chain reaction along some old faulty wiring that caused a fire on your floor. The building isn’t destroyed, but your apartment has been ruined by smoke and heat. Your electronics are useless, and your furniture is irreparably damaged.

Time to put your life on hold? Not if you have renters insurance. Even though this incident is clearly the fault of your landlord, you’d be on the hook for the cost of replacing your damaged possessions without sufficient renters insurance coverage. Your landlord’s insurance covers the unit’s structural components and appliances — and furniture if the place came furnished — but it doesn’t extend to anything you own.


Cons of Renters Insurance

Renters insurance has some notable drawbacks, including higher costs to cover valuable items and significant restrictions on coverage without purchasing add-ons (riders) at an additional expense.

1. Collections or Specific Valuables May Require Additional Coverage

Renters insurance covers the cost of replacing everyday personal property and equipment, but it always comes with a coverage limit. This limit may be as low as $5,000 or as high as $500,000, and it generally doesn’t cover novel or valuable possessions.

For example, if you store multiple pieces of jewelry in your apartment, your renters policy might not cover them (even a regular old engagement ring might not fit the bill). If you have extensive collections of records, stereo equipment, shoes, artwork, or even rare books, you might also be out of luck.

You can still cover these items, but it will cost you. You’ll need to purchase a rider — a supplementary policy covering specific items — or a separate, specialized property insurance policy for high-value items like jewelry. For instance, Allstate offers a scheduled personal property insurance rider that allows you to exceed its standard per-item coverage limit of $1,500 for specific named items with higher intrinsic or replacement value.

2. There Are Coverage Limits and Exclusions

If you’ve ever been in a car accident that wasn’t covered by your auto insurance policy, you know that simply carrying insurance doesn’t necessarily free you from financial or personal liability. Depending on your deductible size, you must make some out-of-pocket payments before your coverage kicks in.

Before you take out your renters insurance policy — and for as long as you keep it — you need to expend some effort to maximize the chance it will deliver when the time comes.

First, take a careful look at your coverage limits and exclusions. According to State Farm Insurance, the average renter owns personal property (property not covered by their landlord’s insurance policy) worth about $35,000. If you’re “average” in this regard, you’ll need at least this much coverage to insulate you against a total loss. It might also be a good idea to take on additional coverage if you anticipate making big purchases in the near future.

It’s crucial to mind coverage limits on specific product categories as well. You shouldn’t expect standard rental insurance policies to cover high-value items, such as $5,000 rings and $10,000 stereo systems. The cost of riders or scheduled property protection can add up quickly. To minimize the cost of a rider or supplemental policy, purchase it at the same time — and through the same insurer — as your main renters insurance policy to qualify for bundling discounts.

It’s also critical to understand what renters insurance doesn’t cover. Like homeowners insurance, rental insurance is stingy about paying for flood damage and sewer problems. If you live in an area that’s prone to flooding, ask your insurer whether you’d be covered in the event of a flood. If you won’t, look into supplemental flood insurance policies, which may be subsidized by state or federal programs.

For example, if you occupy a ground-floor or basement apartment that’s prone to flooding or damage from sewer backups, your renters policy may not cover associated cleanup costs. Your insurer should offer supplemental “sewer and drain” coverage. Ultimately, however, you’re reimbursed for a specific insurance claim may turn on events that aren’t wholly within your control.

3. “Replacement Value” Coverage Can Be Costly

When you take out your renters insurance policy, you must choose between a “replacement value” policy and an “actual cash value” policy. In the event of an accepted claim, a replacement value policy reimburses you for each lost or destroyed item’s value at the time of purchase (so be sure to save your receipts). An actual cash value policy, meanwhile, reimburses you for each item’s depreciated value.

Depreciation calculations are complex and difficult to generalize. But as a rule of thumb, electronics such as computers and TVs tend to lose most of their value within three to five years. More durable items like couches, tables, and jewelry may retain their value for longer.

4. Credit Issues Could Increase Your Insurance Costs

One of the lesser-known consequences of a bad credit score is the potential for higher rates for auto and property insurance. Renters who have solid credit scores (about 660 to 680 and up) generally pay less for comparable policies than those with suboptimal scores.

This can be a problem for renters required to carry property insurance or who seek the peace of mind that comes with coverage. Of course, you’re free to reapply for coverage as your credit score improves, but in the meantime, you’re stuck paying more.

5. Potential Caps on Reimbursements for Temporary Living Expenses

Many insurance companies place a dollar cap or time limit on reimbursements for temporary living expenses. Suppose it takes four months after a fire to restore your apartment to a livable condition, and your renters insurance policy only covers relocation expenses for two months. In that case, you’ll need to pay out of pocket for the other two months of living expenses.

In other words, it’s probably best to assume your renters insurance policy won’t cover every single expense that arises out of an unfortunate circumstance. Having a healthy emergency fund saved up is one way to keep unexpected costs like this from derailing your finances.


Final Word

Choosing to purchase or forgo renters insurance is not a decision to make lightly. Nor is it a decision to agonize over and blow out of all proportion. If your renters insurance cost-benefit analysis has you at an impasse, consider this: You stand to save far more each year by moving to a more affordable city for renters than by doing without renters insurance.

In the grand scheme of things, peace of mind is relatively inexpensive.

Source: moneycrashers.com

Car payment too high

Buying a car with bad credit is possible—it’s just going to cost you. You’ll probably have a higher interest rate and require a bigger down payment, and you may have a much smaller selection to choose from than someone with a better credit history.

Here’s how to go about buying a car with bad credit and what you’ll need to be aware of to avoid being overcharged.

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1. Check Your Credit
2. Improve Your Score
3. Fix Credit Errors
4. Know What You Can Pay
5. Make a Bigger Down Payment
6. Get a Shorter Loan
7. Work with a Bad Credit Car Dealer
8. Get Preapproved
9. Get a Co-signer
10. Comparison Shop
11. Read the Fine Print
12. Refinance

Buying a Car With Bad Credit

If you have poor or bad credit, buying a vehicle requires some common steps that people with good credit don’t necessarily need to worry about. Consider taking these steps when buying a car with bad credit.

1. Check Your Credit

If your credit is poor, you may be stuck paying a higher interest rate until you can improve your credit scores. Your credit score is a huge factor when it comes to the interest rate and credit financing you will receive for your auto loan—or if you’ll be approved at all. You’ll want to go into this process knowing what your score is and what your options are.

Check your credit from all three major credit bureaus several months before you begin your car shopping journey so you have time to rebuild your credit if possible. Track your credit history to determine the areas where you can most improve before applying for a car loan.

2. Improve Your Score

There is no official minimum credit score you need to buy a car, but a higher score will open up more options and better rates. According to Experian, the average credit score for used car purchases at the end of 2018 was 659.

If your score is below 660, look for ways to improve your score before applying for a car loan. Your free Credit Report Card from Credit.com will help you determine the most efficient ways to improve your score: paying off debt, clearing up errors or taking care of old collection accounts could bump you over that coveted 700 threshold. Delaying the car finance process to improve your poor credit score and rebuild your credit can save you money in the long run.

3. Fix Credit Errors

If you find mistakes on your credit reports, fixing those errors could bring your score up quite a bit. If possible, give yourself at least 30 days to dispute credit report mistakes before you start car shopping and looking for an auto finance company or submit a loan application. If you think this is your best option, you can try DIY credit repair, or work with a credit repair service such as those from Lexington Law.

4. Know What You Can Pay

Whether or not you’re able to improve your credit score, you should know what you can afford to pay before you start shopping—and stay committed to your budget. Auto loan calculators are helpful tools to use when you are trying to determine how much car you can afford. These calculators can also provide you with an estimate of what you will be paying for the entire term of the auto loan, interest included.

〉 Try it now: Auto Loan Calculator

5. Make a Bigger Down Payment

If your score is still on the low side and you don’t have more time to rebuild your credit before purchasing a car, be prepared to put a large chunk of money down. If you’re able to put down more money, you can borrow less money—which will usually mean more savings overall. How much you have to put down on a car with bad credit depends on how low your score is (and why) as well as the price of the car and the dealer you’re working with. In general, at least $1,000 or 10% of the purchase price is recommended.

If you’re unable to put any money down, your options will be severely limited. You may be able to buy a car from a private seller who is willing to take payments, but this scenario is unlikely.

6. Get a Shorter Loan

Longer loans are generally considered a higher risk: there’s more time for you to potentially default on the loan, so the interest rates tend to be higher. The monthly payments will be higher for shorter loans, however, so make sure you are able to fit this into your budget with some room to spare.

7. Work with a Bad Credit Car Dealer

If you need a car now and have a credit score that falls below the 600 range, you may need to go to bad credit car dealerships that specialize in no-credit or poor-credit buyers. These dealerships will work with your credit history to get approval, but interest rates will likely be high and terms may be unfavorable.

8. Get Preapproved

Getting preapproval for auto financing from a bank or credit union could better prepare you for the car shopping process. This preapproval process analyzes your income, expenses, credit score and credit report and determines if you qualify for an auto loan from the lender and how much the lender would be willing to lend. Submitting your paperwork early and learning what obstacles you face could spare you a lot of headaches later when going through the loan approval process.

9. Get a Co-signer

If you have a poor credit score, it may be helpful to get a co-signer for your loan application. Not all lenders offer this option, so consider this carefully before moving forward.

10. Comparison Shop

Always shop around for your loan. You never know what options are available until you look. Look for the best possible terms and make sure that you can actually afford the payments so you don’t end up negatively affecting your credit even more. It’s also a good idea to compare rates from other lenders like banks or credit unions before settling on a loan straight from the dealership.

11. Read the Fine Print

The fine print can make a big difference in the overall purchase price of the vehicle, especially if your credit means a high interest rate. Make sure there’s no prepayment penalty so you’re not fined for paying off a loan quicker than agreed, and avoid pricey add-ons that increase the sales price.

12. Refinance

Auto loan refinancing could help lower your auto loan rates and your monthly payment, which could end up saving you hundreds over the life of the loan. For loan refinancing, you typically want a strong history of making on-time payments for at least 12 months. However, keep in mind that the loan refinancing will also take your credit history and current credit scores into account as well. So, as always, continue working diligently to improve and rebuild your credit rating.

Key Takeaways

Whether or not you can get a car loan with bad credit depends on many factors. If you follow these tips, you may be able to get an auto loan and save money even with poor credit scores.

You can view your credit score and get an easy-to-understand Credit Report Card for free at Credit.com or via the mobile app for iPhone and Android. Start by taking a look at what factors are having the most impact on your scores and credit rating so you know what to address first.

Source: credit.com

5 Things Car Dealers Won’t Tell You

Whether you are shopping for a new car or a used one, you know how overwhelming the process can be. No matter how much research you’ve done, or how hard you’ve bargained, you may still second guess yourself, wondering if you struck the best deal.

Here are five things dealers may not tell you that can save you money on your next car purchase.

Invoice Price Isn’t Our Bottom Line

Most of us know that the sticker price is just a starting point for negotiations. And we may even know to research the invoice price. But most of us don’t realize that even when we buy a car “at invoice” the dealer has plenty of other ways to make a small profit. One of those ways is something called the “dealer holdback.”

According to Edmunds.com, an amount called a “holdback” is 2-3% of either the MSRP or the invoice. After the car is sold, the manufacturer pays this amount to the dealer, hence the name “dealer holdback.” On a $20,000 car, a 2% holdback would be $400.

Ummm, There’s Been An Accident…

Shopping for a used car? Your car dealer may be just as reluctant as your teenager to mention that the car’s been in an accident. “When it comes to accidents, it’s don’t ask, don’t tell,” warns Michael J. Sacks,  automotive consumer advocate and director of communications for 1 800 LEMON LAW. A dealer is not going to come out and say a car has been in an accident. You must ask. If you don’t and you find out later, how can you prove the car was misrepresented?”

In addition to asking specifically about accidents, you can check a vehicle’s history through Carfax. “While a Carfax report does not guarantee a problem-free used vehicle, it does help to reduce the risk. Never buy a used car without reviewing its history,” insists LeeAnn Shattuck, Chief Car Chick with Women’s Automotive Solutions.

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Low Monthly Payments Are Our Friend, Not Yours

Yes, most of us know that just focusing on the monthly payment, rather than the overall cost of the car, is a mistake. But that’s not stopping us from taking out loans of five years or longer. Experian reports that the average loan term for a new vehicle jumped to an all-time high of 65 months in the last quarter of 2012, up from 63 months in the last quarter of 2011.

The minute you start talking monthly payments with a dealer you’re in trouble, warns Shattuck.

“If you tell the dealer, ‘I can afford $300 a month,’ all they have to do is play with the loan term and get you the payment you want without getting you a good deal on the car.”

The longer your car loan, the more likely you are to be “upside down” on your loan, owing more than the vehicle is worth. That’s especially risky if you drive a lot of miles since the high mileage will also cause the car to depreciate more quickly. “The more miles you drive per year the shorter your loan term should be,” she insists. In addition, interest rates for 60- to 72-month loans tend to be higher. A higher rate combined with a longer term can add up to thousands of dollars by the time the car is paid off.

Your Credit Score Is Different Than Ours

If you’ve checked your credit reports and scores before you started auto shopping (smart move) you may be surprised to learn that the credit score the dealer sees is different than the one you have obtained. Credit.com’s credit scoring expert Barry Paperno explains:

While the typical FICO score predicts the likelihood of any account on a consumer’s credit report going delinquent, auto dealers often use the “auto score” version of the FICO formula to predict the chances of an auto loan — not just any account — incurring late payments.  To do this, the FICO auto scoring formula gives slightly more weight to auto loan-specific information on the credit report, such as auto loan payment history. The result is often a higher auto score than standard FICO for a consumer with positive auto loan history (all things on the credit report being equal), and a lower auto score if there is negative, or a lack of, auto loan history.

Of course, you still want to check your credit reports and scores before you need to finance a vehicle. Ideally, you should check them at least a month before to allow time to fix mistakes you may find on your credit reports. (You can use Credit.com’s free Credit Report Card for an easy to understand overview of your credit, along with your free scores. You can update your Credit Report Card monthly.) In addition, though, you’ll want to shop for a car loan before you set foot in the dealership. If the dealer knows you have already lined up financing, they can’t charge you a higher rate on a loan because your credit “isn’t good enough.” All they can try to do is match or beat the rate on the loan you’ve already lined up.

It Doesn’t Have to Be That Difficult

Dread haggling? Don’t make it harder than it has to be. “The actual process of negotiating a price for a new vehicle is a lot simpler than most people realize,” writes Mike Rabkin, a professional car shopper who walks car shoppers through the process. “It’s all about who you talk to and how knowledgeable you appear.” One strategy, he says, is to bypass the sales person and go straight to the decision maker. That person could go by different names, depending on the dealer: sales manager, general sales manager, fleet manager, Internet manager, etc.

“Whatever you do,” says Rabkin, “make sure you get competing quotes from at least four dealers. To know a good price, you have to know what a bad price is,” he says. “Competition is what makes them more competitive. Even if you don’t plan to shop at other dealers, you have to let them know you are shopping around.”

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Other experts agree. “You can buy a car with minimal haggling by calling and speaking to the fleet manager directly,”says Blair Natasi, PR director for MyRedToy.com, an online reverse auction service for car shoppers.

Or find a dealer that is transparent with customers.”The world of car buying is constantly changing and some dealers are finding that less pressure and more transparency helps their sales and earns them enthusiastic customers,” says Edmunds.com Sr. Consumer Advice Editor Phil Reed. “These enlightened dealers realize that many shoppers are well informed and they accept this and are willing to expedite the sales process accordingly. (They understand) how important customer satisfaction is for repeat sales.”

How do you find a straight-shooting dealer? Reed suggests: “You should try to learn as much as possible about a dealership before you give them your business. There is always the BBB to consult. We have dealer ratings and reviews on our site. You can always type the name of the dealership and ‘reviews’ into Google and you will get reviews from a variety of sources. Word of mouth from friends and family is also quite valuable, and it’s not uncommon for friends to refer you to a specific sales person. It’s important, however, to do all of your research on the price of a car, because a referral doesn’t mean you have an inside deal.”

And if you’re still not comfortable negotiating for the best price, you can hire a professional like Shattuck or Rabkin. The car I previously owned was purchased with the help of a professional car shopper and I was confident I got a good deal. I was able to pay it off early and drive it for a long time. My past car I purchased on my own, with help from my hubby, and while I think we did OK, I do wonder if we could have done better.

Image: iStockphoto

Source: credit.com

Is There Any Chance of Lowering Your Car Payment?

Buying a car with bad credit is possible—it’s just going to cost you. You’ll probably have a higher interest rate and require a bigger down payment, and you may have a much smaller selection to choose from than someone with a better credit history.

Here’s how to go about buying a car with bad credit and what you’ll need to be aware of to avoid being overcharged.

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1. Check Your Credit
2. Improve Your Score
3. Fix Credit Errors
4. Know What You Can Pay
5. Make a Bigger Down Payment
6. Get a Shorter Loan
7. Work with a Bad Credit Car Dealer
8. Get Preapproved
9. Get a Co-signer
10. Comparison Shop
11. Read the Fine Print
12. Refinance

Buying a Car With Bad Credit

If you have poor or bad credit, buying a vehicle requires some common steps that people with good credit don’t necessarily need to worry about. Consider taking these steps when buying a car with bad credit.

1. Check Your Credit

If your credit is poor, you may be stuck paying a higher interest rate until you can improve your credit scores. Your credit score is a huge factor when it comes to the interest rate and credit financing you will receive for your auto loan—or if you’ll be approved at all. You’ll want to go into this process knowing what your score is and what your options are.

Check your credit from all three major credit bureaus several months before you begin your car shopping journey so you have time to rebuild your credit if possible. Track your credit history to determine the areas where you can most improve before applying for a car loan.

2. Improve Your Score

There is no official minimum credit score you need to buy a car, but a higher score will open up more options and better rates. According to Experian, the average credit score for used car purchases at the end of 2018 was 659.

If your score is below 660, look for ways to improve your score before applying for a car loan. Your free Credit Report Card from Credit.com will help you determine the most efficient ways to improve your score: paying off debt, clearing up errors or taking care of old collection accounts could bump you over that coveted 700 threshold. Delaying the car finance process to improve your poor credit score and rebuild your credit can save you money in the long run.

3. Fix Credit Errors

If you find mistakes on your credit reports, fixing those errors could bring your score up quite a bit. If possible, give yourself at least 30 days to dispute credit report mistakes before you start car shopping and looking for an auto finance company or submit a loan application. If you think this is your best option, you can try DIY credit repair, or work with a credit repair service such as those from Lexington Law.

4. Know What You Can Pay

Whether or not you’re able to improve your credit score, you should know what you can afford to pay before you start shopping—and stay committed to your budget. Auto loan calculators are helpful tools to use when you are trying to determine how much car you can afford. These calculators can also provide you with an estimate of what you will be paying for the entire term of the auto loan, interest included.

〉 Try it now: Auto Loan Calculator

5. Make a Bigger Down Payment

If your score is still on the low side and you don’t have more time to rebuild your credit before purchasing a car, be prepared to put a large chunk of money down. If you’re able to put down more money, you can borrow less money—which will usually mean more savings overall. How much you have to put down on a car with bad credit depends on how low your score is (and why) as well as the price of the car and the dealer you’re working with. In general, at least $1,000 or 10% of the purchase price is recommended.

If you’re unable to put any money down, your options will be severely limited. You may be able to buy a car from a private seller who is willing to take payments, but this scenario is unlikely.

6. Get a Shorter Loan

Longer loans are generally considered a higher risk: there’s more time for you to potentially default on the loan, so the interest rates tend to be higher. The monthly payments will be higher for shorter loans, however, so make sure you are able to fit this into your budget with some room to spare.

7. Work with a Bad Credit Car Dealer

If you need a car now and have a credit score that falls below the 600 range, you may need to go to bad credit car dealerships that specialize in no-credit or poor-credit buyers. These dealerships will work with your credit history to get approval, but interest rates will likely be high and terms may be unfavorable.

8. Get Preapproved

Getting preapproval for auto financing from a bank or credit union could better prepare you for the car shopping process. This preapproval process analyzes your income, expenses, credit score and credit report and determines if you qualify for an auto loan from the lender and how much the lender would be willing to lend. Submitting your paperwork early and learning what obstacles you face could spare you a lot of headaches later when going through the loan approval process.

9. Get a Co-signer

If you have a poor credit score, it may be helpful to get a co-signer for your loan application. Not all lenders offer this option, so consider this carefully before moving forward.

10. Comparison Shop

Always shop around for your loan. You never know what options are available until you look. Look for the best possible terms and make sure that you can actually afford the payments so you don’t end up negatively affecting your credit even more. It’s also a good idea to compare rates from other lenders like banks or credit unions before settling on a loan straight from the dealership.

11. Read the Fine Print

The fine print can make a big difference in the overall purchase price of the vehicle, especially if your credit means a high interest rate. Make sure there’s no prepayment penalty so you’re not fined for paying off a loan quicker than agreed, and avoid pricey add-ons that increase the sales price.

12. Refinance

Auto loan refinancing could help lower your auto loan rates and your monthly payment, which could end up saving you hundreds over the life of the loan. For loan refinancing, you typically want a strong history of making on-time payments for at least 12 months. However, keep in mind that the loan refinancing will also take your credit history and current credit scores into account as well. So, as always, continue working diligently to improve and rebuild your credit rating.

Key Takeaways

Whether or not you can get a car loan with bad credit depends on many factors. If you follow these tips, you may be able to get an auto loan and save money even with poor credit scores.

You can view your credit score and get an easy-to-understand Credit Report Card for free at Credit.com or via the mobile app for iPhone and Android. Start by taking a look at what factors are having the most impact on your scores and credit rating so you know what to address first.

Source: credit.com

More Americans With Bad Credit Are Getting Auto Loans

Roughly 26% of car buyers feel that they overpaid for their vehicle, according to a 2014 survey from TrueCar, Inc. That same survey admittedly also found consumers believe car dealers make about five times more profit on the sale of a new car than they actually do — but whether you truly paid too much for your now-old ride or you simply think you did, there are ways to save the next time you hit up a car dealership. For starters, the rates on auto loans are largely driven by your credit, so simply bolstering your credit score can potentially save you thousands of dollars over the life of your loan. Plus, it never hurts to comparison shop and negotiate when it comes to auto loans and the actual vehicle itself — you may be missing out on savings by doing one and not the other.

But First… How Much Car Can You Afford?

According to Credit.com contributor and car insurance comparison company TheZebra, automotive experts generally suggest auto loans not exceed 10% (if it’s just the loan) to 20% (if it’s the loan and related expenses like car insurance) of your gross monthly income. Of course, that’s a broad rule and every potential car owner is going to have to take a long, hard long at their finances and current debt levels to decide what they can, in fact, afford. Following these three simple cost-cutting steps can help you save big on your auto loan and next car purchase.

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1. Do a Credit Check

Not checking your credit before you start shopping for a car is a huge mistake. Because your auto loan rates are directly tied to your credit scores, even a small inaccuracy on your credit report could cost you. Before you start shopping for your dream car, take an hour to check all three of your credit reports and credit scores online. You need to check with all three major credit reporting agencies — Equifax, Experian and TransUnion — because you don’t know which one a lender will use for your application. If you have a credit score above 750, you can probably qualify for the best rates available and negotiate an excellent deal on your car. If your credit score is lower, see if you can give it a boost before you apply for a loan.

You can view two of your credit scores, along with your free credit report snapshot on Credit.com. The snapshot will pinpoint what your specific area of opportunities are and what steps you can take to improve. However, as a general rule of thumb, you can raise your credit score by disputing errors on your credit report, paying down high credit card debts and limiting new credit applications.

2. Shop Online

Unless you have a credit score in the 800s and can qualify for a 0% auto loan offer, you are probably not going to get the best deal on a loan from the dealership. Auto loan rates and fees offered by online auto lenders are usually a lot lower than the rates offered by dealership financing programs. Plus, you can shop and compare rates online without causing damaging inquiries to your credit report (provided you’re not formally applying for every offer you see). Most online lenders have calculators or rate guides that show you what rate you could receive based upon your credit score. (Note: Be sure to vet any lender, whether online or within a dealership, before taking them up on an offer.)

With many online loans, you fill out the application and receive an approval by email within a few hours. Then the lender mails you a check that is ready to be made out to the person or business selling the car. If you end up not buying a car or not using the loan, you toss the check (shredding it first, of course). Plus, the check from the lender usually specifies a certain price range (for example, $9,000-$10,000). This leaves you with some room for negotiating a lower price with the seller even after you have received your loan approval. Speaking of which …

3. Negotiate the Price

Many people may wind up overpaying for a car simply to avoid negotiating the price of a car with a salesperson. Luckily, the Internet makes negotiating with car dealers a whole lot easier. Before you start shopping, look up the listed price, invoice and MSRP of the car you want through an unbiased site like Kelley Blue Book and request free price quotes online. Armed with these facts, you’ll have an advantage over the salesperson when you start the negotiations. You should be able to save a couple hundred dollars, if not a few thousands, by negotiating with the car salesperson before you decide to buy.

Proving It

You may be thinking: This is all fine and dandy, but does it really add up to $3,000 in savings? Let’s crunch the numbers using this auto loan calculator.

According to data from Experian, the average interest rate on a new car loan for prime customers as of the last quarter of 2015 was 3.55%. The average rates on a new car for non-prime customers and subprime customers during that timeframe were 6.24% and 10.36%, respectively.

So, let’s say you wanted to buy a $16,000 car and had $1,000 saved for a down payment. If you chose a loan repayment period of 60 months, had a non-prime credit score (think just below 700), and got a loan through a dealership, you could receive about a 6.3% annual percentage rate (APR).

  • Dealership option: $292 a month – $17,525 total costs

However, if you checked your credit reports and scores before you applied and found a way to boost your score to prime (think around 750), your interest rate from the dealership could drop to about 3.5%.

  • Improved score: $273 a month – $16,373 total costs

You would have already saved $1,152 dollars, just by checking your credit reports! That’s a pretty good return on your investment. Next, you might be able to reduce your rate even more by shopping for a loan online with your new credit score of 750. Let’s suppose, for argument sake, you qualify for a 2.7% APR (the average interest rate for super-prime customers during the last quarter of 2015, according to Experian).

  • Online loan: $268 a month – $16,052 total costs

You would have saved almost $1,473 by working on your loan options using Step 1 and 2. Finally, if you went to negotiate with the salesperson you could probably make a deal with the seller to reduce the price of the car down to $14,000. In this case, you would only have to borrow $13,000 with your 2.7% APR loan from an online lender.

  • Negotiated deal: $232 a month – $13,912 total costs

Your total savings from following these three simple steps would equal $3,613 over the life of your auto loan!

Source: credit.com

Can Your Credit Score Save You Money on a New Car?

Generally, the credit bureaus consider anything over 670 a good credit score.

If your score is 671 or higher, you’re doing fairly well. The best credit score and the highest credit score possible is 850 for both FICO® and VantageScore models. FICO considers a score between 800 and 850 to be “exceptional,” while VantageScore considers a score above 780 to be “excellent.” It’s possible to get an 850 credit score, but it’s tough to achieve.

In This Piece

FICO and VantageScore Credit Score Charts
What Credit Scores Mean
Do Lenders Prefer FICO or VantageScore
What Makes a Good Credit Score
What Else Do Lenders Consider
How to Get Your Credit Scores
How to Improve Your Score


Credit Score Charts for FICO and VantageScore

Credit scores calculated using the FICO or VantageScore 3.0 scoring models range from 300 to 850. Those scores are broken down into five categories, though the breakdowns differ slightly.

For FICO, a good credit score is 670 or higher; a score above 800 is considered exceptional. For VantageScore 3.0, a good score is 661 or higher, and a score of 781 to 850 is excellent.

On the flip side, FICO scores below 670 fall into the fair and poor range, while VantageScore 3.0 scores below 660 are considered fair, poor, or very poor.

FICO and VantageScore aren’t the only credit scoring models. However, they are the most commonly used models and the ones used by the three major credit bureaus: Experian, Equifax, and TransUnion. Some lenders even have their own scoring models. But most lenders and credit card companies use FICO scores or VantageScores.

>> Learn more about how Vantage Score compares to FICO.

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What Do Credit Scores Mean?

The three-digit numbers called credit scores are how the scoring institutions break down your credit profile. That number is calculated based on the information in your credit report at a credit bureau. Each bureau has its own file, which explains why your score might differ from one scoring institution to the next. Your file is a picture of how you’ve used credit to date.

Your score and where it falls tells lenders and credit card issuers how likely you are to pay off a loan, pay off a credit card, make late payments, and default on payments. In other words, it tells them if you’re an acceptable risk and if they should approve you for a loan or credit card.

A low score doesn’t necessarily mean lenders won’t give you a loan or card. Instead, it can mean they do so at a higher interest rate and with inferior loan terms. In other words, to offset the risk you pose, they charge you more interest or a higher annual fee.

For example, if you’re buying a $300,000 house with a 30-year fixed mortgage and you have good credit, you can end up paying around $94,000 less for that house over the life of the loan than if you had bad credit.*

Scores are also used by landlords, cell phone companies, and even employers to check how risky you are.

Do Lenders Prefer a Good VantageScore Score Over a Good FICO Credit Score?

Lenders don’t necessarily prefer one score over the other. It’s likely, though, that a given lender uses only one credit scoring institution.

FICO reports that 90% of the top US lenders use FICO scores when deciding whether to loan money to an applicant. On the other hand, VantageScore states that between July 2018 and June 2019, approximately 12.3 billion VantageScore credit scores were used.

The VantageScore model offers these advantages to lenders and consumers:

  • It was developed by the three major credit bureaus to offer a model across all bureaus that’s more consistent than FICO.
  • It calculates scores for more people by giving a score to people with a shorter credit history.

Both models are consistent enough that knowing where you stand in one gives you a reliable indication of your credit in general.

What Makes a Good Credit Score?

The same primary considerations go into calculating VantageScore credit scores and FICO credit scores:

Payment History

A history of late and missed payments for either scoring model lowers your credit score more than any other factor.

When determining your score, the FICO and VantageScore scoring models look at how recently you missed a payment or were late, how many accounts you were late on, and how many total payments on each account were missing or late.

Credit Utilization Ratio

Your credit utilization ratio is the amount of credit you’ve used divided by your total available credit limit. For example, if you have credit cards with a combined credit limit of $8,000 and balances of $3,000, your credit utilization ratio is 37.5%.

A good credit score requires a credit utilization ratio of 30% or less, although 10% or less is ideal.

Credit Age

Your credit age is how long you’ve used credit. More specifically, the length of your credit history is how long your credit accounts have been reported open, and your credit age is the average of how long all of your accounts have been open.

Say your oldest account was closed and fell off your file, and the next oldest account is 10 years “younger” than the account that fell off. Now, instead of showing how long you’ve actually used credit overall, credit files may show the age of the oldest account on file and your score may decrease.

To maintain a high credit age, keep at least one account on your credit file that is at least six months old. As you grow older, it should be easier to maintain a higher credit score as your accounts continue to grow in credit age.

Account Mix

Account mix is how many installment accounts and revolving accounts you have.

  • Installment accounts are loans—such as mortgages, car loans, or personal loans—with a fixed monthly payment for a specific term (number of months or years).
  • Revolving accounts are credit cards and credit lines with a credit limit that you can charge against.

Lenders want to see you can handle both types of accounts, so a good mix of the two makes for a better credit score.

Credit Inquiries

Hard inquiries happen when a lender looks at your credit report because you’ve applied for credit. A hard inquiry affects your credit score—lowering it by 5 to 10 points. The inquiry can stay on your credit report for up to two years, but it will impact your score for only 12 months. Though hard inquiries make up only 10% of your score, try to minimize credit inquiries to maximize your score.

When you need an auto loan or mortgage, it’s normal to shop around to find the best rates. Depending on the scoring model used, if you do your loan shopping in a 14- to 45-day span, the inquiries can be lumped into a single inquiry and affect your score less. FICO score models allow 45 days. On the other hand, the VantageScore model uses only a 14-day span.

Soft inquiries don’t affect your credits score.

Is a Credit Score the Only Thing Lenders Consider?

Lenders look at more than credit scores. The score plays a large factor, but so does your full credit report—sometimes from one bureau, sometimes from all three. Lenders may also look at your annual income and your debt-to-income ratio or overall debt.

Your debt-to-income ratio is calculated by dividing the total recurring monthly debt you have by your gross monthly income. This determines the percentage of debt you have compared to your income.

Credit card issuers and lenders may also look at how many reported delinquencies you have, how many hard inquiries were added to your credit file, your overall credit card utilization rate, your annual income, and your credit history’s health.

How Do I Get My Credit Scores?

You can get your full credit report from each credit bureau free once a year from AnnualCreditReports.com. Through April 2022, you can get a free copy of your credit report from each bureau weekly to help protect your financial health during the COVID-19 coronavirus pandemic. Those reports don’t include your credit score.

Most online options for viewing your credit score—free or paid—are limited to one or two scores. ExtraCredit from Credit.com takes it twenty-six steps further by offering you 28 of your FICO scores from all three major credit bureaus. When you sign up for an ExtraCredit account, you can also earn money when you get approved for select offers, monitor your accounts with $1 million identity theft insurance, and get exclusive discounts on credit repair services. All for less than $25 a month.

If you’re not ready for ExtraCredit, Credit.com’s free Credit Report Card offers you your Experian VantageScore 3.0 credit score for free for life.

What if My Credit Score Is Less Than Good?

Now that you know what’s a good credit score, it’s crucial to act on yours. If your credit is fair or poor, find out why. Then you can address the factors and work to improve your score.

Do you want to boost your credit profile? Our new ExtraCredit Build It feature can help. ExtraCredit identifies rent and utility bills you’re already paying and adds them to your credit reports as new tradelines. This allows the credit bureaus to see additional payment information from you, which can help build your credit profile.

*Assuming someone with poor credit (620–639) gets a 30-year fixed-rate loan at 4.03% APR compared to someone with excellent credit (760+) getting a 2.441% APR. Interest for the borrower with poor credit would total $217,478. Interest for the borrower with excellent credit would total $123,425. The difference of $94,053 is based on calculations made on 9/30/20 from https://www.myfico.com/credit-education/calculators/loan-savings-calculator/.


Source: credit.com

How to Get Free Car Insurance Quotes

  • Car Insurance

Choosing the right car and getting an auto loan is only half the battle. You still need car insurance coverage and finding the right insurance policy is a taxing, boring, and often expensive process. But if you keep some simple tips and techniques in mind, you can find affordable car insurance quotes and save yourself a fortune on insurance premiums. 

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

How Can You Get a Free Car Insurance Quote?

Car insurance quotes should be provided free of charge. That’s not the case for all of them, but there are plenty of companies and services that will provide you with a free quote. You can then compare these quotes to help you find the best policy.

Online car insurance quotes are generally free, so if you’re being charged a fee, take your business elsewhere.

How to Find Cheap Auto Insurance Quotes

There are a few simple steps to getting a free quote and using this to secure the cheapest car insurance rates:

1. Be Prepared

To save yourself some time when dealing with car insurance companies, make sure you have some essential information, including:

  • Personal Information: You’ll need to have your basic information at hand when dealing with insurance companies. This includes your driver’s license and the details of everyone else included in the auto insurance policy.
  • Vehicle Information: Make a note of the mileage and the date that you purchased the vehicle, as well as the make and model.
  • Vehicle Identification Number (VIN): You can get the VIN from the dealer or seller.
  • Driving Record: Note down all accidents and claims, as well as any driving courses you have completed.
  • Insurance Record: Finally, many car insurance policies will insist on at least 6 months of insurance before they supply you with a new policy.

2. Understand What They’re Looking for

Knowing what car insurance companies are looking for can help you prepare and allow you to secure some cheap and comprehensive coverage. Generally speaking, the things that have the biggest impact on your quote include:

  • Age: Young drivers are significantly more likely to be involved in an accident and to make a claim, so they can expect to pay more for motorist coverage. Policies should get cheaper as you age, but this changes once you reach your 50s and you will start receiving more expensive quotes thereafter.
  • Coverage: The extent of your coverage is key to the price of your policy. Do you need roadside assistance, how much liability coverage do you need, and what other coverage options should you consider?
  • Car Insurance Discounts: A safe driver in a new car with no claims can secure some big discounts on an auto insurance policy. There are even student discounts for teen drivers and policyholders who have completed defensive driving courses.
  • Location: Your location has a major impact on the cost of your auto policy, and whether you’re in California or Hawaii, Florida or New York, could impact your policy by tens of dollars.
  • Marital Status: You’re more likely to get cheap car insurance quotes if you’re married, as you’re statistically less likely to make a claim.
  • Renter vs Homeowner: A homeowner pays less, on average, than a renter.  The difference is slight but could save you tens of dollars a year.

3. Improve Your Chances of Getting Cheap Insurance

You can’t magically make yourself a few years younger (if only!) and if you’ve already made a claim on your insurance there’s not much you can do to reverse time and undo that claim. However, there are a few ways you can reduce your premiums and bring those insurance costs down, including:

Check Your Credit Score

Your credit score plays an important role in pretty much every financial decision that you make, whether you’re applying for a credit card, looking into life insurance or getting an auto insurance quote. 

A good credit score shows that you’re a trustworthy individual who knows how to handle your finances. It also suggests that you’re less impulsive. 

Of course, that’s not always the case and having a bad credit score doesn’t mean you’re impulsive and reckless. Far from it. However, insurance is based on statistics and probability, and statistically speaking, an individual with bad credit is more likely to be reckless than an individual with good credit.

Check Your Auto Insurance Coverage

There’s no point paying for full coverage if you’re driving a cheap car that costs less than $500. Be careful how you structure your auto insurance with regards to liability, collision coverage, and auto repair. Make sure you weigh the pros and cons against your car and the likelihood of encountering an issue and use these to set realistic and affordable premiums.

Look for Insurance Discounts

You can secure auto insurance discounts for a variety of reasons. One of the best of these is a multi-policy discount, which is offered to policyholders who have several different policies with the same insurance provider. For instance, you can purchase life insurance, property liability insurance, and more, with the insurer essentially offering you a wholesale discount.

There are also discounts for multi-car and driver policies, whereby you add several cars or drivers onto the same policy. But the reductions don’t stop there, and you should also look into the following:

  • Good driver discounts
  • Discounts for student drivers
  • Discounts for paying in full
  • Paperless discount (provided when you agree to paperless billing)
  • Company and employee-based discounts
  • Military discounts

Shop and Compare

Don’t accept the first policy you’re offered; don’t assume they’re giving you the best price and complete coverage. Work with different insurance agents, check multiple providers, and run some searches on comparison websites.

Bottom Line: Free Auto Insurance Quote

Most auto insurance companies provide you with auto insurance quotes for free, and there’s no reason why you should be paying money for these quotes. Be wary of any companies or sites that charge you for this service, remember to compare several quotes from several different companies, and once your policy begins, keep searching for discounts and doing what you can to reduce quotes in the future.

Source: pocketyourdollars.com