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Who Will Take a Chance on You?

Here’s a question we’re often asked: if lenders are all drawing credit reports from the same three credit bureaus—Experian, Equifax and TransUnion—why do some lenders accept and others reject my application when it comes time to refinance? If I have bad credit from late payments, bankruptcies or delinquencies, wouldn’t every lender see the same bad credit report and deny my loan application?

The answer is a definite no! All lenders—whether banks or credit unions—have their own ways of defining risk and measuring it. What may seem like an acceptable level of risk to one lender may be a clear denial for another. In that instance, the institution that does offer you the loan, may do so with a higher rate to cover their risk.

Every lender has its own formulas for calculating risk and no two institutions have the same one. They are essentially using your past history to determine how likely you are to pay them back. Late or missed payments, bankruptcies, home foreclosures, judgments against you for non-payment and high credit balances are all warning signs to lenders.

While the customer’s credit report is an important component of a lending decision, there are dozens of other inputs that may be used to calculate your final credit score. As explained by the VantageScore credit reporting site:

“There is no one credit scoring model that singularly represents the consumer lending marketplace. In addition to…the dozens of FICO* models [measuring consumer credit risk] that are in use today, many lenders rely on their own proprietary models to grant or manage credit.

In light of the reality that no single credit model is the yardstick used by all, or even most, consumer lenders, consumers should understand that no score they buy or obtain from a free-score web service is guaranteed to exactly match scores from the model or models a lender may consider when making a lending decision.”

Recommendations

To make things as easy as possible when you go to refinance, here are two recommendations you should follow:

  1. Work with an umbrella organization. Instead of approaching a number of different banks or credit unions to apply, go to a central refinancing source like RefiJet.com. We have relationships with a wide range of lenders and can match you with the best one for your particular financial situation. We handle all the paperwork for you and don’t charge you any fees—what could be easier?
  2. Work on your credit score. You should always be aware of your credit score—you are entitled to view yours for free each year—and the ways in which you are helping or hurting it. Make a concerted effort to pay your bills on time, establish a credit history if you don’t have one, and manage your credit accounts well, with low rates and balances. If your credit history is poor, make a concerted effort to “clean up your act.”

To learn more about how RefiJet works and how we can help find the best auto refinancing loan for you, complete the form on our home page and we will be in touch!

The Truth About Identity Theft

You may think getting your identity stolen is a “one in a million” type of thing—maybe it does happen to people, but the chance of it actually happening to you is extremely rare. You might think victims of identity theft must be careless with their ID or credit card information or vulnerable to online scams or “phishing”—responding to those fake emails that appear to be from trusted institutions.

Yet multiple sources report that there are 15 million cases of identity theft each year just in the U.S. alone. Assuming approximately 250 million adults in the country, that means that six of every 100 adults are victimized each year.

I know for a fact that identity theft can happen to even the most careful person—because it happened to me several years ago. And make no mistake about it: your life becomes an emotional roller coaster, and it can take months or even years to fully clear your name.

In my case, the thief bought high-value gift cards at a number of big-box stores using my identification information—including my birthdate and social security number—over the course of a weekend in a geographic location far removed from me. Thankfully, my credit card company alerted me to the potential fraud because I was simultaneously using my real card elsewhere myself.

Yet the damage was done. When your identity is stolen, the faster you can respond, the better chance you have to preserve your credit. Here are the steps the federal government recommends you take immediately if your identity has been stolen:

  1. Close or freeze every credit card you have with banks, retailers and other merchants.
  2. Change logins, passwords and PINs for each of your investment and credit accounts.
  3. Call your local police department to report the crime.
  4. Contact any of the three major credit bureaus—Experian, Equifax or Transunion—to place a fraud alert on your credit and freeze your credit report. Once you have contacted one of these bureaus, they are obligated to inform the other two.
  5. Get a free copy of your credit report to see the specific incidents where fraud has occurred.
  6. Contact each merchant that has unfairly charged you for a fraudulent transaction to explain the situation and request a reversal.
  7. Report the case to the federal government at identitytheft.gov.

This process will be painstaking and frustrating. You will spend hours on your computer or making calls and likely face a number of dead ends along the way. Be sure to follow up regularly by checking your credit report to make sure your account gets cleared.

While anyone can be targeted for identity fraud, it does help to keep your email free of spam to the extent possible and never give out personal information—including your birth date, social security number, passwords and account information—to anyone without being absolutely certain who they are. Your good name is one of your most valuable assets and it’s worth protecting, no matter what the cost.