Understanding Auto Loan Financing

Auto Loan

Cars, trucks, motorcycles, RVs or boats, they’re all expensive.  It’s unusual that these purchases are made in cash.  Whether buying a new or used vehicle, most people choose to finance the purchase and make specified payments over a designated period of time.  Financing can be arranged in two different ways.

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How Will Borrowing Money Affect My Credit?

Getting a Loan

Taking out a loan can help you build your credit.  But remember, to get that benefit, loans must be paid back in full and on time, and according to the terms of the loan agreement.  When these terms are not met, the lender can take steps to repossess collateral and collect any money that is owed.  As a result, the defaulted loan can be listed negatively on credit reports and lower your credit scores.

Let’s take a closer look at how this all works.

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E-Signing Your Rights Away

In our increasingly paperless society, more and more companies are requiring consumers to sign contracts electronically, called “e-signing.”  You may have encountered this yourself.  A door-to-door salesperson promises you a deal that sounds almost too good to be true, but only if you sign their electronic tablet on the spot.  An online lender guarantees to get you money now, but only after you check the boxes on the website.  The convenience seems hard to pass on.  You don’t even have to deal with the finicky fine print! Instead, you get what you want, and you can get it now.

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Who Can See Your Credit Report?

Your credit report contains quite a bit of information about your financial history. It includes personal information, all of your open credit accounts and whether or not they are in good standing, and any negative marks, such as accounts in default or vehicle repossessions. Due to the sensitive nature of this information, not just anyone can see a copy of your credit report.

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What do Auto Lenders check on your Credit Report?

When you apply for an auto loan, lenders will perform a credit check on you. Your credit affects whether or not you’ll be approved for the loan, and the interest rate for the loan. The interest rate and terms of the loan have a major impact on how much you will end up paying overall, so it’s important that you know where your credit stands BEFORE you apply for an auto loan. When you apply, lenders will look at the following components of your credit file.

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Get to Know Your Credit Report

Checking your credit report regularly helps you understand where you stand when it comes to your finances. Many organizations, especially lenders, use credit reports as a way to get to know a consumer’s spending habits. They can be used to determine whether or not to approve someone for a new line of credit, a home loan, or a rental property. Although credit reports include a significant amount of information about you, there are certain things that will not be included.

What’s On Your Report

Credit reports contain the following information:

  1. Identifying information, including your name, address, social security number, employment information, and birthdate.
  2. All credit accounts you’ve opened, such as credit cards and loans. This section includes both open and closed accounts and provides details on each account, such as the type of account, date it was opened, credit limit, account balance, and all past payments made.
  3. All inquiries regarding your report from the past two years. Inquiries often come from lenders checking your credit before approving you for a loan or line of credit.
  4. Negative information, such as late payments, car repossessions, foreclosures, defaults, tax liens, collection accounts, judgments and bankruptcies.

What’s Not On Your Report

While credit reports have a majority of your financial information included, there are certain items that will not appear.

For example, credit reports list your employers but do not contain further information regarding your employment status or salary.

While information regarding lines of credit are listed, bank account balances, retirement accounts, 401k, and investment or brokerage account information is not included.

Also, your credit report will not be affected by marriage. After you’re married, your credit report and credit score remains independent of your spouse’s. Marriage will only affect your credit for accounts you and your spouse open together.

How to Obtain Your Credit Report

The three credit bureaus (Equifax, Experian, and TransUnion) are each required to provide one free credit report to consumers every 12 months. In order to obtain these reports, write a letter to the bureaus and request your report. Be sure to include two forms of identification, such as a current driver’s license and utility bill, with your letter.  You should receive your report within approximately two weeks.

Monitor Your Report Regularly

Credit reports are an effective way to determine if you’ve been a victim of fraud or if any mistakes have been made regarding your credit history. You should carefully review your credit file and report any suspicious listings. If you believe that you are a victim of identity theft, you should take steps by notifying the police, the credit bureaus and the creditors. If you have disputed errors and the credit bureau has not corrected your report, you can contact an attorney to discuss whether your consumer rights have been violated. Checking your report regularly is a good idea so that you can dispute errors as soon as possible.

Why It Matters

Credit reports are essentially a compilation of your credit activity. They allow lenders and other organizations to get to know you. When you learn how to read and interpret your credit reports, you will become confident to dispute any inaccuracies, and handle the errors in a timely fashion.  Viewing your reports regularly, helps to eliminate any surprises when you apply for loans or other lines of credit, apply for a job, or attempt to rent an apartment.

Seek Legal Advice

Flitter Milz is a nationally recognized consumer protection law firm based in suburban Philadelphia, Pennsylvania, that represents consumers in cases involving credit reporting accuracy and privacy violations.   Contact us for a free consultation to discuss problems with your credit reports.

How Much Should I Spend on my Credit Card?

Credit cards can give you a lot of flexibility when it comes to your finances. When you get a credit card, you have the freedom to make purchases even when you don’t have any cash on hand. As long as you always spend within your means and make payments on time, your credit accounts can help build a well rounded credit history and reflect positively on your overall financial health.

Most consumers know that every credit account has a spending limit. If you exceed this limit, purchases may be declined. This doesn’t mean that you want to spend just up to your limit every month. If you consistently max out your credit cards, or come close to doing so, it will negatively affect your credit and lenders will see you as a high risk borrower. As well, if balances are not paid off at the end of the month, interest is charged on the remaining balance, plus all new charges.

How much credit do I have?

The easiest way to see your credit limit is to log in to your online account or check the monthly statements that you receive in the mail. You should see the available credit on the account clearly listed.

How much credit should I use?

Keep your credit utilization ratio low to continue making the most of your credit accounts. Ideally, you don’t want to spend more than 30% of your available credit. This means that if your account has a $1,000 credit limit, you should avoid spending more than $300 each month.

If your available credit is fairly low and you’re having a difficult time keeping your spending below 30%, consider making multiple payments per month to keep your balance down. Credit companies typically report balances to the bureaus at the end of the month. When it’s reported, you want your usage to be above 0%, but below 30%. This shows that you’re a responsible borrower.

Can I increase the amount of credit that I have?

If you regularly use more than 30% of your available credit, it might be a good idea to see if the creditor is willing to increase your limit. The creditor will probably need to perform a hard inquiry to assess your creditworthiness. Hard inquiries temporarily have a negative effect on your credit.

Creditors are often willing to increase your limit if you make payments on time and in full each month, or if you’ve had an increase in income.

You could also consider opening another credit card. Each individual account has its own set limit, so opening a new account will give you an additional 30% of the new account’s limit. Keep in mind that opening another account also requires a hard inquiry on behalf of the creditor. For this reason, it’s best to choose between opening a new account or requesting that an existing creditor increase your limit. This way, you avoid two hard inquiries.

Seek Free Legal Help

Flitter Milz is a nationally recognized consumer protection law firm that represents victims of abusive collection tactics.  Contact Us for a free evaluation of contact that collectors have made with you.

How to Monitor Your Credit

Your credit history plays an important role in your ability to get approved for new lines of credit, whether it’s a new credit card, a personal loan, or another type of borrowing agreement. It also affects your ability to rent an apartment, or possibly be hired or promoted in your job.

Review Credit Reports & Dispute Errors

Do not wait until you’re ready to apply for a loan to check your credit. Monitor your credit reports regularly to see that your information is accurately reported.  If there is an error, send written disputes to the credit bureau.  You do not want to be denied for a loan because of someone else’s error. Credit applications are considered hard inquiries on your credit file, and denials could result in lowering your credit score.

Seek Legal Help

Flitter Milz is a nationally recognized consumer protection law firm that represents victims with credit reporting privacy and accuracy problems. Contact Us for a free consultation to discuss errors on your credit reports.

Tips on Purchasing a Car

The decision to purchase a new vehicle is exciting. Whether it’s your first car purchase or not, the freedom of mobility and independence is invaluable. You can go anywhere, whenever you like.

But cars are expensive. Buying a vehicle that suits your needs and your budget can be a challenge. Often, the vehicle that you would like to drive may not be the one that you can afford. Become an educated buyer.

Buying a car is a two step process

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Credit Report Listings with Negative Impact

Your credit report plays a critical role in your overall financial health. The information that it contains will affect your ability to get new lines of credit for auto or personal loans, rent an apartment, and sometimes even get a job or promotion. It’s important to understand all of the information on your report and what types of negative listings may appear.

Every person’s credit report has the following:

  • Personal information.  Your name, current and previous addresses, social security number, date of birth, and possibly current and previous employers.
  • Credit accounts.  Current and previous credit accounts including details such as payment history, credit limit, monthly payment amount, and current balance. Auto loans, student loans, credit cards, and any other type of credit accounts in your name will be listed.
  • Inquiries. Hard inquiries are listed on your report when there is an application for new credit, and may remain on your report for up to two years. Several hard inquiries, which may be viewed by a lender as high risk, may lower your credit score and impact your ability to be approved for credit.  Soft inquiries are listed by companies offering to promote a special product or service and do not hold negative weight on your report.
  • Negative listings and public records. Late payments, debt, accounts in collection, repossessions, accounts in default, bankruptcies, foreclosures, and judgments are all listed on your credit report. Negative information can stay on your report for up to seven years and will lower your credit score. It may make it more difficult to get approved for new credit, or could result in higher interest rates on any loans or credit.

What you can do about negative listings

Negative listings on your credit report are frustrating, especially if you’re making an effort to improve your financial situation.  Take steps to pay down debt over time.

-Monitor your credit reports
-Dispute errors with the credit bureau and credit furnisher
-Pay your bills in full and on time
-Make a budget and stick to it

These positive actions will help improve your credit and show that you’re on the right track, even while the negative listings remain.

Seek Legal Help

Flitter Milz is a nationally recognized consumer protection law firm that represents victims of car repossession, credit reporting errors and unfair debt collection practices.  Contact Us for a free consultation to determine whether your consumer rights were violated.