How Credit Scores Affect Buyers?!
All You Need To Know About Credit Scores Before Buying Used Vehicles- Credit scores are important to establish your financial reputation. Higher scores mean low-risk customers, so lenders can give them the best deals. However, some lenders only need proof of income to approve you.
Tuesday, March 28th 2017
How credit scores affect buyers is a question on so many buyers’ mind. In the old days, everyone in the village might have known everyone else. So asking around the village in the old times, did give lenders the feel for how much to trust people to pay back the money. And if you did not make your payments on time, your reputation would be ruined and no one else would want to lend you money for fear that you will not pay it back. But today, our world is huge and word-of-mouth is just not good enough. Lenders hence look for alternative ways to check how trustworthy are their clients before they give them loans. These lenders base their decisions heavily on your credit scores instead of word-of-mouth. Using your credit scores, they can get your authentic, unbiased credit history without needing to ask around.
There are three credit agencies that you should be aware of:
2. Equifax and
Your credit scores usually do not match from all three bureaus. They all have slightly different ways to calculate your credit scores. They also use different cycles to calculate the credit scores. In addition, many lenders send their customers’ payments records to one or two agencies and not to all three. This can mean that your good records or your bad records are not showing in all three reports and hence your scores can vary significantly. This, on the other hand, can effect you when seeking financing from lenders. If they only see the credit score that happens to be the lowest one, then they would treat you differently than if they see the credit score that happens to be your highest one.
Cut off percentages for calculating credit scores:
Basic Credit Scores range from 300 to 850. The way the scores are calculated often follow these general rules:
35% for payment records, whether they are good or bad!
30% for amounts owed compared to available loan limits, larger limits are better!
15% for length of credit history, older ones are better!
10% for the types of credits used, different lenders screen this differently!
10% for new credit requests for new loans, each request drops the score!
Uses of Credit Scores:
Of course, loans from traditional lenders are directly affected by your credit scores. Since higher scores indicate more financial trustworthiness, the lenders love to lend people with the highest scores. This reduces their risk of losing on their money loaned to customers. People with higher credit scores can be given better loan deals with the lowest interest rates as incentives. Banks are really not helping grow the economy, because their goal is to make money off of money and not whether your home mortgage flourished, or your business became a success. They just want their money back with profit! But lenders who enter as partners in the deal, which are rare, care about how wise you are going to use your money because they can profit if you profit and lose if you lose. For example, in-house financing dealers use their money directly to finance your vehicle. They know that their vehicles need to keep working and stay in top shape as long as possible because customers are likely not to make payments on vehicles that are “lemon” deals and break fast. Wise Buy here pay here car dealers try their best to ensure that the vehicles work for a longer time than the duration of the loan agreement, which is great for customers.
When you are looking for work, your employer is authorized to pull your credit report as well. This comes from the belief that people with great credit records are honest and responsible workers. Not all employers pull your credit report but when they do, they only pull your credit report and are not allowed to pull our credit score as well. This is true because most states restrict employers from pulling credit scores but allow them to review the credit report.
Insurance companies also seek to pull your credit reports and scores. This has to do with data showing that people with great credit records are less likely to need to file insurance claims. Whether this is because they are richer and do not need to file as often because they are not in dire need of money or because they are people who take little risks in life and hence cause fewer accidents is unclear.
Different Credit Scores And Reports
There are different credit scores that are generated to different lenders. If lenders are credit card companies they are looking for the credit cards portion of your credit report more than your mortgage payments record! And vice versa, if a mortgage company is looking at your credit score, they care more about your past mortgage payments more than your credit card payments. This is why credit agencies generate classic scores, bankcard scores, mortgage scores as well as auto scores specifically generated to the specific lenders in mind.
Buy Here Pay Here Dealers Can Accept All Credit Scores
Buy Here Pay Here
The Buy Here Pay Here car lots understand that credit scores are often not good predictors of risk. Someone with a great score might still not make their payments if they no longer have a job. This is why they base their financial judgments on employment rather than scores. Many lenders do the same and base their financing approval after they review the assets and employment of their clients.
What happens when customers do not make their payments on time?
Late fees are fair game! However, some lenders refuse to announce late fees guidelines because they feel that if they tell you that there are late fee, it is as if they are ok with you making your payments late!
Based on the agreement entered, some dealers have you sign that you will not be late for even a day so they will call you to get their money back.
Of course there is the risk that your vehicle will be towed or repossessed until the payments are made as well as a penalty and towing fees.
Vehicles can have GPS systems installed by the dealers with automatic shut down systems enabled to force the customers to make the payments on time. This can be done via an online access system where the dealers simply press a button to locate and shut down the vehicle. The Buy Here Pay Here Car Dealers can even trace your life travels to confirm information that you entered on the loan application. So for example, if you entered that you live somewhere and work some where, but your vehicle is parked every night at a different address and you travel each day to work at a different work address, then you would be caught lying by the GPS system installed and the deal can be terminated if the car dealership deems it necessary!
Risks with buying used vehicles:
Rolled Back Mileage: Many vehicles that get used for traveling from state to state, can keep their shapes sharp but are really over used mechanically. Some sellers hence roll back the miles of the vehicles illegally to keep the prices of the vehicles up to make higher profits. One way to catch this is be looking at the car report. Any insurance claim or trade of hands would have triggered the miles to be reported so a sudden reversal of miles can send an alarm to you that this vehicle has been tampered with. Also, checking to see if the vehicle has tires that match the mileage shown is another way to confirm if the vehicle’s miles has been rolled back.
Title washing: When vehicles have “salvaged” titles, the titles are deemed “not-clean.” Some sellers aim to wash the title if it is unclean by moving the vehicle from state to state until the word “salvaged” is dropped from the title. Then they sell it as if it had a clean title. A title that is not clean can cause the vehicles’ prices to drop dramatically so car buyers need to be aware of this and ask for written title guarantees.
What Credit Score Is Needed To Get Approved for Financing?
Many people ask this question and want a definite answer. However, there is no definite answer. While traditional dealers often refuse people with scores lower than 550, other financial elements can sway their decision making process. For example, a great paying job or larger ready down payments can show that such customers are lower risks. However, people with scores from 550 to 720 are usually approved at traditional dealers but with higher interests. And customers with scores higher than 720 can have the best financing offers from the traditional dealers.
However, even after all that is said, there are Buy Here Pay Here Chicago dealerships and other famous dealership locations that are available. These dealerships are not your average traditional dealers and do not require any credit scores at all; and having good credit scores may not alter their decision at all. Since they look for the customer’s proof of income and make their financial decision on that, they have done away with the credit scores all together!
Hence the answer to the common question: What Credit Score Is Needed To Get Approved for Financing? No pre-set number as each case is different!
For more help, please refer to agencies like Experian or get your credit directly from https://www.annualcreditreport.com/index.action
Thank you for visiting our site today Tuesday, March 28th 2017 .