My son was in the market for a used car. He had just graduated from high school and needed transportation to work. I agreed to co-sign for him and our hunt began. We visited a number of car dealerships and finally found a great deal on a Honda Civic. The price was right so we decided to find out about the financing. I thought no problem my credit scores are good so the interest rate would be low. The finance manager called us in and presented the offer. He had pulled one credit bureau and my score was a 619. I thought to myself for a minute and remembered that last week my husband and I purchased a home. My scores were 720, 690 and 655. I had my credit report at home to prove it.
I proceeded to explain this to the finance manager with no avail. It fell on deaf ears. The finance manager informed us that they pull one score and whatever that score is that is what they base my interest rate on. Okay, "I said." "So why is my score so low? " No response! I found out later that they had applied to 20 different banks at one time. The bank that answered back first was the last bank they sent our paperwork to. Each time my credit report was pulled my score dropped. So by the time the last bank made me an offer on an interest rate my score had dropped from 655 to 619. The cutoff supposedly is 620 to qualify for a decent interest rate. I was livid! I know some of you reading this will disagree. Your credit score should not drop if you are shopping for an item in a short period of time. That's what I thought as well.
Much to my dismay, my score dropped from 655 to 619 in one week. I did not have any late payments or derogatory credit. I previously studied my credit report and knew every entry listed. I ask the finance manager for a copy of the credit report he pulled and he gave it to me. Wow was I shocked! The final offer was this; we either accept the high interest rate or walk away. We walked away! I fought hard to get my credit report repaired from this mess. I finally achieved it a few months later. I'm happy to report that the interest rate that we got was a 7% interest rate compared to a 14%.
I learned a valuable lesson that day I will never forget. I now keep an updated credit report on file from all three credit bureaus. I take it in and ask the finance manager up front what my rate will be. If I find the rate acceptable than I allow them to pull my credit report once. No exceptions!
Lesson #1
Keep an Update Copy of Your Credit Report on file
You should always know what your credit scores are so that you have the power with the banker or finance manager. If you are inform about your situation you can be better prepared to talk and negotiate the best interest rate that is available.
Lesson #2
Closing Credit Cards Accounts
It's simple - you never want to get rid of old, positive information on your credit reports.
This information actually helps your credit scores. Banks and finance managers want to see this positive account information. They want to see your long, perfect history of making your payments on time because this information significantly helps your credit scores. If you close your account it will eventually fall off your credit report and you would have lost a great trade line. I thought I was doing myself a favor several years back and closed two credit cards. They were paid better than agreed and at zero balance. I did not realize that it could have helped me on a purchase I did that same year. I now know better.
Lesson #3
Get Three Quotes
I learned this one the hard way. Whatever you're buying or financing always shop around and ask for a written quote. I always ask for a quote in writing signed by the finance manager or banker. I then shop the quote either in person or online. I can predict now what my interest rate should be by my credit scores and I will not settle for anything less than I deserve. Years ago, I purchased a rental property and took the first interest rate that came my way. I was a green investor with a thirst for the business. My heart got in the way of my head. I ended up with an interest rate of 10% when I could have qualified for a 7%. I re-financed a year later and saved myself a bunch of money on the loan.
The importance of credit today is significant; overlooking this fact can be very detrimental to your financial health. Now that you understand the importance of your credit score, please keep a copy of your credit report in a safe place. You will thank yourself many times over. You can visit my website in the resource area below for more information.
Deborah Thomas
We fix your credit or you get your money back! Guaranteed!
[http://creditmatters123.wordpress.com]
[http://www.startmycreditrepairbusiness.com]
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