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.
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:
I have a long, established, positive credit history.
FICO score 720 and above.
I use my credit wisely and never miss a payment.
FICO score 690 - 719.
I have a positive credit history with no recent late payments.
FICO score 670 - 689.
I am responsible with my credit and usually make my payments on time.
FICO score 650 - 669.
I try to be responsible with my credit but have had some recent credit challenges.
FICO score 630 - 649.
I have a number of issues with my credit.
FICO score 610 - 629.
I have significant credit issues or have very recently established credit.
FICO score 580 - 609.
I have an extremely poor credit history or I have no credit history at all.
FICO score 579 and below.
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
- Length of credit history: How long have you had your credit accounts?
- New credit and credit inquiries: Have you recently taken on more
- 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.