Can you purchase anything today without some type of credit? The answer is yes if you pay cash as some do, but credit is king.
When you want to purchase or lease a car, your credit is key to having a successful outcome at the least amount of cost. Moreover, your car and homeowner’s insurance will be affected by your credit scores, too.Everyone either uses a credit or debit card, or if you are a techie, then you are using your mobile phones, iPods, and even your voice to pay your bills with PayPal, Zelle, or Venmo. This has become an everyday, convenient and seamless process.
When it comes to large purchases like a car or home, one will apply for a loan. Cars are generally much easier to buy as almost everyone qualifies. The interest rate for purchasing or the “factor” when leasing will solely depend on your profile and credit scores. Those with the highest scores will secure the best deal, but those with less than stellar credit, e.g. 720-740-plus, percentile will, unfortunately, pay more.
When it comes to applying for a home mortgage, the playing field is quite different. One can attain a mortgage for as little as 3% down, with a fair credit score ranging from 580-669. However, PMI (private mortgage insurance) would be required in the event of non-payment, so the bank would get reimbursed on a failed loan. Scores above 620, qualifies you for a conventional mortgage without PMI.
In today’s society, your personal and business credit is very much the defining factor for borrowing money. You are rated by that magic number called a FICO credit score as well as your debt/income ratio. As one’s debts increase, so does that ratio and it sends a signal about your credit profile and scores via Experian, Trans Union, and Equifax to anyone who will be lending you money or who might want to provide you credit or credit cards.
Excellent credit is as important and similar to having a point-free driver’s license since the cost of your insurance will be less with a higher score and you will qualify for the lowest interest rate from your lender.
The Fair Isaac Company was the originator of this concept back in 1989. Prior to that time, you could have excellent credit scores, but your personal character-based profile, first impressions, and decision-making by your bank could determine whether or not the lender would provide you a loan. Discriminatory practices might have been used to deny a loan.
Today credit scores are used as a basis to determine the strength of the borrower and not character traits. Scores can range from 300-850 as a way to determine your creditworthiness and what, if any money, a lender will provide you. Obviously, the higher the score the better the interest rates and terms of the loan. Low scores will cost you much more money when applying for an installment loan or mortgage.
You should check your credit scores and profile at least once a year, which is free (you may have to pay $10-$15 for your scores). Determine whether the information is accurate and if not protest any derogatory remarks by writing to the credit reporting agencies. Make sure you note your full name, address and account number or if you are concerned about someone stealing your information, note at least the last four digits of the card or loan number with proof of the error(s).
Another option would be to hire a credit-fixing agency to do the work. However, inquire as to whether they charge a flat fee or an amount per derogatory remark that is removed. Do your homework and be extremely careful before hiring a company as there some that will charge you money and not provide the required results.
So your first step would be to check with Consumer Affairs to see if there had been any complaints against them. Dunn & Bradstreet will also have a company’s profile and rating as noted and there could be irregularities, so it would be advisable to check it out once a year. Another avenue to check is online reviews and testimonials which will reveal and provide how a credit-fixing company is viewed by consumers and whether satisfied with the services or not.
My professional opinion is that your credit today is one of the most important, if not the most critical variable with respect to borrowing money, attaining reasonably priced insurance, and purchasing or leasing a vehicle. If you don’t take care of it by paying all your bills on time or if you are going to be late, at least notify those companies that your payment will be delayed. They do allow a certain number of days (ask them) before they report to the credit bureaus as a late payment.
Being late too many times could have a devastating effect on downgrading your credit scores and long-term profile as a credit risk. As they say, “an “an ounce of prevention is worth a pound of cure.”
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40+ years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.), a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry. ”For a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.