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Shopping Around For a Loan

Before you take out a loan near you, it’s a good idea to shop around with a few lenders to make sure you’re get the best loan deals.

Check Your Credit
First, consider your credit history. It’s always a good idea to check your credit report and credit score before you shop for a loan. That way, you can gauge your likelihood of getting approved without actually applying for the loan. Each loan application puts a credit-score damaging inquiry on your credit report and can hurt your chances of getting a subsequent application approved. Check your credit report for any errors and dispute them before putting in your loan application. Make sure you’re current on all your accounts, even debt collections, to improve your chances at getting improved.

Shopping Around For a LoanFind Out the Cost
Get the cost information – interest rates and fees. As you discuss the loan with a loan officer, make sure you completely understand the cost of the loan. The Truth in Lending Act requires lenders to give you a disclosure that outlines the interest rate and fees of the loan. It will include details about the annual percentage rate (APR), finance charge, amount financed, and total payments by the end of the loan. Each of those factors is important. Look for a low interest rate loan with a low total payment amount.

Know the Life and Payment Amounts of the Loan
Get the length of the loan and monthly payments. It’s important to know how long you’ll be paying on the loan and how much you’ll be paying each month. You want to afford your monthly payments, but keep in mind the lower your payments, the longer you’ll pay on the loan, and the more you’ll pay in interest charges.

Get Loan Quotes
Compare quotes from different banks. Don’t stop at a quote from a single bank. Chances are, there’s a better deal out there, but you don’t know until you look. Get quotes from at least three different banks and compare the terms of each. Unless you’re shopping for a mortgage, you should do your loan shopping as quickly as possible. Mortgage loan applications made within 30-45 days won’t affect your credit score, but other loan applications will hurt your score as soon as the inquiries appear on your credit report. You can always explain away inquiries by letting lenders know you’re shopping around. If you have a solid credit score, additional inquiries might not hurt too much.

Negotiate the Best Loan Terms
Negotiate a better deal. If you like a bank, but don’t like part of the deal you’ve been offered, try to negotiate a better one. It’s easier to negotiate if you have good credit and a steady income on your side. Let the loan officer know you’re looking for the best deal. Don’t be afraid to turn down a loan offer that is outside your price range.

Loan Discrimination is Illegal
Lenders must give your loan application fair consideration. The Equal Credit Opportunity Act, a federal law, prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, participation on a public assistance program, or exercising rights under the Consumer Credit Protection Act. If your loan application is denied, the lender should send you a letter letting you know why. You may be able to fix the reasons and reapply.…

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How to Read a Credit Report

Your credit report is a document that contains details about your financial habits – what accounts you have, how you pay those accounts. Each month your creditors and lenders update your account information with the credit bureaus who then update your credit report. You can order your credit report from any of the major credit bureaus – Equifax, Experian, or TransUnion. Once you have your credit report in hand, here’s how to read a credit report.

Your credit report has four major sections – personal information, account history, public records, and inquiries. Some credit reports also include a credit summary section.
Personal Information

This section lists your identifying information. Things like your name, current and previous addresses, current and previous telephone number, and place of employment will appear here. If you’ve had your name changed, your former name will show up on your report.

It’s not unusual for name misspellings to be included on your report because one of your creditors reported it that way. Credit bureaus usually leave these misspellings to keep the link to your account information.
Credit Summary

Some credit reports include a credit summary between your personal information and credit accounts sections. This summary includes the number of accounts you have, the total balance, total payments, the number of current and derogatory accounts. This credit summary lets you quickly see your credit standing.
Account History

The bulk of your credit report information will appear in the account history section. Here, you’ll find each of your accounts, along with the following account information:

• Name of the creditor
• Account number, partial
• Account status, whether it’s open, closed, inactive, paid, settled, etc.
• Date the account was opened
• Monthly payment
• Date the account was updated with the credit bureau
• Balance as of the date the account was updated
• Credit limit
• High balance, the highest balance you’ve ever held on the account
• Remarks, any comments made by the creditor will appear in this section
• Payment status, current, 30 days late, etc.
• Payment history, which details the status of your payments for the life of the account
Public Records

The public records section lists bankruptcies, judgments, and tax liens. Criminal arrests won’t appear on your credit report, only financial related data is included. In some states, overdue child support payments are included in your public records. Collection accounts could appear in this section, in their own section, or in the credit accounts section.

Accounts that appear in the public records section of your credit report have the biggest impact on your credit score. You want to keep this section free of any account listings.

This section lists everyone who’s checked your credit report within the past two years. Your credit report includes two types of inquiries – hard and soft. Hard inquiries are from business to whom you make an application for credit. Soft inquiries appear when you pull your own credit report or when businesses pull your report for promotional purposes. When a business pulls your credit report after you’ve made an application, only hard inquiries show up. You’ll see hard and soft inquiries on your report.

Your credit reports at all three bureaus won’t necessarily be the same. Some of your creditors might only report to one credit bureau and bureaus only share information with each other in certain circumstances. So it’s a good idea to check all three credit reports from time to time.…

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How to Improve Your Credit Score

Your credit score is only three-digits, but it’s one of the most important numbers of your life. Your credit score is a grade for your credit. It’s a numerical value that helps creditors, lenders, and other businesses make decisions about you. High credit scores are better because they show that you have a history of handling your financial responsibilities. If you have bad credit, here are some things you can do to improve your credit score. Dispute credit report errors. The information on your credit report directly influences your credit score. Any errors could hurt your credit score, especially negative ones like an inaccurately reported payment status. Order a copy of your credit report and review it to make sure everything in it is correct. If you find errors, dispute them.

Pay off past-due accounts. Accounts that are more than thirty days past due hurt your credit score the most. That’s because payment history makes up 35% of your credit score. If you have delinquencies, including charge-offs and collections, bringing them up to date will give your credit score a boost. Pay off the most recent delinquencies first because they have the biggest effect on your credit score. Pay your bills on time. The longer you pay your bills on time, the more your credit score will improve. Be aware of your due dates and send your payments in enough time to reach your creditors. Setting up automatic payments will eliminate the need to remember your due dates and ensure your payments arrive on time.

Bring your balances below the credit limit. Your level of debt is another significant part of your credit score – 30% to be exact. The higher your credit card balances are relative to your credit limit, the lower your credit limit will be. Your credit utilization – balances divided by credit limit – should be lower than 30% for the best credit score. If you have high credit card balances, pay them down and keep them down. Keep certain credit cards open. Many people close credit cards without knowing the effect it will have on their credit scores. The age of your credit history counts for 15% of your credit score. If you close an old credit card, your credit score could drop because your credit score looks shorter. Closing credit cards that still have balances increases your credit utilization and decreases your credit score. Before you close a credit card, be sure it’s not going to hurt your credit score.

Only open the accounts you need. Every time you make a new application for credit, your credit score takes a hit. These credit report inquiries account for 10% of your credit score. Though the inquiries remain on your credit report for two years, only those made within the past year affect your credit score. Limiting your credit applications will help your credit score in terms of credit inquiries, but also with your level of debt. The more credit you have available, the more tempted you’ll be to use it. Remember, high balances hurt your credit score, so removing the temptation to charge more can keep your credit score in a good range.…

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