Posts from the ‘FICO Score’ Category

Emergencies can ruin your planned finances!

How about getting your morning tea at 12:00 hours and your lunch at late evening? This routine would be considered as terrible. So, to avoid such incongruity, everything in life should be planned. It is important that we know where we are investing, what you will do and where you go; so design your life in such a way to avoid any confusion or uncertainty.

When it comes to finances one need to be extra careful in handling money. An account of all; the daily expenses, extra expenses and any scheduled expenses are always necessary. However, how best you plan to keep your finances intact, it’s difficult to entirely secure it. Emergency or external factors may ruin or challenge your plans. A big emergency in form of natural calamity to secondary factors like shares downfall or loss of job etc. can leave you standalone.

To our rescue there are many funds in form of loan but what if you already own one? and are unable to bear its brunt. Would you take another loan to fulfill the requirement? Not a smart move, the move should be to smartly handle the situation and go for a loan modification.

Unlike home loans, obtaining a new car loan may be very challenging after a repossession, which stays on your credit report for a minimum of seven years. So avoid the pitfalls of “post-repo” car shopping by keeping the car you have and protecting your good name.  What would be the best option? The best option will be to go for auto loan modification to make your payments low and rescue from this hassle.

How about getting your morning tea at 12:00 hours and your lunch at late evening? This routine would be considered as terrible. So, to avoid such incongruity, everything in life should be planned. It is important that we know where we are investing, what you will do and where you go; so design your life in such a way to avoid any confusion or uncertainty.

When it comes to finances one need to be extra careful in handling money. An account of all; the daily expenses, extra expenses and any scheduled expenses are always necessary. However, how best you plan to keep your finances intact, it’s difficult to entirely secure it. Emergency or external factors may ruin or challenge your plans. A big emergency in form of natural calamity to secondary factors like shares downfall or loss of job etc. can leave you standalone.

To our rescue there are many funds in form of loan but what if you already own one? and are unable to bear its brunt. Would you take another loan to fulfill the requirement? Not a smart move, the move should be to smartly handle the situation and go for a loan modification.

Unlike home loans

, obtaining a new car loan may be very challenging after a repossession, which stays on your credit report for a minimum of seven years. Anthony Tribunella, the director of Auto relief group says, “Avoid the pitfalls of “post-repo” car shopping by keeping the car you have and protecting your good name.” What would be the best option? The best option will be to go for auto loan modification to make your payments low and rescue from this hassle.

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What’s CARD Act?

“The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 is a federal law passed by the United States Congress and signed by President Barack Obama on May 22, 2009”.                         Source:  Wikipedia

The CARD Act is approved to protect card holders from the unfair practices, sudden hikes in interest rates and changes in terms and conditions usually done by credit card companies. Following is the extract summary of the bill:

  • Credit card holders must be given protection against sudden hike in interest rates. A minimum 45 days notice must be provided to all card holders for any changes in interest rate so that they don’t feel cheated.
  • Regular payers must not be penalized by credit card companies. If a customer is regularly paying all his/ her bills on time for six months continuously, they must be charged their previous interest rate and not the hiked rate.
  • Credit card holders must be informed 21 days before the due date of their bill payments to avoid penalties.
  • Credit card companies usually mention some confusing terms such as ‘fixed rate’ and ‘prime rate’ as it is misleading for credit card holders. It is important that they set proper definitions of those terms.
  • The CARD act also gives the right to card holders to set a credit limit for their card. This will avoid over-spending and thus credit card companies will not be able to charge for non-payment.
  • Fair allotment of payments must be done by the credit card companies. The debts which have a higher interest rate must be cleared off first and then other bills.
  • The act also limits the amount of ‘over-the-limit’ fees that are usually highly charged by credit card companies to gain profit.
  • Vulnerable consumers will be protected from fee-heavy subprime credit cards.
  • Under this act, congress must collect the data on industry profits of credit card industry and present every year.
  • The credit card holders will have the right to get an explanation of the minimum amount he/she has to pay against the debts and interest charges.
  • A credit card cannot be issued to teenagers i.e. below 21 years or if issued they must present a co-signer who can give a guarantee to repay the debts.
  • Banks must provide a reason for participating on college campuses and at university-themed events.

Under the CARD act people will get a chance to improve/ raise their credit score. The rules under this act automatically helps card holders to pay timely as they will be more aware of their limits, interest rates, etc and they can avoid paying penalties resulting in improvement in credit score. A high credit score in itself has many benefits for availing loans. Thus, you can get a loan at a lower interest rate as you would have paid off all your debts on time.

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How Bankruptcy is related to Auto Credit?

Filing a Bankruptcy for individuals can be of two types, Chapter 7 and Chapter 13. The effect of Bankruptcy can stay on your credit score card for up to 10 years. There are certain things which need to be considered while planning to file for a bankruptcy.

If you are considering repossession for your vehicle, then this won’t be the right time. If repossession occurs before filing for bankruptcy, then it is implied that you are using bankruptcy to avoid paying your debts and after filing will indicate that you have not learnt your lesson. And if repossession occurs outside of repossession then you will find it very difficult to get an auto credit from anyone, including the subprime lenders, for many years.

If you have filed your bankruptcy under Chapter 13, you will need an order from the trustee to obtain addition loans. Without this order you are not allowed to apply for any kind of loans during bankruptcy.

The lender has the right to repossess your vehicle if you fail to make payments and you are filed under Chapter 7. You may also not be given approval for another vehicle loan from your lender after filing for bankruptcy.

If your case has been filed under Chapter 7, and you vehicle has been repossessed but the case has been discharged, you have a chance to obtain an auto loan from a subprime lender. However, a low interest rate is not guaranteed. This type of loan is called as a bad credit auto loan.

Repossession is of two types, i.e. voluntary and involuntary. In an involuntary repossession, your vehicle is taken away by a repossession service whereas a voluntary repossession happens when the vehicle is brought to a place decided by the lender and then surrendered. Though there is not much difference in both types, it is still named differently.

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Dreaming of owning a SUV? Check your ‘FICO Scores’ before applying an Auto Loan

Most of the auto lenders will look into one of your FICO® scores to determine the rate they will offer you.

What is FICO?

FICO, created by The Fair Isaac Corporation as the first credit scoring system for a bank credit card in 1970, is the representation of your credit worthiness, i.e., your risk to your auto lender. If your score is less, you will not be fit for a loan. So, more your score, less risky you are. That shows you will not run away, but you will pay!

When your FICO gets affected?
There are few factors (by which you can Guess) affecting your Credit Score. (Source: wikipedia)

  • 35% — Payment History: Late payments on bills, such as a mortgage, credit card or automobile loan, can cause a consumer’s FICO score to drop. Paying bills as agreed over time will improve a consumer’s FICO score.
  • 30% — Credit Utilization: The ratio of current revolving debt (such as credit card balances) to the total available revolving credit (credit limits). Consumers can improve their FICO scores by paying off debt and lowering their utilization ratio. The closing of existing revolving accounts will typically adversely affect this ratio and therefore have a negative impact on their FICO score.
  • 15% — Length of Credit History: As consumer’s credit history ages, assuming they pay their bills; it can have a positive impact on their FICO score.
  • 10% — Types of Credit Used: (installment, revolving, consumer finance) – Consumers can benefit by having a history of managing different types of credit.
  • 10% — Amount of credit obtained recently: Multiple credit inquiries for a consumer seeking to open new credit, such as credit cards, retail store accounts, and personal loans, can hurt an individual’s score. Applying for lots of new credit in a short period of time is also viewed as risky and can cause a drop in an individual’s score.

“Sometimes we do mistakes not unknowingly but well knowing them! We are aware of these things but we “Realize” it when a (bit) tough situation, like unable to pay your loan, Repossession of the vehicle, late payment, loan for higher interest rate, comes. This may seriously affect your Credit Score. (Repossession of your vehicle will definitely reduce your chance of obtaining a loan for the next vehicle)

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