Limousine Digest - November 2003
Give Me Some Credit! — By: Julia Rose

As a savvy business owner, you probably have a good idea of when you will purchase additional or replacement cars for your fleet. You’ve watched the trends, you know what you want and what you can afford, and you’re ready to make your purchase, but have you completed the most important step?

When you are applying for a vehicle loan or any line of personal or business credit, the absolute first thing you should do is check your credit report. Think about it: your credit report and score are most definitely going to be scrutinized and dissected by those making the loan, so shouldn’t you know what’s on the report before they do? If you’re like many people, you don’t worry about your credit on a regular basis. But now you are planning on securing a loan, and your credit report just became an important thing. Would you know what to look for or how to interpret it?

What’s on Your Report?
The quickest way to get your report is to visit websites for the three credit bureaus — Experian, Equifax, and TransUnion — and purchase your report online (see box for more information). The data between the three may vary wildly, so you can also opt to purchase a “three-in-one” report from all of the bureaus for a higher fee. This is recommended, not only to compare the reports, but to correct any errors you may find. You can expect to find: personal information such as your name, date or year of birth, current and previous addresses, and your employer; a list of all your credit accounts (credit cards/revolving credit lines, loans including mortgages, and other loans) with your payment history from at least the last two years; public records such as liens or bankruptcies; and the names of those who inquired over at least the past six months about your credit history. In addition, you can choose to purchase your credit score — a mathematical calculation usually ranging from 350 to 850 of different factors from your credit history. Essentially, this is the number that determines your credit worthiness and is one of the first things lenders examine. While the equations are basically figured the same way, the number will vary from bureau to bureau as your reported credit history varies. The higher the number, the better your score is. In general, you want your score to be at least 650 if you are going to take on a loan, especially a car loan. A high score will also place you in the optimum position for negotiating a better APR since you are considered a prime borrower.

It’s Not What You Expect
So that late payment you made on your mortgage or credit card bill is sticking out like a sore thumb on your report, or the bankruptcy you filed in 1999 is still on your record and lowering your score. The good news is you can boost your score over time with a few small steps. But you need the car now? It’s still possible to get a lender to make a loan, but chances are your down payment will be higher and you more than likely will have an increased APR. However, by taking steps toward developing a positive credit history, you may be able to refinance the vehicle in the next year or two at a better rate.
 
Did you find an error on your report? It is estimated that at least 50 percent of people have an error on their credit report. There are steps you can take to dispute the error and get it removed. By contacting the creditor or the credit bureau that reports the error in writing, you can take the necessary steps toward cleaning up the blemishes. The creditor or credit bureau will investigate your claim and will decide whether it is, in fact, an error. Once determined to be no fault of your own, it will be removed from your record. Be sure to check a current credit report to make sure it was removed.

Is your score marred by late payments due to unemployment or illness? You also have the right to submit a letter to credit bureaus explaining your situation and why there were late payments or higher balances. This personal statement will be included in your credit report with any and all credit inquires. The statement can tell the story behind the numbers — and it may even help you get a better rate from a sympathetic lender. Of course, this will only work if you prove that you can still make the payments on time. Timely payments are often the biggest factor in determining your credit score.

Credit Repair?
Understanding and improving your credit is not necessarily a one-size-fits-all formula. No two credit reports are alike, and lenders want to see a positive payment history before they will offer you a good rate or even a loan at all. Here are a few tips that may get you on the road to a better credit history:

1. If you have had late payments in the past, make every effort to make timely payments. This is the one most important thing you can do to improve your credit score.

2. If you carry high balances on your credit cards — over 50 percent of your credit limit — pay more toward your balance, if possible. Lowering your debt to around 20 percent of your limit will show lenders that you can handle your revolving credit accounts responsibly.

3. If your credit history is short — that is, your positive history is less than two years old — the only thing you can do is wait it out. This is very important if you have delinquencies. Concentrate on paying your accounts on time and lowering your balance. If you have no credit cards, consider opening one or two accounts that report to credit bureaus and manage them with on-time payments and low or zero balances.

4. If you are already on the iffy side of credit, do not apply for more credit cards or loans that you do not absolutely need. Although having credit and paying it on time is a good thing, your credit score can be affected negatively if you have too many open accounts. Lenders see this as a potential to spend. Also, you ideally want less than four inquires within a calendar year. Credit inquires for loans, insurance, and even employment can stay on your report for up to two years. Checking your own credit report does not count toward your inquiry tally.

5. You can do what most credit repair agencies claim to do yourself for free or a small fee. For example, if you contact your credit card company to discuss a payment plan or an APR reduction, they may work with you to reduce your debt. Although they want the most amount of money from you, credit card companies would prefer a regular and timely payment versus the possibility of you declaring bankruptcy or having the debt changed-off. It doesn’t hurt to ask. Avoid any ads that promise to “erase” your debt or credit history — they may be pushing you to declare bankruptcy! Bankruptcies can stay on your history for up to ten years, so it should only be considered after all the other options have been exhausted. Unfortunately, there are no quick fixes for delinquent accounts, unless it was an error. However, if you are drowning in debt and don’t know where to start, you can contact a non-profit credit counseling service to get you on the right track. Their services are either free or low-cost. They do NOT erase bad history; they work to improve your good history.

It is a smart idea to check your report annually, especially if you are working on improving your score. Try getting a copy of your report when you aren’t looking to make a major purchase so you may check for errors. If your score is low, but aren’t under the gun to secure a loan, you can take some time to clean up the errors or boost your payments. Clever business owners plan ahead for the unexpected — checking your credit should be part of that plan. LD


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