The Credit Criminal
This Post is A Special Dedication To Virgo's Everywhere!!
Ahhhh.. The exhilaration of having great credit. People walk in financial institutions like Beyoncé singing Flawless, when they have great credit. Especially when not long ago, only the "Bank Of One Lump Sum" would give them a loan. That means cash only, you are approved for air! Don't pass go, just get the hell out my dealership! That's bad when you're young but out right demoralizing when you're older.
For all the criticism millennials receive from their elders, I find millennials much more credit savvy as young adults. I just read a revealing article in the NY Post about a young lady from Brooklyn named Martina Palliant.
She was quoted in the post saying "I need a man who has his life together and can pay his bills". This excerpt from the NY Post says Paillant, who attends graduate school in Miami, asks potential suitors their credit scores by the fourth date. While some may call her snooty for checking someone’s FICO number before becoming Facebook official, she’s been focused on her finances since she was 16 years old and has a credit score above 800. Now thats truly amazing to me. I'm not ashamed to admit, I didn't know what credit was until my first year in college. Many of my customers, friends, and associates have said the same. I believe millennials benefited from access to information on the internet and many parents learned the lessons of the book Rich Dad, Poor Dad.
I can totally identify with the "One Lump Sum" customer. I can still remember the first day I realized I had great credit. After years paying off small delinquent accounts and a car loan, I decided to check my score at work. I was fortunate to get a car loan based on my employment at a dealership. I wasn't that focused on raising my score. I just paid what I owed and made timely payments on the car loans. I didn't know what effect that would have, I just knew it was better than NOT paying. I'm going to let you in on a little secret.
The car salesmen giving you advice at the dealership has no idea how credit works.
Sure, you have some veterans of the industry and former managers with the knowledge but I've met finance managers who have no idea how to properly read a credit report. Its not usually the fault of the salesman either. Most dealerships do a poor job of training and thats assuming the manager actually tries.
So can you imagine the shocked look on my face when I saw a 831 score? It was like Christmas Day seeing the toy you wanted but didn't think you'd get or when you go on a blind date playing wing for a friend and your dates a 10. And even then I still didn't realize the true power of that score until a co-worker saw my score on the computer screen and strolled over to my desk. He seemed more excited to see that score than I was. I believe he wanted to use my credit to buy some property since he was flipping houses on the side. He told me with that score, I could buy not one but multiple properties because banks would give me anything I wanted. In the late 90s and early 2000s it was easy to get loans. Deregulation in the financial sector allowed banks to do whatever they wanted which resulted in the Great Recession of 2009. I remember walking away from that conversation feeling a bit taller with a different swag in my walk. I felt like I struck it big! Cops would pull me over and I'd be like, "What are you pulling me over for"? Do you know what my credit score is"? Yeeees!! This must be what it feels like to be Beyoncé on stage. I felt Flawless.
Here's the thing though. There's a difference between having a great credit score and having great credit.
You do know how important understanding your blood pressure is to your physical health is right? Well thats akin to understanding what your credit situation is to your financial health. Both bad credit and high blood pressure will give you a headache. Did you know that credit can even affect your auto insurance premium? You didn't did you? I didn't know either until I became a licensed insurance broker. So before you call me or walk into a dealer, check your credit.
I feel the best way to view your credit history is to deal with the credit bureaus directly. You can use a online site like Credit Karma to get an idea but I find they aren't always 100% accurate. You should be able to obtain a free report from Experian, Transunion or Equifax at least once a year. Based on my experience, banks usually focus on Experian (http://www.experian.com) and Transunion (http://www.transunion.com). Credit scores range from 250-900. Anything between 780-900 is considered excellent, perfect or prime credit. 700-780 is very good to excellent. People who have 5 plus years of 700-900 scores with auto and mortgage loans on the bureau get the prime interest rates. 630-700 is fair to good credit. If you're in that range the rate can vary from prime up. 630 and under is considered below average, poor, bad, subprime credit. Keep in mind prime rates also depend on the year and term of the car. Banks give higher rates on older cars and longer terms. For example: A pre-owned 2012 Ford Escape you want to finance for 60 months (5yrs) will usually have a higher interest rate than a pre-owned 2016 Ford Escape for 48 months (4yrs). Down payment and amount financed can also play a part. Each bank has its own guidelines.
Let's be clear, some think they have good credit because someone told them, they're neighbor's cousin uncle's wife bosses nanny, got a car loan with a 500 score and they have a 610
You may have a higher score but it's not good credit. The 500 score customer could've had a perfectly paid auto loan and all other accounts delinquent. A great employment history and high salary also helps. Banks are more willing to approve a reasonably priced auto loan when they see you've had a good auto payment history even if you've stiffed a few other creditors. You should also be aware a 700 plus score doesn't automatically mean you're eligible for a loan without a co-signer. Banks normally want a 2-5 year credit history with 2-5 credit lines. They may also require a previous retail installment loan account. For example: That loan you took out at the furniture store for your new living room set or the time you decided to purchase a timeshare in Cancun after a few days of bliss soaking up your liver in Tequila.
Because I understand people go through rough times or wasn't explained how credit works, I offer consultation on how to improve your credit
Because I understand people go through rough times or wasn't explained how credit works, I offer consultation on how to improve your credit. I also work with credit repair professionals to help repair the damage that's already taken place.
People who have no credit face a different challenge. I often get asked, "How do you get credit when you have no history?" Believe it or not some people have no credit even as they enter their 30s and 40s. I just sold a car to one such individual. You can start by getting a credit card with a small limit. They will usually give you at least $250-$500 to start. I find Capital One is great bank to get started with (you can apply online https://www.capitalone.com/credit-cards/compare/m/?). The key is to use it sparingly. You don't want to use up the limit unless you have an emergency. Loan officers want to see available money on your credit card accounts. They don't want someone who maxed out a credit card in 2 months applying for a loan.
For more information or tips on how you can improve your credit please call 718-269-9335
