Regardless of whether or not you have ever dealt with credit in any form, checking and understanding your credit report is imperative to your financial security. Credit reports are often easily obtained and not difficult to understand. So what makes up a credit report and why is it so important to keep tabs on it? Read below for answers.
Credit reports basically consist of credit scores that are based on a mathematical formula. The result of this formula applied to your financial situation is intended to “predict" how efficiently you will pay your bills. What does your credit effect? Well, pretty much all major purchases will be affected by your credit score, from a new car to a new home or computer. Poor credit scores can result in a difficult time purchasing these large ticket items. If your credit score is poor, discuss with your bank or other financial institutions ways to repair your credit.
There are three valid and equally important reasons for keeping tabs on your credit report. The first is simply constantly being “in the know" of your financial situation. You need to know what is going on with your finances at all times and this is one good way to ensure that. The second is that mistakes happen. Things can be charged twice against your credit cards, or a glitch could have occurred keeping your electronic mortgage payment from being posted. If your credit score is poor, you need to take a closer look at your credit card bills and statements, as well as your mortgage statements.
The third reason is perhaps the most important: preventing identity theft. Identity theft is becoming an increasingly large problem in the United States. One of the most common effects of identity theft is a debilitated credit score, as credit cards and bank accounts are often used to fund elaborate purchases, cash advances and other forms of financial theft. If you know that you are paying your bills on time, paying your mortgage on time, etc, but your credit report is in bad shape, you know there is a problem and you need to investigate it further.
The Problem I was driving home from the store the other night when I noticed a license plate that made me laugh to myself and then I proceeded to feel sorry for the poor sap driving. The plate read "0 DOWN". It was a white, shiny, new Ford Explorer (probably an 06'). Here's what really got me about the caption: Not only did this consumer purchase a brand new vehicle with no money down, but he was proud of it. DUMB! Commercial advertisements and society as a whole embeds the "Buy Now, Pay Later" method into our heads and it works so well that around 90% of all consumers who purchase new cars do not put $5 down on the vehicle before signing the papers. The sad fact is, is that the average new automobile loses $3,000 as soon as it leaves the lot. Technically, you have gone into debt for something that loses value before you even use it. As if this wasn't depressing enough, the less money you put down on a car and the worse off your credit is, the more you pay for the car. If this isn't one big sand trap I don't know what is!
The Role of Your Credit Report Your online credit report is affected 2 ways when you buy a new car with no money down. First let's look at the role it plays after you decide you NEED that shiny new sports car. The mass majority of consumers are thinking of one thing when they sit in the 'sales chair' to go through the paperwork: driving the car home (man this is bringing back some bad, bad memories). In order to do this you will need to finance the vehicle which requires pulling up your credit history and your credit report. This can easily be done online right in the sales office while you look around to make sure no one else tries to sneak off with your new toy. The worse off your credit report is, the higher interest rate you will pay. (This is fine though as long as you can still afford to buy food every other week and pay a few bills here and there.) The other role that your credit report plays in this game is the after-effect. The average new car buyer's car payment is 25-30% of their total income. This creates a nice, big road block on your credit report in itself for when you are ready to make another large purchase. Not to mention when you fall behind on even one payment and your credit file takes a hard blow. Try to keep these factors in mind next time the kid in you tries to make a financial decision.
The Solution Well you're not going to like the best solution but here it is anyway: PAY FOR THE CAR IN FULL! If you saved the car payment every month in a good money market account; not only would you save time and money, but when you walked into the sales office with piles of hundred dollar bills you would get quite a deal! Okay, so you're more likely to win the super lotto than do that right? Well here are a few ideas. As long as you practice a few you might get ahead of this nasty game a little bit or at least protect your online credit report. First, consider getting a 2 or 3 year old car. You can still get a shiny one and the previous owner will have taken the major depreciation of the vehicle passing the savings directly to you. Second, if you can, try waiting and searching to find the best deal possible. Trust me, there is more than 1 of those cars in the market. Third, put something down. Anything! For starters you could put down 10 to 15%. This will lower your monthly payment, lower your interest rate and maybe even cut your payoff time down. Lastly, get a bargain. Don't settle for the asking price by any means. Be patient and keep control of your focus. One definition of maturity is learning to delay pleasure.
To read more about how you can get your online credit report free with no obligations, see what is on your file and find out how to fix your credit report go to http://www.cleancreditonline.com
Both Sara Chambers & Tom Justice are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Sara Chambers has sinced written about articles on various topics from Finances, Auto Insurance and Computers and The Internet. Sara Chambers is a marketing consultant and an internet content manager for . Sara Chambers's top article generates over 14800 views. to your Favourites.
Tom Justice has sinced written about articles on various topics from Free Credit Report Score, Debts Loans and Credit Cards. Tom Justice is the webmaster for Clean Credit Online and does all the designing, marketing, SEO and maintenance for the site. He has a passion for personal finance and how the economy and consumers are affected by money. To see how you can use Clean Credi. Tom Justice's top article generates over 2400 views. to your Favourites.