Understanding Your Credit Score

Photo by Simon Cunningham, LendingMemo.com

Photo by Simon Cunningham, LendingMemo.com

With the average used car asking price hovering right around $15,000, chances are you will need to take out a loan to assist with the purchase of your next vehicle. This is why your credit report is such a critical part of the car buying process.

By understanding how to read your credit score and spot inaccuracies, you increase your chances of being approved by a lender and receiving a lower interest rate.

The Credit Rating Scale

The FICO credit rate scoring scale ranges from 300 to 850 (The higher your score, the better your chances of being approved for a loan and receiving a lower interest rate). While most Americans have a credit scores that falls within the 600 to 800 range, a couple of numbers you want to be aware of include:

720: 720 is the magic number. If your score is 720 or better, you are considered an excellent credit candidate – meaning that you have an improved chance of qualifying for a great rate.

620: Most lenders are wary of credit borrowers with a rating of 620 or lower. While you may still be able to get a loan, you may be considered a subprime borrower -meaning you incur the chances of only qualifying for a higher interest rate.

How is Your Credit Score Calculated?

According to FICO there are four basic elements used to calculate your credit score. These include:

Payment History = 35%: Your payment history accounts for approximately 35 percent of your entire credit score. While FICO tell us that a few late payments are not automatic “score-killers,” this is a large part of the calculation, which means that a history of late payments can negatively affect your score

Amount You Owe = 30%: The second largest factor making up your credit score is the amount of your outstanding debt. It is important to understand that owing a lot of money does not necessarily correlate to a negative credit score. However if a high percentage of your available credit has been used, this is an indication that you may be overextended and more likely to make late or missed payments.

Credit History = 25%: The length of your credit history, including how long you have been building your credit and the ages of your oldest and newest lines of credit, account for about a quarter of your credit score. For example, if you have recently opened up a number of new credit card accounts, your overall score may be negatively affected.

Type of Credit = 10%: The final part of your credit score equation involves the type of credit of you have access to. A good credit score is one that includes a quality mix of installment loans, mortgages, retail accounts, credit card accounts and finance company accounts.

Checking for Inaccuracies

Now that you understand what your credit score is and how it is calculated, it is up to you to check for inaccuracies. This should be done before you even begin the car buying process. By checking your credit score six to twelve months in advance, you have time to contact the reporting credit card bureau and ask for any errors to be corrected.

The Fair Credit Reporting Act (FCRA), which promotes the accuracy, fairness, and privacy of information in the files of the nation’s credit reporting companies, entitles you to get a copy of your credit report every twelve months from each of the three credit reporting bureaus. You can order this report by visiting AnnualCreditReport.com

At UsedCars.com, we’ve partnered with ConsumerInfo.com, an Experian company, to provide you with a FREE Credit Score when you sign up for a FREE trial of their freecreditscore.com Credit Monitoring Service. Learn more about this offer by visiting our Free Credit Score and Report Page.

Four Great Used Sedans

Buying a used sedan should not mean you are settling for less than the best. In fact, the used car market is full of any number of reliable mid-size sedans – each offering an array of high-tech and luxury comfort features.

To help with your search for a premier car at an affordable price, UsedCars.com has gone ahead a done a little research for you. Browse below to search through our listing of some of the best used sedans on the market:

2007– 2012 Nissan Altima:
With an average used car price tag that ranges between $10,000 and $20,000, this fourth generation Nissan Altima is a virtual steal for any car buyer searching for a sedan that offers the compelling mix of finesse, power and driving comfort. With its 175-horsepower engine and sports tuned suspension, these used sedans are able to offer a rewarding ride, while still affording enough room and interior comfort for multiple passengers.

Test scores for the 2010 model year include:
• Consumer Reports – Overall Test Score: 91/100
• NHTSA – Average crash rating: 4.4/5 .0
• JD Power and Associates: Predicted reliability score: 3/5

2008 – 2008 Chevy Malibu:
If a reliable, roomy and fun to drive car with an affordable price tag is what you are after, then this generation of Chevrolet Malibu is almost certain to deliver. With its responsive design and roomy interior, this third generation Malibu offers high-end appeal at budget car pricing. Add in the mid-size sedan’s high safety rankings, and it becomes the perfect choice for the family minded car buyer.

Test scores for the 2009 model year include:
• Consumer Reports – Overall Test Score: 74/100
• NHTSA – Average crash rating: 4.8/5 .0
• JD Power and Associates: Predicted reliability score: 3.0/.05

2009 – 2012 Hyundai Genesis:
What a used Hyundai Genesis offers is luxury car comfort at affordable car pricing. Many of these later model sedans can be found for under $20,000 – included with this low price is a number of standard comfort features, including dual-zone automatic climate control, leather upholstery, heated front seats, seven-speaker sound system, satellite radio and iPod compatibility. Add in the Hyundai Genesis’s strong record of continued reliability, and it easy to see why this sedan continues to rank among one of the most popular used cars on the market.

Test scores for the 2010 model year include:
• Consumer Reports – Overall Test Score: 87/100
• NHTSA – Average crash rating: 5.0/5 .0
• JD Power and Associates: Predicted reliability score: 4/5

2010 – 2012 Ford Fusion:
This second generation Ford Fusion offers that compelling mix of budget car pricing and high-end appeal. While this mid-size sedan was built for the everyman, it has a number of standard comfort features, including alloy wheels, full power accessories, auxiliary audio jack, blind-spot mirrors, and the Ford Sync System. Better yet, the Fusion has received continuous high praise in terms of reliability, making it a great choice on the used car market.

Test scores for the 2010 model year include:
• Consumer Reports – Overall Test Score: 76/100
• NHTSA – Average crash rating: 4.6/5 .0
• JD Power and Associates: Predicted reliability score: 5.0/5

Find a Vehicle to Match Your Lifestyle

One of the first steps in the car buying process is determining the type of car that fits your needs. While this may seem simple enough, the truth is that too many car buyers fail to thoroughly examine their needs before they go to the dealership. What happens next is that they become persuaded by the “great deals” offered by the sales representative, and they wind up selecting a car based solely on the sticker price, not on lifestyle.

While your car buying budget should be a large determinant of the car buying process, if you use it as your sole means of guidance, you will wind up with a vehicle that is less than ideal. To help you avoid this, try using the following points as a guide

The number of passengers

The number of passengers a car can carry is often tied to price – with larger three row SUVs often being priced significantly higher than their two row counterparts. What this means is that car buyers, who are looking for more room but are tied to limited budgets, end up with oversized sedans or practically designed minivans.

The good news, however, is that recent innovations in the engineering of seating layouts have led to more choice for consumers, and car manufacturers have begun introducing compact crossovers to their lineups. For example, compact crossovers, like the Mazda 5 and Mitsubishi Outlander, feature third rows of seats that fold up, allowing the vehicles to serve double duty as cargo haulers.

The importance of fuel economy


If you have a long commute, then it may be safe to assume that fuel economy will be a leading factor in your search – an element which alone can help you eliminate a number of vehicles form your search. For instance, if you need the room and styling of an SUV, the Ford Escape Hybrid or the Kia Sorrento may be the choice for you (both these cars offer roomy interiors while leading their respective categories in fuel economy).

Other choices include models that offer a clean diesel engine option. Manufacturers like Mercedes-Benz and Volkswagen have begun to include clean diesel engines as part of their packages. With diesel cars averaging up to 30 percent better fuel economy than their gasoline engine counterparts, this is great news for the fuel conscious car buyer who does not want to sacrifice style, comfort or power.

The role of traction

Deciding between two-wheel, four-wheel, and all-wheel drive is an important part of the buying decision. Unfortunately, many car buyers do not completely understand the difference. If this sounds like you, use the following guide as a reference

• All-Wheel Drive (AWD): In the simplest of terms, AWD generally means that the vehicle provides power to all four wheels at the same time. Because these vehicles provide front wheel traction, they are often ideal for slippery road conditions and some off-road driving.
• Four-Wheel Drive (4WD): 4WD vehicles differ from AWD vehicles because they can often be switched to 2WD. Also, the drivetrain for these vehicles may allow all four wheels to receive torque from the engine simultaneously. Because these 4WD vehicles often have lower gear ranges, they have become a great choice for traversing challenging off-road conditions.
• Two Wheel Drive (2WD): Two-wheel drive, which is the traction of choice for most vehicles, is when the engine powers either the front or rear wheels. In sedans and minivans, front wheel drive is often ideal because it allows for better drivability and more control during slippery road conditions. Vehicles, such as trucks and SUVs, that are used primarily for hauling are better served as rear-wheel drive.

Popular Used Toyotas

According to Toyota, somewhere near 80% of the cars and trucks they have built over the last twenty years are still on the road. With this type of track-record, there is little wonder as to why this Japanese brand is the recognized leader in producing dependable, long-lasting and reliable vehicles. Since the unveiling of the first Toyota, the A1, all the way back in 1935, the manufacturer has looked for new ways to impact the auto industry. This is a mission that they continue to take seriously today, as evidenced by both the Camry and Prius – two cars that offer leading fuel economy without sacrificing performance and drivability.

 

If you’re looking for a used car, one you will be able to rely on for years to come, it may be time you took a Toyota for a test drive. Discover the durability and reliability yourself by test driving a used Toyota today.

 

Top Used Toyota Models

 

  • 4Runner  If you are in need of an SUV capable of providing comfortable everyday use while still being rugged enough to withstand a heavy-duty workload, the Toyota 4Runner certainly won’t disappoint. Engineered on the frame of a heavy-duty pickup truck, the 4Runner has established a reputation of durability and reliability. Add in the SUV’s roomy interior and comfortable driving experience, and the midsize 4Runner becomes versatile enough for use both on and off the road. 

 

  • Avalon  When searching for a comfortably designed car with a full-sized, roomy interior, you will not be disappointed when you take the Toyota Avalon for a test drive. Since bursting onto the scene in 1995, the Avalon has been a popular choice among car buyers looking for a family sized sedan that offers both reliability and above average fuel economy. While a used Toyota Avalon may not boast the exterior styling refinement of a luxury sedan, its roomy interior and powerful engine help this peppy full-size car stand ahead of many of its market competitors.

 

  • Camry  If you’re looking for a solid used car that you will enjoy driving for years to come, you won’t find many choices that can compete with a Camry. For over 25 years, both new and used Toyota Camrys have remained among the most popular midsize sedans in the U.S – and for good reason. Families keep coming back to the Camry because of its roomy interior, smooth ride and powerful, yet fuel-efficient engine.

 

  • Corolla  Because of its reputation for driving hundreds of thousands of miles with little in the way of mechanical breakdown, the Toyota Corolla consistently ranks as one of the top choices among used car buyers. Since the 1960’s, this affordably priced sedan has been a great option for car buyers on the hunt for a simple, fuel efficient, economy sized car. While many things have changed about the Corolla over its long history, one thing remains a constant: The Corolla continues to be the benchmark of hassle-free reliability that all other car manufacturers measure themselves by.

 

  • Highlander  If you are searching for a stylish, powerful ride with enough storage space to match your lifestyle, then it is high-time you added a used Toyota Highlander to your search. What this is fun-to-drive crossover offers is a quiet, sedan- like driving experience, all wrapped up in the style and body of an SUV. With the ability to fit up to seven passengers, the Highlander continues to be a great option for both growing families and contractors in need of a vehicle with a little bit of extra hauling space.

 

Find a Used Toyota Near You

Since its inception, Toyota continues to wow both critics and car buyers with its ability to produce cars and trucks that are not only fun-to-drive, but that offer a long-standing history of reliability and affordability. For this reason, there is little wonder as to why used Toyotas remain such a popular choice among car buyers.

 

At UsedCars.com, our dedication is to help you in your search for a quality used car, designed to meet all your needs. With access to inventory from dealers across the United States, we will connect you with the best cars at the lowest prices. Please, use our search engine to get started.

How to Get a Loan for a Used Car

Searching for a new or used car but overwhelmed by the prospect of used car financing? If you do not know what you are doing, you could end up with a car loan that you cannot afford. To avoid overspending, the following steps will help you find the car you love at a price that fits your budget.

Determine Your Car Buying Budget

So exactly how much car can you afford? Financing a used car requires deciding how much you can afford to spend each month. Ideally your car loan payments should not exceed 5-10% percent of your take home pay. Keep in mind that this includes all of your car payments, regardless of whether you own one car or two dozen.

Auto Loan Calculator

auto loan calculatorTo calculate your monthly payment: Down payment, trade-in value, purchase price of vehicle, length of car loan and finance rates all must be taken into consideration. To calculate what you can afford, check out our car payment calculator.

Monthly Car Allowance

Deciding what you can afford involves more than simply calculating your monthly car payments. Costs of vehicle ownership include:

  • Insurance: Buying a car, regardless of whether it is new or used, can result in higher car insurance rates. Consider the insurance rate of the vehicle you’re selecting.
  • Maintenance: Even a brand new car needs tire rotations, oil changes and new wiper blades – Small expenses can add up quickly.
  • Gas Prices: Are you making the switch from a sedan to an SUV? If so, you can expect to pay more at the pump. Consider the impact of MPG on your monthly fuel budget.

Check Your Credit Score

Checking your credit score is something that should begin months before you start the car buying process. Why? Inaccuracies in your credit report/score, can take up to three months to be removed. When it comes to applying for a car loan, a bad credit score means a higher interest rate.

To see how your credit rating affects your car loan, check out this handy calculator from BankRate.com.

How to Get Your Free Credit Report

Your best bet is to go with a government approved source. As a result of the Fair and Accurate Credit Transactions Act, you are entitled to a free credit report every year from each of the three major credit bureaus: Equifax, TransUnion, and Experian.

To request your free report head on over to www.annualcreditreport.com (The only authorized free credit report website)

What to do With Your Credit Report

You received your credit score. Now what?

Start searching for inaccuracies: Look for accounts that do not belong to you, have been closed, or have incorrect limits and balances. If you discover inaccuracies, write to the reporting credit bureau and submit evidence to the contrary. By law they must substantiate any claims.

If your credit score is still low – you’re shooting for something higher than 620 – the Better Business Bureau offers tips for improving your rating.

Explore Your Used Car Financing Options

After creating a budget, calculating an affordable car payment, and researching your credit rating, you can begin exploring your used car financing options:

Advantages of Financing through a Dealership

While obtaining financing through the dealer is often more expensive, it definitely has its advantages:

financing your used car

  • Multiple Lenders: Car dealers work with multiple lenders. This reduces the hassle of shopping around for the best rate.
  • More Credit Options: Do you have less than stellar credit? While a credit union may not be able to offer you financing, a dealership will work with you to find someone who will.
  • Tax Credit: While this varies from state to state, many states allow you to deduct the trade-in value of your vehicle from the retail price. This in turn lowers the sales tax. When you finance outside a dealership, you lose this advantage.

Advantages of Financing through a Credit Union

Another option is to go directly to the bank or credit union. While credit unions often offer lower rates than that of banks, both can be an advantageous route when compared to the dealer.

  • Prior Approval: You can start shopping for a car loan before you step foot at the dealership. This will help you narrow your search and settle on a car you can afford.
  • Lower Interest Rates: Seeking outside financing traditionally results in a lower interest rate. This is especially true if you have established a relationship with your local credit union or bank.

For a demonstration of the difference between bank, credit union, and dealership car loans, head on over to BankRate.com and use their car loan rate comparison calculator

Keep in mind that getting approved for a car loan does not necessarily mean that you can afford the payments. When financing your car, take the time to establish a budget, do your homework and shop around for the best interest rate. At UsedCars.com we have partnered with Auto Credit Express to offer a low auto financing option. Complete our No-Obligation form to get a FREE finance quote.