Auto Center

1. Get your credit report

There are three different credit reporting agencies: Equifax, TransUnion, and Experian. They share data, but each makes its own report. You’re entitled to one free report from each agency every year. If you know you’ve got a major purchase, like a car or house, coming up in the next year, you’ll want to check all three bureaus before you start shopping. This way, you can catch inaccuracies before lenders see your information and score. Otherwise, it makes sense to stagger them and view one report every four months. This puts the shortest amount of time between checks.

You can get your credit report for free at annualcreditreport.com. This is the only website approved by the Federal Trade Commission (FTC) for this purpose. Take care to avoid “impostor” websites operated by scammers. They may use similar-sounding website names or common misspellings to trick you and get your personal information.

There are other situations under which you can get a free copy of your credit report. If you are denied credit, you can request a copy of the information that was used to make that determination provided you do so within 60 days. If you have been the victim of certain kinds of fraud, the service will also provide you with a free copy of your credit report in order to help you make it right. These checks will never hurt your credit score.

If you’ve requested your report online, it should be available immediately. You may need to answer a few questions to verify your identity. The service may ask if you shared an address with anyone else or about previous streets you’ve lived on. Once you answer these questions, you’ll get your credit report.

2. Go over your report

There are three things you’ll want to look for. You want to find accounts that are open in your name and you want to see if there’s any collection activity. You’ll also want to look at the number and frequency of inquiries.

There are slight differences in the three reports, but each has a list of accounts. They may be broken down by type (mortgage, installment, revolving, and other) or listed by date. You’ll want to look through each one to make sure you recognize them. This can be a tricky task, as every store credit card you open and every installment loan you make is listed. If there are any accounts you don’t recognize, you’ll want to make a note of them and potentially contact the credit reporting agency. Look particularly for accounts going to PO Boxes or listed with addresses in other states.

“Negative items” include bankruptcies, accounts in collection or accounts reporting as past due. Such activity is another good place to check for fraud. If someone else opened an account in your name, they likely won’t be paying the bills. You’ll also want to look for inaccuracies that may be hurting your credit score. If there’s an account listed here that was discharged in bankruptcy, for example, you’ll want to make note of that, too.

The list of inquiries shows you the number of times someone has checked your credit. No one can do this without your permission, so if there are more inquiries than you remember, it could be a sign someone has stolen your identity. It might be worthwhile to put a freeze on an ability to open new accounts until you’ve gotten everything resolved.

3. Report inaccuracies

Each reporting agency maintains a separate error reporting process, so you’ll have to report each error to the agency that made it. For basic errors, like address, name, or personal information, the agency can make those corrections with minimal trouble. For more serious errors, you’ll need to send a dispute letter. The FTC has a template for a dispute letter available on its website. You can find this by a simple internet search. You can use that or you can draft your own. Either way, you’ll need to clearly identify the accounts or items you’re disputing. Where possible, use partial account numbers or other numerical information. You’ll also need to explain why you consider the item an error. Attach copies, but not originals, of documents that support your claim. Examples include police reports for stolen or lost wallets, bankruptcy orders that discharged a debt or letters from a lender indicating that an account was opened fraudulently.

Send your letter via certified mail. These cost a little more than a stamp, but you’ll get proof of receipt. This is important because the agency has 30 days to decide about your dispute. They’ll send your dispute to the information provider (the company that told the agency about the account or negative item).

If the reporting agency finds your claim to be correct, you can request that they send copies of the updated report to anyone who received your credit report in the last six months, and to any employer who pulled your credit report over the last two years. They’re also required to send you an updated copy with any new information in it.

4. Stay on it

Checking your credit report periodically is the only way to keep yourself safe from identity theft and other modern crimes. If you need assistance, AAFCU is here to help. Our credit monitoring services will keep a vigilant watch on your credit history to check for new accounts and other suspicious activity. Call, click, or stop by AAFCU today to find out how we can make your life easier!

Air Academy Federal Credit Union 
719.593.8600 
800.223.1983 
aafcu.com

Did you know that only 10 percent of Americans know their credit score?

Those are the findings of a survey commissioned by TrueCredit.com, a web subsidiary of the credit bureau, TransUnion. “It is shocking how little Americans know about their credit,” said John Danaher, president of TrueCredit.com. “Good credit is a cornerstone of your financial profile, enabling you to finance major purchases, such as a home, education, or car.” Then, he added, “Not knowing about your credit can expose you to higher interest rates which translates into less money in your pocket at the end of the day.” When you apply for credit, your credit scores help lenders determine whether you can repay the loan based on your past financial performance. With a higher score, you qualify for better interest rates, higher credit limits, and more types of credit than you would with a lower score. Your score reflects the way you use credit, and there are no tricks or quick fixes to getting a good score. However, you can raise your score over time by demonstrating that you consistently manage your credit responsibly.

Here are 10 things you can do to improve your credit scores.

1. Pay your bills on time. If you have a history of paying your bills on time, you’ll have an easier time getting a mortgage loan, car loan, or credit cards.

2. Keep credit card balances low. High outstanding debt can pull your score down.

3. Check your credit report for accuracy. Inaccurate information on your credit report can be cleared up easily. Always contact the original creditor and the credit bureaus whenever you clear up an error so that the inaccurate information won’t reappear later.

4. Pay down debt. Consolidating your credit card debt or spreading it over multiple cards will not improve your score in the long run, instead slowly pay down the amount you owe.

5. Use credit cards—but manage them responsibly. In general, having credit cards and installment loans that you pay on time will raise your score. Someone who has no credit cards tends to have a lower score than someone who has already proven that he can manage credit cards responsibly.

6. Don’t open multiple accounts too quickly, especially if you have a short credit history. This can look risky because you are taking on a lot of possible debt.

7. Don’t close an account to remove it from your record. A closed account will still show up on your credit report. In fact, closing accounts can sometimes hurt your score unless you also pay down your debt at the same time.

8. Shop for a loan within a focused period. Credit scores distinguish between a search for a single loan and a search for many new credit lines, based in part on the length of time over which recent requests for credit occur.

9. Don’t open new credit card accounts you don’t need. This approach could backfire and lower your score.

10. Contact your creditors or see a legitimate credit counselor if you’re having financial difficulties. This won’t improve your score immediately, but the sooner you begin managing your credit well and making timely payments, the sooner your score will get better.

These ideas won’t create a dramatic improvement in your credit score overnight, but over time, they will. Remember, it takes time to develop a strong profile. Once you’ve done it, you’ll find it easier to apply for credit and favorable interest rates.

Need a car but can’t pay cash? You have three choices: Borrow from the dealer or manufacturer’s financing company, borrow from a bank, or borrow from a credit union (unless Uncle Bob is willing to finance you, but who wants the “strings” that go along with that?). Each method has advantages and disadvantages – but if you can qualify, the way to go is usually with a credit union.

Interest rates are still near historic lows. If you are going to borrow money for a car, there’s never been a better time.

Structural advantages of credit unions

Credit unions are known for having lower fees and interest rates than banks and other finance companies. The advantage is in the ownership structure: The owners of banks and the majority of consumer finance companies are stockholders – not you. That means every product or service they provide has but one real objective: to make money for their shareholders, while not alienating you so much that you take your deposits and future business somewhere else. The owners of credit unions, on the other hand, are members, not shareholders. That means profits are distributed among its members in the form of dividends, and in the form of lower fees. Every dime that would have gone to Wall Street, in the case of a credit union car loan, stays with credit union members. And you, as the borrower, get to keep a chunk of it, in the form of lower interest rates and fees.

Advantage to the consumer

• With traditional stock ownership, there is always an adversarial relationship between the bank and the customer. Banks serve the stockholders. The credit union exists, however, to serve members. Think of it: If the credit union didn’t serve member interests, the members could simply replace the management team until they found managers who are more responsive to the needs of the membership.

Advantages of banks

• Credit unions tend to be smaller than banks, with a limited membership. Credit unions also must make do with smaller pools of capital, when structuring their loan portfolios. As a result, they are frequently more conservative with their loan underwriting than banks are. If you have spotty credit, then, a bank may give you a loan where a credit union might not. So try a credit union first. The catch, of course, is you must be a member to get a car loan with a credit union.

Disadvantages of banks

• As mentioned, banks have a substantial cost of overhead, in the form of their many branches, expansive operations, and of course, investor profits. Some very large banks have good economies of scale and can minimize the impact of their overhead on consumer fees. But no bank is going to want to cut into shareholder profits if they can help it.

Dealer financing

• The last option is, of course, dealer financing. These deals can be excellent on new cars (0 percent or 1 percent financing is tough to beat), but the picture isn’t as rosy for older cars, or for those who have less-than-stellar credit. If you go the dealer financing route, look at the fine print: You need a car loan with no prepayment penalty. This means you are free to pay off the loan balance at any time, without any added fees or interest tacked on. The higher the interest rate, the more important this is. The lease option the final option, of course, is leasing rather than buying. A lease is essentially a contract to rent the car for a period, and to turn the car back in at the end of that contract (the lease). Lease payments tend to be lower than loan payments, because when a loan is paid, you keep the car! The loan is buying the whole car, and not just the depreciation it has during its first few years. In the long run, the consumer is almost always better off buying a car outright, rather than leasing. With a car loan, the pain of payments is over in 1 to 4 years, but you can be driving the car for 10 years or more! With a car lease, though, your payments never stop, and you never own the car.

It is much easier to get a new auto loan than a used auto loan. A lender looks at the value of the auto purchase because that vehicle is held as collateral. An older auto with less value equals less collateral for the financial institution that gives the loan. When a financial institution loans money for a new auto, they know they have a new and valuable vehicle if the loan goes into default due to non-payment from the borrower.

Additionally, if a loan is given for a used car, the financial institution or dealership may charge higher interest rates than they would for a new auto loan. As a result, the higher rate may make the vehicle cost more in the long run because of costs related to the interest. A new auto depreciates in value once mileage is put onto the vehicle. Usually the largest depreciation happens in the first two years of owning it.

Whether you decide to go with a new or used auto loan, don’t assume the dealer will have the best interest rate. Sometimes, dealership rates are even higher than rates offered by financial institutions or online options.

Become an empowered buyer who knows your financial plans and options before walking through the dealer’s doors. Research and compare interest rates to find the best loan rate. Look online. Call different dealers and financial institutions. By having your financing plans in place before you go to the dealership, you will have more bargaining power to negotiate the best possible interest rate.

If you’re thinking about buying a new car, you know that the best time is the end of the year. The end of the model year means car prices on current year vehicles will never be lower.

If you’re a savvy enough consumer to wait until dealers are desperate to sell, you owe it to yourself to wait just a little longer to do your research on financing options with AAFCU. Don’t be fooled by dealers that advertise a zero percent financing option. Let’s look at four hidden costs that come with these advertised low rates.

1. It may not be as easy to qualify for zero percent financing as you thought. Car commercials don’t talk about the fine print, but dealers place a pile of restrictions on zero percent financing. Roughly 60 percent of people who apply for those loans get rejected especially if they have bad credit.
2. These loans are usually short-term. If the dealer is offering zero percent financing over the life of the loan, expect it to be no more than three years. Many zero percent financing offers only cover part of the life of the loan – typically 6 months. This means a much higher payment than you’d have on a five- or seven-year loan.
3. Dealers may use the promise of zero percent financing to trick you into paying more for the car in the long run. With their knowledge of your financing options, they can manipulate the price of your trade in and the cost of the transaction to arrive at a monthly payment you’re happy about. That way, you’ll focus on the cost of the payment, not the price of the car long term.
4. Choosing zero percent financing will usually prevent you from taking advantage of other discount options. Zero percent financing is offered instead of manufacturer rebates and other discounts. Also, these financing packages are usually incompatible with special discount programs like Ford’s Friends and Family package.

With all these hidden costs, zero percent financing is more expensive than a loan obtained through a private lender, like AAFCU. To see this effect, let’s look at some sample numbers*. We’ll assume that you’re paying $20,000 for a car. You’re presented with two choices. You can take 0 percent financing on a three-year loan or you can get a 4 percent interest rate on a five-year loan, plus a $2,000 rebate. Let’s see how those options break down.

If you take the 0 percent financing option, your monthly payment will be $555. Assuming no other fees or problems arise, you’ll pay $20,000 over the lifetime of the loan. Yes, this option is the higher monthly payment, but if you can’t make a payment one month, you will be paying more interest than expected the next month, and several to follow.

If you take the rebate, though, your monthly payment will be $331- a much more reasonable amount. Over the lifetime of the loan, you’ll pay a total of $19,890. That means you will save $110 and have a lower car payment.

Even if it’s not incompatible with cash back incentives and other rebates, having outside funding lined up before you go to the dealership can be a tremendous advantage in the negotiation process. By continually postponing questions of financing, you can let the dealer think there’s still money to be made. This position might lead them to give you more on your trade-in, lower the price of the car or offer you more options.

The loan you get to pay for your car may be the biggest financial decision you make outside of your home. You owe it to yourself to do your research and treat this decision with diligence. You wouldn’t buy a car just because it had an enticing price tag. Why would you do that with a loan?

Remember, dealerships make money from financing. They want you to finance your car through them, because it’s one more way for them to profit from the sale. It’s also one more piece of information they can use to manipulate the total price of the car in their favor. You can take that power away from them by doing your research on car financing.

If you’re considering buying a new car, your first call shouldn’t be to the dealership. It should be to Air Academy Federal Credit Union. Our professional staff can answer any questions you might have about auto loans and other options to finance your new car. Buying a car is one situation in which that old cliché “knowledge is power” really is true. Take the time to educate yourself about your vehicle financing options. Your wallet will thank you for it! Call AAFCU today!

 *These numbers are for demonstration purposes only.