Credit Scores

Are you tempted to opening a department store credit card to save a buck when shopping? Many retailers offer in-house department store credit cards that may provide an immediate discount for opening the card. However, there are some disadvantages that need to be considered before opting into their credit card program.

Every time you apply for a credit card, your credit score is reviewed to determine the amount of risk you pose to the lender. Each one of those checks can lower your credit score as these inquires are considered negative activity.

Additionally at any given time creditors want their customers to have considerably more credit then is being used. Store credit cards typically offer their newly approved cardholders a line of credit close to the amount they are charging that day. When the charge processes, the customers credit utilization ratio greatly decreases and a FICO point deduction may occur.

Typically, store credit cards are notorious for having some of the highest interest rates out there. Those high interest rates can totally negate the initial discount you may have gotten for opening the card in the first place. If you only make the minimum payments, that initial 10% discount will be worthless in just a couple of credit card billing cycles.

All this being considered, there are some great benefits to department store credit cards. If you constantly shop at a particular department store, you will be entitled to special incentives just for you. Discount coupons, private sales and even free merchandise for quantity purchases may be coming your way.

Additionally, opening a department store credit card is a great way to establish first time credit. Consumers typically have any easier time getting approval to open a department store credit card. By paying them off in a timely fashion, you can use a department store card to its advantage and build a stronger credit history.

You've probably seen the advertisements on television from auto dealerships who claim to be able to work with any buyer to get an auto loan, regardless of your credit history. "Bad credit or no credit, as long as you have a job, we can get you a guaranteed auto loan!" This seems to be the motto of this sort of dealership. But how exactly are they able to offer auto loans for people with bad credit, when no one else will take on the bad credit borrower?

Auto dealerships can choose to offer you a loan if you have bad credit because they are the ones extending you the credit. There are a few things that will allow an auto dealership to offer guaranteed auto loans for bad credit. The first thing you should know about these loans is that the interest rate on a bad credit auto loan is almost always going to be higher than financing that you apply through for through a credit union, bank or other financial institution. Sometimes auto dealerships will charge up to 20% interest on a bad credit auto loan. Over time, this high interest rate will make it almost impossible to pay off a bad credit auto loan.

The second thing you should know is that the reason why dealerships can offer an auto loan for bad credit is that your new car is collateral for the loan. Which means that, if you should default on your auto loan payments for ninety or one hundred and twenty days, the auto dealership can choose to collect the collateral, or, in other words, repossess your car.

Many of us can relate to having hard times with money, and sometimes, when there is no other option, a bad credit auto loan can be a good idea for some people. The good news is that, if you make your payments on time for your a bad credit auto loan, that in and of itself will help your credit rating and bring your credit score up when it is reported to the three major credit bureaus. In six or twelve months time, you might even qualify for better loan terms and, at that time, you can look into refinancing your auto loan at the best interest rate.

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