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Credit Talk

Unless you are paying cash for your next vehicle up front the only way to take one home is either to finance or lease it. Financing requires making monthly payments to pay for the purchase of the vehicle. Leasing involves paying for the use of the vehicle over time plus any lease charges. Both always require submitting your personal credit to lenders . The benefits of good credit can open many doors. Big time ticket items like cars are often purchased on credit. Using an extension of your own credit to buy or lease the vehicle can be advantageous. Credit is convenient, but it is not free. Creditors charge fees for their financial flexibility. Every creditor charges in a different way so you must be careful when you enter in agreement with them. Typically the fees they charge include interest as well as points against your credit score.

Credit Rating

Your personal credit rating is a self-assessment of your spending , billing habits and your overall debt load. Keep in mind your past credit activity affects your score and can limit you in terms of getting the lowest rates.

Here's a guide to help determine your credit rating:

Rating Description
Excellect I have a long, established, positive credit history.
FICO score 720 and above.
Great I use my credit wisely and never miss a payment.
FICO score 690 - 719.
Very Good I have a positive credit history with no recent late payments.
FICO score 670 - 689.
Good I am responsible with my credit and usually make my payments on time.
FICO score 650 - 669.
Fair I try to be responsible with my credit but have had some recent credit challenges.
FICO score 630 - 649.
Poor I have a number of issues with my credit.
FICO score 610 - 629.
Very Poor I have significant credit issues or have very recently established credit.
FICO score 580 - 609.
Extremely Poor I have an extremely poor credit history or I have no credit history at all.
FICO score 579 and below.

Credit Score

Your credit score can be your best friend or your adversary. Your goal is to maintain a good credit score, as these scores are used by creditors when they're deciding whether or not to extend credit to you. The most commonly used credit scores generated by the credit bureaus are often referred to as "FICO® scores," even though each of the three major credit bureaus has its own name for these scores. FICO® stands for Fair Isaac and Company, the company that produces the software used by many credit bureaus to calculate your credit score. These scores range from 300–850: the higher, the better.

Over the years, this three-digit scoring system emerged as a way to compare how the information on your credit report compares with each bureau's credit history on hundreds of thousands of other consumers.Basically, your credit score suggests to creditors how likely you are to repay your debt. Because your credit score is such an important aspect of obtaining an extension of credit, multiple factors are used to compute your credit score:

  • Past payment history: Have you paid your credit accounts on time?
  • Amounts owed: How much credit you have available vs. how much you owe.
  • Length of credit history: How long have you had your credit accounts?
  • New credit and credit inquiries: Have you recently taken on more debt?
  • Types of credit established: May include credit cards, home mortgages and car loans.

The truth is, there is no one score. Every bureau has its own scores for different purposes, and each bureau uses its own method of calculating your credit score based on the criteria listed above.

Additionally, it's quite probable that at any given time, each credit bureau will report a different credit score for you. They all attempt to remain as current as possible, but the resulting score is only as accurate as the information they have available. This is why you should check your credit scores from time to time.

Creditors may use the scores they obtain from the bureaus in their own formulas to determine a credit score of their own. While we can't identify the factors used by every creditor in identifying your credit score, it's safe to assume that these formulas incorporate your credit bureau score, as it fluctuates from time to time. Fluctuations can be used as a guide to understanding your financial behavior (how likely you are to repay a debt). It's a tough job trying to keep track of everyone's credit. While the credit bureaus try to stay on top of your credit history, sometimes things are missed and the different bureaus may maintain different data on you. Therefore, your score from any given credit bureau is a reflection of the most recent information they have on you, so it's possible for your credit score to change by the day. Here's where you come in. To remain in good credit standing, you must take a proactive approach to guard your credit history.

Credit Tips

If you've looked through the Credit talk and Your Credit sections above, you should have a basic understanding of what credit is, how it works and why you need it. The goal now is to help your credit remain in good standing. So here are our top four tips for maintaining good credit:

Pay Your Bills on Time
Establish a process to make your payments well before the due date, so you can help avoid late fees and other possible charges. Also, make sure you have the money in your account – you can write a check or schedule an online payment, but if you don't have the cash, you won't be on time. Making payments on time is not only simple; it's one of the best things you can do for your credit score.

Be Proactive
There's a wealth of information out there on the Web and in the media that addresses issues that you may have with your credit and how to maintain good credit – use it! And be sure to periodically review your credit report for errors. If you issue a complaint, the bureau and your creditor must investigate it and correct or remove any information that isn't accurate. Check your credit report at each of the three major credit bureaus:

Equifax: 800-685-1111

Experian: 888-EXPERIAN

TransUnion: 800-888-4213

You can contact the agencies directly to get a copy of your credit report. Or you can visit to request your reports online.

Use Credit Wisely
Creating a budget (even a high-level one) will show you where your money is going – and this is powerful knowledge. Armed with this info, you'll find it's much easier to track outstanding debt and work toward paying it off.

Inform Your Creditors of an Address Change
Notify your creditors immediately when you move, so you can receive and pay bills on time.

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