Credit reports, car loans, dangers and opportunites

Credit reports, car loans, dangers and opportunities.

The world of finance, and in particular the world of car loan finance is rather complicated. Such is the case that most of us do not even try to understand it. This of course is not the best line of action in an industry where every choice you make can either save you or cost a lot money. Bad decisions do not only mean a higher expenditure in the present, every credit transaction is recorded and becomes part of your credit history. Your credit history will then help other finance companies decide if to provide you with credit and at what price. Your credit history also affects your rating and performance with insurance companies and other institutions.

So great, your credit history will control everything in your life and if you screw it up you’re in trouble. What does that have to do with car loans? Well as we mentioned finance companies and insurance companies will decide the rate and conditions of your credit and insurance on your credit history. That is fair, they have to assess what sort of a risk you are before they provide you with cover or lend you their cash. The problem is that many car dealers will carry out a credit check of your credit history without even asking you. Why do they do this? They carry out credit checks for two main reasons. One, it helps their finance sections decide if you would be a good client before you even decide to ask for finance and two it helps them know how regal their treatment needs to be. If you have a good credit score it generally means you are more likely to get a good price and have more options than a client that is lumbered with a bad credit history.

This means that you could end up paying more for a car than another person simply based on your credit report. This is unfair, the base price of a product should not be cheaper just because you have black spots in your credit history. It’s like Wal-mart charging you more for bacon if you are poor, certainly not kosher. Paying a higher interest is a different case because if your credit history is bad you are more likely to fail on your car loan payments.

How do car dealers get hold of your personal data and carry out a credit check. They will either ask you for it or use a more indirect method. One “trick” that has been used widely is to ask for your driving license when you ask to give the car you like a test drive. While you are busy behind the wheel they are busy on their laptop looking at your credit score. When you come back you might have lost a whole lot of leverage with your car salesman. The solution? Don’t provide personal information until you have agreed on the best price you can get and not later and don’t take the car for a test drive until you have decided to buy it and have a price set in stone for it.