Credit Infocenter

5 Things You Should Know Before Getting a Student Loan

November 8th, 2019 · Credit Repair

Making it through college is hard enough without having to deal with student loans and debt. Luckily, we live in a world where student loans are easy to apply for and easy to get. In part, this is a beautiful thing, because it enables people who otherwise wouldn’t be able to afford a higher educational degree the chance to earn one. 

On the other hand, taking out student loans can be dangerous. There are a lot of loopholes and complicated financial strings that are usually attached to loans. So take a minute and keep reading to learn more about 5 important things you should know before getting a student loan. Armed with more knowledge, you’ll be better able to make smart financial decisions as you navigate the world of student loans. 

1. Know What You Need

First off, don’t borrow more than you need to. Student loans are meant to help you live within your means while you’re busy with school and aren’t making much at work. You can actually calculate what the right amount is for you. Try to borrow an amount that will keep your payments low–around 10%–of your monthly income, after taxes. 

This will help you avoid overreaching and paying more than you need to on your monthly payments. 

2. Choose Federal Loans Over Private Loans

Before exploring any other avenues, try for a federal loan first and fill out your FAFSA. There are two types of federal loans: subsidized and unsubsidized. Subsidized federal loans don’t build up interest while you’re in school, while unsubsidized do. 

Federal loans are easier to get because they don’t require good credit history, and the repayment plan is based on your income. We recommend taking out a private loan only after you’ve taken out as many federal loans as you can. 

3. Your School Will Help

Talk to your financial aid office. They’re familiar with the ins and outs of loans and can help you with any questions or concerns you may have. After you’ve applied and been approved for a loan, your school takes care of the rest.

The money comes to the financial aid office and is applied to your student account. You’ll be refunded any excess money after all the initial fees are met. 

4. Loans Come with Fees and Interest

This is a fundamental thing to understand about student loans: you will pay and owe more than whatever amount you received. This is due to fees and interest rates that always come with loans, no matter what. Federal loans have a fixed rate on fees, whereas private loans will determine the interest rates and fees for each individual. 

5. Student Loans Are Limited to Certain Things

While a student loan can seem like a big relief for your finances, keep in mind that student loans can only be used for educational expenses, meaning anything that is needed for you to pursue your education. This could be clothes, books, rent for housing, or a laptop.

Now that you understand these important facts about student loans, you will be ready and equipped to find one that is right for you and your unique situation.

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Pros and Cons of Auto Loans

November 1st, 2019 · Credit Repair

Very few people have enough liquid cash on hand to pay for a car or other vehicle in full. That’s why there are car loans. As with most loans, car loans come in enough variety and with enough options that you’ll have to make a decision about which fit is the best one for you. 

There are longer and shorter auto loans, and each comes with different strings attached. But when your best option for financing your vehicle is an auto loan, it’s better to be educated on your options than completely ignorant. That being the case, there are a few things you should know about the pros and cons of auto loans. Keep reading to discover them. 

The Auto Loan Pros

Let’s take a look at the pros associated with getting an auto loan.

Affordability

To begin with, you likely don’t have thousands of dollars you can just give a dealership in exchange for a car. With an auto loan, you’ll be able to make monthly payments you can actually afford in exchange for driving a vehicle you could never have paid for upfront. 

Access to Better Vehicles

Going along with affordability, the ability to take out an auto loan to finance a vehicle gives you access to many nicer and better-quality vehicles than you would normally have if auto loans didn’t exist. 

Building Credit

As long as you stay on top of it, taking out an auto loan is a great way to establish a steady, consistent habit of regular payments that will help build up your credit score and qualify you for better loan offers in the future. 

Cons of an Auto Loan

Unfortunately, there are some negatives associated with getting an auto loan. 

Interest

As with all types of loans, you’ll wind up paying more than the amount you took out on the loan. This is due to interest rates that loan companies place on the loans they give out. The amount of interest you pay will vary depending on your personal credit history and score, as well as who you’re borrowing from and the current state of the economy. 

With a poor credit score, it’s possible to pay less for a greater period of time. Just realize that this will cost you even more in the long run. 

Insurance

Insurance can go up drastically when you take out an auto loan, especially if you’re purchasing a nicer vehicle with a higher value. If you borrow from certain companies, you’ll be required to pay extra on insurance in the case of accidents or damage to the vehicle in an effort to protect your lender’s interests.

Finances

It’s all too easy to be swept up in the grandeur of purchasing a brand new, top-of-the-line model. It’s also easy to rationalize the higher monthly payments with thoughts of being frugal and careful with expenses as you work to pay off the auto loan. Those rationalizations on the lot don’t always translate into reality at home. 
Have you decided yet? It pays to arm yourself with as much information as possible. Learn more about auto loans and other types of loans today so you can make an informed decision.

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How to Fix Your Credit in 5 Steps

October 25th, 2019 · Credit Repair

Your credit is worth a lot of money, and bad credit can really cost you.  If you’ve had missteps in your credit history, you may wonder how to go about getting your credit back in shape.  Before hiring a credit repair company like Lexington Law, you should take the time to do what you can yourself first.  Fortunately, it’s not difficult to do. 

1.  Pull Your Credit Report and Review Your Credit Score.

Due to the Fair Credit Reporting Act, every American is entitled to view his or her credit report once per year for free.  There are several ways of viewing your  credit report:  You can go to Annualcreditreport.com, or the three credit bureaus:  Experian, Equifax and Transunion.  Getting your credit score is pretty easy these days:  most banks are issuing credit scores for free, whether you have a traditional checking or savings account or a credit card account.  The type of credit score you get is important.  There are two credit score types, the Vantage score and the FICO score.  Most lenders use the FICO score, so if the score you get is a Vantage score, try to obtain a FICO score.

Credit scores range from 350 to 850.  A good credit score is between 680 and 720, an excellent score is anything above 720.  If you are below a 680, it’s a sure sign your credit could use some improvement. 

The types of things you will see on your credit report are:

  1. Your personal information, such as name, address, employment history and social security number
  2. Any collection accounts you may have
  3. Any public records such as delinquent child support, bankruptcies or judgments
  4. A list of all your credit accounts such as credit cards, personal loans, mortgages or auto loans. 

The areas you should pay the most attention to are negative accounts, such as public records, collections or any late pays on your credit accounts. 

2.  Dispute anything erroneous on your credit report.

Negative information can sink your credit score by up to 100 points.  Make sure everything on your report is correct.  Once you have your credit report, it helps to print it out and highlight any errors you see on your report.  This includes any errors in your name, address or social security numbers.  Having inaccurate personal information can lead to credit merging or mixing, something that happens when two people’s credit reports are accidently combined.  If your credit report gets merged with someone else’s, you could get bad credit on your credit report that takes extra effort to clear up.

To correct information on your report, the most effective way to dispute is to write a letter.  Clearly identify the mistakes you are disputing, and include any supporting documentation you may have to substantiate your claims.  Send your credit disputes return receipt requested and keep copies of your letters and documentation for your personal records.  The credit bureaus have 30 days to investigate your claims and correct mistakes. 

3. Maintain a good payment history.

Your credit history makes up 35% of your score, so it is the most important thing to monitor and correct.  Even if you have a poor payment history, negative information does not stay on your credit report forever – most bad credit marks drop off of your credit report in 7 years.  In addition, the older negative credit marks lose some of their “sting” as time goes on.  Having a recent, a positive paying record will always help your credit score – it’s never too late to start building a good credit history. 

If you find it hard to pay off your debt each month, now may be a good time to start budgeting your money so you have enough to meet your financial obligations each month. 

4.  Pay down your credit cards.

Your credit utilization is 30% of your credit.  Simply put, your credit utilization is the ratio of your total credit balance divided by your total available credit.  A “safe” credit utilization rate is 30% or below, however the best credit utilization rate is below 10%.  Paying off or down your balances will result in a near immediate credit boost if you get them below the targeted utilization rates. 

Another thing you can do besides pay down your balances is to increase your credit limit.  If you have been a customer for several years or if your overall credit history with the bank is good or excellent, the bank may be willing to increase your credit line by a significant amount.  You have nothing to lose and everything to gain by calling your creditor and asking for a “raise”. 

5. Keep a Good Mix of Credit and Don’t Close Old Accounts

The “mix” of credit on your credit report is 10% of your credit score.  There are two different types of credit accounts, in the eyes of the credit bureaus:  installment accounts and revolving accounts.  Revolving accounts have a credit limit – the amount up to which you can borrow money, whereas an installment account starts with a balance of a set borrowed amount and regular periodic payments are made over a set amount of time to pay it off.  A good example of a revolving account is a credit card or an equity home line of credit.  Installment loans are usually mortgages, personal loans or auto loans.  If you are looking for ways to get extra points, opening a new credit card if your only accounts are installment loans will help boost your score.  Likewise, opening a small personal loan or buying a new (or newer) car will help round out your credit balance if the only things are your reports are revolving accounts. 

The age of your accounts comprises 10% of your score.  Opening a new account will definitely help your score, as the credit bureaus reward new accounts on your credit report with higher scores but if you have older accounts on there as well, don’t close them, even if you are not actively using the account.  While closing an account does not remove it from your credit report, open accounts in good standing are weighted more heavily and positivity towards your credit score.

In conclusion

Before you hire a credit repair company like Lexington Law, it makes sense to see what you can do to reduce the overall costs by fixing your credit yourself.  Fixing your credit can take 6 months to a year and the less that needs to be done means the cheaper the cost. 

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