Alternative to Credit Cards

auto-loan

What is your credit score? The question many young people dread when applying for a loan. The idea of building credit can make someone from any background begin to sweat. Hardly any of us have been taught what credit really means let alone how to build good credit. A common way is by getting a credit card and using it like a debit card. Buying groceries and gas with it only when you already have the money, and paying it off as soon as you get the bill. I want to show you briefly a few alternatives (yes alternatives) to building your credit through the use of a credit card.


Bill Payment

By paying a bill as simple as your rent on an apartment you are actually improving your credit score (As will other recurring payments such as a home loan or student loan, but let’s concentrate on getting those loans before we pay them off). Making consistent and on-time payments using these methods will build your credit; but on the down-side they are slow ways of doing it. They often take years to build up any sort of credit difference. It’s better than nothing, but its going to take you a while to build enough credit to qualify a of substantial loan.

Borrowing For A Car Loan

The best and quickest way that you can build your credit is through a car loan. Once you have built a little bit a credit, or if you have a relative who would be willing to co-sign a loan with you, buying a car and paying your loan off quickly (But not too quickly) is the most effective way to build your credit. (As an aside, paying off the entire amount of the car loan within a few months may seem like a good idea but for one it builds no credit as you are creating no payment history, and also it can actually look negative on you credit report as it may be construed as you totaling the car and receiving an insurance payout to pay off the loan.) A car loan increases your credit by showing payment history and the capacity to pay off a loan. Making these payments on time will give you good credit, making payments early and making extra payments will greatly increase your credit. It will pay off the loan faster, and prove that you are responsible and want to be debt free.

Early Payments

Obviously, as I brought up earlier, a mortgage can be a great source of credit. For example if you had a 30-year mortgage, and each year you made one extra payment, you would have that loan paid off in 20 years. This technique shows creditors that you will honor their loans, and will make your credit score sky-rocket. If you need someone to co-sign an auto loan for you, then after 1 year of using this technique your credit will be good enough that you will qualify for the loan on your own.


Loans In General

I work at an insurance company that has its own bank and we often deal with getting people different kinds of loans. I have heard from lenders and customers countless times that the best way to improve your credit it to get an auto loan, and pay it off quick. Using a credit card or paying rent may build your credit, but building it through an auto loan is the most efficient and therefore makes the most sense.

First Time Auto Loans

Importantly, first time auto loans (Meaning this is your first time borrowing money for the purchase of a car) have certain extra stipulations regarding who can borrow and how much you can borrow. Obviously they check your credit but generally amounts over around $5,000 require a co-signer to even receive a loan at all. This applies even if you have perfect credit and is the way of the bank protecting its own interests. On top of this most auto loans in general require that the car be in decent condition (As determined by the teller generally, haha) and sometimes go through a brief “check-up.” During this check-up the teller pretty much makes sure that the car has an engine and runs. They may check such things as safety mechanisms and functionality depending on the bank as well.

Wrapping Up

To finalize this information I want to lay out a brief disclaimer. I work in the finance & insurance industry and even I do not entirely understand what goes on when it comes to credit. No one really does. The best you can do as far as building your credit is diversify. By that I mean try it all. Do everything you can to show that you know how to handle your money correctly. Pay bills on time, pay back your loans, avoid late or missed payments. When it comes to this there is not much “more” to it. If you handle your money well and smart then it will eventually show in your credit score. Don’t feel that a credit card is the only way to improve your credit just because of the name, but don’t discount it as a tool to get you where you want when used properly as well.

Author: This article was authored in part by Tara of Colt Sampson’s State Farm Insurance Agency and edited by myself, Jeff Kingston. You can learn more by contacting Tara or Colt Sampson.


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Getting Credit Report Errors Fixed

So you have that first credit card and you are making sure you do everything possible to ensure wise use of you card. Even with you doing everything right there is always something that can go wrong. In fact errors in your credit report are much more common than you might think. According to a recent study found on CNN Money, around 42 Million Americans have errors in their credit reports! 42 MILLION! Errors in your credit score can cost you loans, jobs, security clearances, and above all WILL cost you money in the long run. So what can you do to ensure that your report is a 100% accurate representation of you?

1. Take a Look at That Credit Report.

credit errors


Obviously you won’t know if there is a mistake unless you look it over. What should you be looking for? Below is a list of some of the things you should be checking for. Realize that this won’t get you to every single possible error. Try to check a variety of things and make sure all of it is correct.

  • Incorrect Activity. Missed payments, late bills, and other items that did not actually occur
  • Fraud. Lines of credit, credit cards, and other items that you did not purchase or sign up for
  • Incorrect Account Details. Credit limits, balances, or other information that may show incorrectly
  • Outdated or wrong Personal Information. Just what it says. If your personal info is not showing up correctly or up to date, other information may be the same.

Another note: Be sure to perform this check on the reports of all three bureaus and compare each of them for accuracy.

2. Request Any Changes

At this point you know that there is either a problem or no problem at all. Obviously, if your report comes back with errors or inconsistencies, there is work to be done. So at this point what can you do? You get everything together and write a letter to the offending credit bureau. Now, I know you are thinking: “A letter? Who is this guy?” Letters may seem outdated but when it comes to the credit bureaus this is the best way to go. Make sure you include all the evidence of your claim and what should be the correct information.

3. Wait And Follow Up

As you wait for a reply, make sure you have made copies of all of your correspondence in both directions. Photocopy what you send and what you receive in return. After waiting a month or so for the bureau(s) to get back to you feel free to follow up with more letters. They are legally obligated to look into any claims of errors so it shouldn’t be much of a problem getting things fixed.

If for some reason your dispute is not resolved, your last resort will probably be disputing the error directly with those parties involved. If you are wondering what exactly should have an effect on your credit and what should not check out more on the relationship between your credit cards and your credit score.

We hope you’ve found this enlightening. Good luck in your future credit endeavors!

Jeff Kingston


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Worn Out Credit Card? Fix it Now!

credit-card-reader
Ok, so this is a bit off the regular topics, but you know that person who is in front of you at the grocery store swiping their card 5-6 times , then trying another one  then another? Ya, that’s me; and not because I keep getting denied. In my mind the most annoying part of being a credit (or debit for that matter) card owner is that my cards only last about 3 months before they get demagnetized…

So what have I done to fix this problem?


Get a new card

Yes, this is the most obvious solution. I generally plan on a 6-month schedule of new cards. A bit bothersome, but definitely the easiest considering any bank I’ve aver been with will replace my card for free.

The plastic bag trick

A lot of you may know this one. Simply wrap the card up in receipt paper or a plastic bag and the reader suddenly works like a charm. So, why does this work? A technical explanation is that the magnetic reader actually reads your card’s strip better from a bit of a distance. Putting that plastic between the card and the reader helps ensure a more accurate read. Interestingly enough, I’ve found that Scotch Tape has the exact same effect! Simply wrap your card’s strip in tape and you’re good. No more plastic bags or receipt paper!

Why does it happen in the first place?

I’ve heard a lot about card strips’ magnetic charges being lost as they rub together and what not. I think it’s a bunch of bull. The reason my cards don;t work for long is that being inn my wallet physically wears the strip off. I can see that much. So why does the bag/paper/tape method work so well? Why is it so hard for you to read a book that is a quarter inch from your face? Ya, same reason.

Hope you enjoyed this quick tip. I do prefer having that nice clean card, but tape usually ends up cover all my cards eventually. Good luck with your card reading ventures!

Author: Jeff Kingston


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