Month: November 2017

Protecting Your Credit Score During The Holidays

If your credit score is the last thing on your mind, you’re not alone.

During the hectic holiday season few consumers give it a second thought. This makes it easy for them to hurt it without realizing it.

There are steps you can take to ensure your credit doesn’t take a hit, so you can relax and enjoy this festive season.

 

Why Protecting Your Credit Matters?

 

There are several reasons why it’s important to keep your credit score in mind over the holidays. You don’t want to start the new year off learning that it has drop several points.

Lower scores will make it harder for you to get loan approval, for everything from vehicles to mortgages and credit cards. If your application is approved, you will be paying higher interest rates. Even though it only took a few weeks for it to drop, consumers often find that it can takes years to repair.

 

How to Keep Your Credit Score from Falling

 

Want to protect your FICO score and credit history? Here are a few steps that will help you keep it safe.

  1. Don’t open any new lines of credit.

The holidays are a time for presents, vacations and festive gatherings. This also means you will probably be spending more money. It might be tempting to apply for a new credit card, but doing so will hurt your score. Every time you fill out a credit card application, an inquiry is made.

The loss of a few points is temporary, but it can still impact you financially. You might find it more difficult to be approved for a low interest loan. How many points you lose, and how long it takes to recover, will depend on the average age of your other accounts or financial history.

 

  1. Try to keep balances low.

One of the main factors that determines your credit score is the total amount of your debt. This includes credit card balances. Scores often drop when card holders are close to reaching their limit.

According to an Experian survey, 31 percent of holiday shoppers maxed out their credit cards.

Consumer Education Manager for Experian, Sandra Bernardo, recommends using 25 percent or less of your available credit. Budgeting for the season ahead of time, will help you avoid running up your credit card debt.

 

  1. Don’t take out a personal loan.

Personal loans might be a smarter decision financially. They come with fixed interest rates that are lower than ones offered by credit cards. You also know the date the last repayment will be due, and exactly how much you can spend.

Even though these loans do have advantages, there is a downside. You are opening another line of credit, and this can affect your score. There will be an inquiry into your history, and this temporary dip could last for several months. If other lines of credit are already maxed out, adding a new one will add to your debt total. This is also factored into your credit score.

 

  1. Avoid payday loans.

Rowe Price, a global investment management firm, noted that 11 percent of parents surveyed took out a payday loan during the holidays. The one advantage of these loans, is that they do not appear on your credit history.

However, there are several downsides. Interest rates are higher, and repayments are typically due weekly. Failure to keep up with your payments usually send your account to a collections bureau. This will appear on your credit report, and it can take up to seven years before it is removed.

 

  1. Pay bills on time.

It’s easy to forget due dates for bills during the busy holidays. This is one thing that you don’t want to do.

35 percent of your FICO score is your payment history.

Even one late or missing payment can cause it to drop.

Setting up automatic payments is the best way to make sure your bills are always paid on time. This does mean that you will have to pay attention to your bank account balance to ensure there are enough funds to cover the payments.

 

  1. Avoid holiday scams.

Unfortunately, the holidays come with plenty of scams. Falling for one can have a devastating effect on your credit. The best advice to follow is “if the deal sounds too good to be true, it probably is.” Do not give out any personal information over the phone or in response to an email.

Emails advertising significant savings from retailers, if you fill out a short online form, is one of the most common holiday scams. Once they have your name, birthdate and social security number, it is easy for them to assume your identity. Phone calls from charities asking for a donation is another favorite ploy with scammers.

 

  1. Keep an eye on your credit report.

The best way to protect your score is to monitor it. You can check it for free through the online site, Credit Karma. Most banks also offer credit monitoring tools at no cost, if you have an account with them. You are entitled to three free credit reports a year from the credit reporting bureaus; Equifax, Experian and TransUnion.

Monitoring your report allows you to catch any mistakes and petition to correct them. It also allows you to watch for any signs that your identity might have been stolen.

 

Protect Your Credit and Enjoy the Holidays

 

The holidays are a busy time of year, and can quickly become expensive. This doesn’t mean that your credit score has to suffer. Have a budget in mind that includes surprise expenses, do not open new lines or credit and monitor your score.

With a little financial planning and attention, you can have a merry holiday and keep your credit score in tack.

Holiday Car Buying With Bad Credit

Promises of instant approval, no down payments and low interest rates make it almost impossible to ignore car dealership holiday ads.

Especially, if you have bad credit. While, this might sound like the solution you need to put yourself behind the wheel. It is important to find out if holiday car buying deals will hurt or help you financially.

 

3 Reasons to Buy a Vehicle During the Holidays

 

If your auto loan application has been turned down due to a poor or no credit, the end of the year might be the best time to try again.

  1. Automobile sales are typically down in November and December.
  2. Buy Here Pay Here and traditional dealerships are struggling to meet sales goals.
  3. Car lots are trying to get rid of old models to make room for new inventory.

All this combined, often means that they are more inclined to take a risk on buyers with less than perfect credit.

Depending on your FICO score, you might even be able to work out a deal that includes less money down or a lower interest rate.

If you have a trade-in, it can increase your chances of approval.

 

How Holiday Car Deals can Hurt You

 

Even with the incentives and advantages, buying a car over the holidays can hurt your credit if you’re not careful. Some pitfalls that you’ll want to avoid include,

  • Purchasing a vehicle you can’t afford. Just because you were approved for a new car, doesn’t mean you have to accept it. Will you be able to make the higher payments on time? What about your other financial responsibilities? It can be tempting to “treat yourself”, but choosing an older, less expensive model can ensure your credit doesn’t take a hit.
  • Not reading the fine print. Not all dealerships fully explain the loan agreement. This could be financially devastating. Be sure to read the entire loan agreement, especially concerning interest rates. The last thing you want is to be surprised when it suddenly increases.
  • Loan agreements that let you skip a month. A month without a car loan payment might sound great, but it can hurt you. The skipped payment will be tacked onto the end of the loan or it could be added to the following month, which means the amount due just doubled.

 

Before You Go to the Dealership

 

There are a few steps you can take to ensure you get the best deal on a car loan.

Pre-approved Auto Loans

If it is possible, having pre-approved financing will limit your risk of signing for an auto loan that could hurt your credit. Your credit history and other factors will play a role in determining your chances for pre-approval, but it is worth it to take the time and apply.

Know What You Need

It will be harder for a salesperson to talk you into a vehicle you really can’t afford, if you know exactly what you need. Think about the type. Do you need a sedan, pick-up or is a compact car enough. You also want to consider mileage and model year. Knowing before you go is important, whether you’ve been pre-approved or are looking for a deal.

 

Questions About Holiday Auto Deals

 

Considering buying a car this holiday season, but aren’t sure if it is good financially? The answers to these commonly asked questions might help you make the right decision.

Are there different types of deals?

Some incentives often offered at Buy Here Pay Here lots include,

  • Cutting prices on all vehicles. In some cases, by as much as 10 percent. This can put many makes and models in your price range.
  • Rebates are frequently offered by the manufacturer. The only downside is that it is usually only on newer models. Auto buyers with low credit scores often find it difficult to get loan approval.
  • Dealerships often offer lower interest rates on auto financing. Sometimes, regardless of past credit.

Can I save money on holiday auto deals?

It is possible to save money when you buy a car during the holidays. Your credit score will determine how much, and what deals you qualify for. Older model vehicles will often be your only choice, but if the price has been reduced, this could be the ideal time to buy.

Will all vehicles be on sale?

When it comes to most used and older models, they will probably be on sale. It is up to the discretion of the dealership. New vehicles typically won’t be reduced, unless the car lot has a high inventory.

Can I get low interest rates with my bad credit score?

Some BHPY auto loans might approve you for a low interest auto loan, but traditional dealerships probably won’t. If you want to increase your chances of approval, a co-signer or larger down payment can help.

Will insurance premiums be less expensive too?

Unfortunately, the cost of auto insurance does not change because you bought a vehicle during the holidays. It will still be based on make and model, along with mileage. Your driving record will also be factored in. The cost of insuring your new car should be considered, before you buy.

 

Celebrate with a Holiday Car Deal

 

The holidays can be the perfect time to buy a vehicle, but you do want to be careful.

Know what you want, and can afford. Carefully read the loan agreement, and don’t be afraid to ask for a better deal. Even though your credit history may exclude you for some offers, there are still plenty of dealerships that will be willing to work with you. Who knows, maybe this holiday season you’ll be able to get the vehicle you need.