Bad Credit Blog

“I thought the website was a great help for me! I did have one question that I am hoping you can answer for me… I am just now 18 and I was trying to figure out some good ways to try to build up some credit to get a new car. Everything else I have found was not as helpful as this site, so I was hoping there was a way that you guys could give me a good honest answer to this question. Any help would be a great addition to what I have already learned here on your site. Thank you”

That’s a note from a young man who emailed us recently. I emailed him and answered his questions, but after thinking about it we decided it would make a good post for people who are looking to finance their first car.

Banks look at a few different things when deciding if you’re “trustworthy” enough finance a first time car through them. Credit score is definitely one of them. Other factors though are:

• Time on the credit bureau (how long have you actually had credit)
• Job history (At least 2 years of steady employement (even if you’re only 18)
• Income (must be $1200 a month gross, but $1500 to $1800 is better. That’s about $9.40 to $11.25 per hour, full time)
• Down payment (when you’re a first time buyer a down payment goes a long way towards showing the banks that you are a responsible person)
• How much do you want to borrow? (Even with $4,000 to $5,000 down it’s always best to try to buy a $10,000 or less car)

These things are true no matter how old you are. If you don’t have credit cards, and never finance anything, then you too can have a zero score, even if you’re 50+.

Now - the above list is just the “getting started” list for financing a car for the first time. Lenders look at a couple other things too:

• Can you prove where you live? (do you have legitimate mail coming to you. Preferably a utility bill - like your cell phone - with YOUR name and address. Not your parents)
• Can you afford the payments? You may earn $1800 a month, and live at home, and not pay rent or utilities. But over the next 5 years you MIGHT move out (at least I’m sure your parents are hoping you will). Then you’ll have rent, utilities, groceries, clothing, etc. etc. etc. So the bank is only going to want to you have a payment that equals MAX 25% of your paycheck. ($400).

Now - that’s the bank. But do you really want to shell out $400 of your hard earned money for the next FIVE YEARS? That’s a long, long time. Consider that when vehicle shopping and keep your payments as low as possible by not buying the “biggest, baddest” truck on the lot.

Another thing to consider is INSURANCE. If you’re a guy under the age of 25 your insurance is gonna be sky high on a newer vehicle. So price around for insurance FIRST before financing. Make sure that you can afford the payments AND the insurance - and that you won’t be eating canned tuna for the next 5 years to afford them!

Even if you earn enough money, have a down payment and a steady job the bank may still turn you down. Especially if you have NO credit history. So be prepared with a co-signer if at all possible.

A co-signer should be someone whose older (30+ years) and has established credit. The better the score the better the interest rate. If their credit is very, very bad then the bank probably won’t finance a car with them so try to find someone with a decent credit score (650 and above).

Once the loan is established remember this - Every on-time (or late) payment is recorded on BOTH your reports. So be kind! NEVER, EVER make a late payment. This person is going out on a limb for you and guaranteeing to pay the loan if something happens to you. So return the favor and keep their credit report clean.

The best way to get a car loan is still through pre-approval. Think about it this way. With cars and trucks going for $10,000 all the way to $25,000 isn’t it better to know how much you can afford before shopping? What happens if you find the “truck of your dreams” but it’s $20,000. That’s probably not a vehicle you can afford.

When you’re pre-approved you can shop with confidence. Find the ONE BEST vehicle that you like, negotiate the price, and go home with a smile on your face!

We hope this information is helpful. If you have questions like the one from this young man give us an email. Contactus@1-800badcredit.com

Good luck to you!

Auto insurance brokers are better than getting quotes from just one “big name company.” Why? Because many – if not most –use your credit history when factoring how much they charge you.

Their reasoning is that there is a connection between your credit behavior and the amount of claims you are likely to file. Though you may disagree, they believe that people with a better credit history will, in all probability, have fewer insurance losses.

Many companies still use the old tried and true method of age, type of car you drive, number of tickets you have received and where you live to gauge their rate. And again, brokers take this into account when putting in your information and shopping for the best rates for you, thus saving you a lot of calling around.

When my wife and I moved from Southern California (where traffic is terrible and there was an accident on almost every major freeway every single day) to Sun City West, Arizona I expected to pay a lot less for car insurance (since it is a retirement community). I got the surprise of my life when my rate went up $250 per year. I was told this was because there were too many elderly people driving here who shouldn’t be driving. I didn’t like being called elderly at all. I was only 65. But since living here for a while I can see their point. Many of the people over 70 drive too slow and their reactions are much slower, thus causing a lot of the accidents on the streets here.

You may think it is not fair for your auto insurance company to be able to look at your credit report but the government says they can do just that. The Federal Fair Credit Reporting Act allows them to do it. It says they may use “Reasonable procedures” and credit history has been ruled as one of them – this also covers consumer credit, insurance, and employment as long as it is fair and equitable.

If you have bad credit then applying for an online quote from one of the big insurance companies won’t be accurate. My daughter used to sell cars and many of her customers with bad credit were quoted one rate online and another when they actually went to establish the insurance, because that’s when the credit got pulled and everything was adjusted. If you look at their sites you will see a disclaimer telling you that this is just a “quote” and that other factors may cause the rate to increase. This is why using an auto insurance broker is better. They will put all the information into the system “up front” and the quotes you get from them won’t change.

Another thing insurance companies look at is your insurance credit score – never heard of it? Well it’s there. The insurance credit score was developed by the insurance companies by using the same methods as the credit bureaus to predict your risk factors.

This isn’t all but enough highlights to give you the picture. Each insurance company uses different techniques. Because of this it is difficult to know what a good credit score is.

Auto insurance brokers aren’t legally obligated to tell you your insurance credit score. If you haven’t checked your credit report in awhile we suggest you order a copy today and know what’s on it before you start insurance shopping.

You can legally challenge any old, outdated, or incorrect information. This can be a daunting task and takes time, persistence and the tenacity of a bulldog. We suggest you contact Lexington Law. They specialize in credit repair. You pay monthly, so once they’ve done everything you need them to you can cancel their services. They even give you a money back guarantee if you aren’t satisfied.

It’s a good idea to shop for insurance with auto insurance brokers who represent many companies rather than just one big one. Auto insurance brokers will look at your needs and match you with the lowest rates possible. If you just call any large company you very likely won’t get the very best rate possible. Insurance, like any other commodity, is subject to competition. All are licensed so you won’t get ripped off.

If you have bad credit it’s better to use a smaller, lesser known insurance company, as they will typically give you the best rates. Most of these companies work only through auto insurance brokers, and don’t advertise on TV and the web. Which is why they can offer you lower rates than the big companies. Give one of our auto insurance brokers a call today and let them compete for your business!

Reference: http://www.ftc.gov/os/statutes/fcra.htm

No matter who you ask, everyone feels they are paying too much for car insurance! With the cost of repairing newer vehicles rising every year the cost of car insurance has skyrocketed causing some people (possibly you?) to try to get under the radar and not carry insurance. If anyone suggests that to do that – remember – it’s BAD advice. Don’t do it. If you think you have problems now they will quadruple or more if you even have a little fender bender.

In California where I lived for 30+ years the state will confiscate your car if you are in an major accident without insurance! Some states require you to have car insurance before they will register your vehicle. In Arizona, where I currently live, if you are stopped they ask for proof, and more states are starting to do that. So think twice before just letting your insurance lapse.

Most people know their car insurance rates are based on their age, driving record, residence and how many miles they drive for work. But did you also know that your rates are based on your credit score? It sounds strange, I know, but before you go shopping for car insurance you might want to pull your credit and see what your score is. Then take some steps towards improving it.

If you need car insurance right now though and are trying to get the lowest rate possible we have some helpful advice for you.

Know The Minimum Car Insurance Coverage That Is Required By The State:

Most states will require some type of minimum coverage. It will vary by state so check your state’s requirements.

For instance in Alabama the minimum requirement is only $20,000 for bodily injury for one person and $40,000 for all people and $10,000 property damage liability. That’s pretty low.
So as an example, if you hit someone driving a $40,000 vehicle causing $20,000 damage to their vehicle (that’s entirely possible with today’s cars). Your insurance will pay $10,000 and guess who is going to have to pay the difference? You!

If you MUST, get the least amount of car insurance you have to, but if you can afford a little bit more (and often it’s not that much more per month) then we recommend you do it. One way to save on car insurance though is on the comprehensive and collision coverage. This is the amount of coverage on YOUR vehicle. Now, if you are driving a relatively new car you obviously need this – if you’re hit by an uninsured driver your insurance will have to foot the bill - but if your car is 10 years old or older you don’t need it.

Most cars 10 years or older are only worth $2,000 to $4,000. If you’re car is in this category then full coverage might be costing more than the insurance company will give you if your car is totaled.

Coverage Your MUST Have:

Uninsured or underinsured coverage is something you should have. There are so many people on the road today with no car insurance, if you are hit by one of them you have two choices. Pay the bills yourself and sue them in court (good luck with that), or use your uninsured motorist insurance to get your car repaired and pay your medical bills. So even if you are trying to get the most scaled down policy possible, try to budget for uninsured coverage. It’s worth the little bit extra.

How To Shop For The Best Rates: You can get your yellow pages and “let your fingers do the walking” as they say or you can go to our website and check our car insurance brokers. They specialize in two things: 1) finding car insurance for people who have bad credit and 2) finding you the best rates PERIOD! They will shop hundreds of car insurance companies for the best rates saving you lots of time, frustration and money.

From Edmunds.com

You’ve got your auto purchase deal deal all set when it hits you: “What happens if this car gets into an accident?”

Technically, the car still belongs to the manufacturer or leasing company. But, you’re still responsible for replacing it.

That’s right. Even after your auto insurance insurance company figures out how much the car is worth and pays off the damage, you may still owe the carmaker some dough. And that’s where GAP insurance comes in.

Though it may sound trivial, GAP insurance insurance is a must for leasing. And if you made a small down payment when buying a car, a GAP policy can be a lifesaver as well. But first, let’s look at why it exists.

As the name implies, GAP insurance covers what traditional car insurance doesn’t. In other words, it closes the GAP between what your auto insurance company pays if your car is stolen or totaled and what you owe the finance company.

Let’s take a test case. Say you bought your car two months ago for $25,000. You begin making car payments at about $500 a month based on a 6-percent interest rate. Then, disaster strikes: a tree falls on your car and flattens it.

You call the auto insurance company and the adjustor looks into his crystal ball and decides at the time of the accident your car was worth only $20,000. The car may only be a couple of months old, but it has already lost 20 percent of its value. Unfortunately, the finance company still wants the full amount you owe them. With interest, tax and license fees, they figure that to be $27,000.

Yikes! There’s a gap of $7,000 between the $20,000 that the insurance company is willing to pay you and the $27,000 the finance company is demanding. Most folks are going to be eating Spam dinners for the next two years, but if you have GAP insurance you can safely order steak.

Apply the same scenario to someone who bought their car. If they left the dealer lot without putting several thousand dollars down, they likely owe more than the auto insurance company will pay if the vehicle gets totaled or stolen in the first few years. Once again, GAP coverage can save the day.

And that’s why GAP insurance is a must for many drivers. In fact, gap insurance is usually mandated by lease contracts or included within them. Unless you have unusually deep pockets gap insurance must be a high priority for your new car .

Is GAP insurance 100% necessary for people who finance their cars ? Well, it depends on your coverage. If your regular auto insurance policy is written to pay off the fully financed amount, then you don’t need GAP insurance. However most policies don’t have this feature so the investment in GAP insurance is a good investment

If your car is totaled or stolen, carefully follow all requirements made by your auto insurance company. For example, some companies require you to continue making car payments on your totaled vehicle until the money from the GAP insurance is paid out.

When you go to buy your next car get pre-approved for the loan first . Then check out our insurance companies companies for your insurance needs including GAP insurance . If you have an accident, you’ll be glad you planned ahead.