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Everyone likes to save money. Auto loans can carry significant financial burdens for many people. One way to save money is to lower the financial Rewards credit cards burden these loans carry.
The best way to save money on your next auto loan is to improve your credit score. A higher credit score means a lower auto loan interest rate. There are four basic tips for raising your credit score.
Regularly check report The first thing each and every individual should do before applying for an auto loan is get their own credit report. Checking credit reports for accuracy should occur once a year. If there are any mistakes that negatively affect your credit, corrections can take up to three months to fix. Staying on top of these mistakes will save you headache in the long run.
Reduce credit card balances An important factor in your FICO credit score is the ratio of owed amount to credit limit. If you have over 25% balance in 0 transfers canada of your credit limit owed, this Rewards credit cards could lower your credit score. Try to limit the use of credit cards if this is your problem. Pay bills timelyPaying bills on time is one aspect of good credit in which most people are aware. Be sure you make timely payments on bills especially 0 in balance transfers canada close to the time you apply for a loan0 balance transfers in canada . A late payment six years in the past will not affect you credit as heavily as a late payment in the present.
Pay off debt Many credit cards offer appealing balance transfer rates. Do not fall victim to these rates around loan time. If you cancel a credit card and transfer it's balance over to another credit card, you are increasing the debt to credit limit ratio. As stated earlier, this is not a good thing. Instead of transferring debt, work on paying off that debt before applying for an auto loan.
There are many reasons why improving your credit score is so important. Saving money on auto loans is just one of the many benefits of having great credit. Improving your credit not only improves the health of your current financial situation, but sets you up for future financial success.2
DID YOU KNOW?
Creditors look at your ability to repay the debt by analyzing your current expenses and your income. Once they have all of that information available a credit granting decision is made.
Many creditors also look at something that is called your "Credit Risk Score". One of the most popular scoring systems is known as a "FICO Score" but it is not the only scoring system. "FICO" derives its name from the company that invented the scoring process: Fair Isaac & Co.
Regardless of the name of scoring rules, Risk Scores are numerical representations that attempt to "predict" the likelihood of you being a good credit risk. In fact, credit risk scores are the sole determining factor that are used by web sites that offer you "instant credit" when you apply on line.
You should know that risk scores are not part of your official credit report and they are not part of your credit history. They are calculated by the particular lender when they receive your credit report. Not all lenders assign the same value to each scoring decision point, which means that your score will vary among lenders.
There are almost as many different scoring systems as there are lenders. Although all of them evaluate your general creditworthiness and your risk of bankruptcy, the models vary widely from there depending upon whether you are seeking a mortgage, credit card, auto loan, etc.
In some scoring systems, a high number is desirable. Others want to see a low number. Your best bet is to find out what scoring system your potential lender uses and ask them what the scoring criteria are. That's the only way that your Credit Risk Score will really mean anything to you when you see it.
Back to FICO scores for a minute. You actually have three FICO scores, which is one for each of the major credit bureaus. Since none of the major bureaus has 100% of your credit history by itself, your scores will vary among bureaus. Please refer to the section on Mortgage Reports to see how this is addressed when you are buying a home.
No credit scoring system is allowed to use non-credit data such as your race, sex, marital status, national origin, or religion when determining your score. Creditors are allowed to use your age as a scoring factor but they are not allowed to discriminate against elderly applicants.
I was told that my score was too low. How can I improve it?
As I said, different creditors use different scoring models and there is no one uniform methodology. You score can go up or down regularly based upon events in your life. Your best bet is to ask the particular creditor that denied you credit how you can improve your score with them.
All of that not withstanding, there are some generally accepted methods of helping to improve your chances of having a good score. Paying your bills on time is one-step in the right direction. If you are behind on payments then catch them up. Here are some other generally accepted tips:
- Keep an eye on your total outstanding debt.
Many scoring models consider the amount of outstanding credit you have as compared to your maximum credit limits. If your credit card balances are at or close to your limit, it could lower your score.
- How long have you had a credit history?
Creditors like to see a long history of satisfactory credit. Of course "long" is a relative term and that's one reason why creditors are allowed to consider your age when making a scoring decision.
- How much "new" credit have you applied for?
If you have applied for "too much" credit, according to whatever arbitrary definition a creditor wants to assign, then this could lower your score as well. As time passes these accounts are no longer considered "new" and your score changes as a result. If you've handled the accounts in a satisfactory manner then your score could go up. Otherwise, it will likely go down.
- How much credit do you have in total?
While you want to have a "long" credit history, you don't want to have too much open credit. This makes creditors nervous because you might be accumulating too much debt and not be able to pay them back.
Remember, your ability to repay the debt a creditor grants you is the most important factor when they look at your credit report but other things are considered too. Use the four tips above before you apply for credit to improve your chances.
For most self-employed people, bookkeeping is about as much fun as a root canal. But like it or not, it must be done, otherwise you'll end up overpaying your taxes big time.
Perhaps this article will help you see this tedious task in a new light. Follow along with me and I can turn your bookkeeping nightmare into the best paying part-time job you ever had.
First, a question:
How much money do you make right now -- per hour -- at your "regular" daytime job or in your business?
Is it $15 per hour? $25 per hour? $50 per hour? Make a mental note of that amount, ok?
Now, let's say by "keeping the books" this month, you record $1,000 worth of deductible expenses.
Let's also assume you are in the 35% tax bracket (15% federal income tax plus 15% self-employment tax plus 5% state tax).
So, for every $1,000 of deductions, you save yourself about $350 in taxes ($1,000 x 35% tax rate).
One more assumption: it takes you about 2 hours to properly record and document that $1,000 of deductions.
Hmmm. You spend 2 hours and save $350 bucks.
How much money did you just make for yourself -- per hour?
$175 per hour! Whoa -- now, compare that to how much you make per hour working in your business or at an employee job. Which "job" paid you more?
Even if it takes you 4 hours -- it's like having a job that pays you $87.50 per hour. Still a pretty good hourly wage, don't you think?
How does that make you feel about bookkeeping? Not such a bad deal after all, is it?
So here's a simple six-step bookkeeping system that will put thousands of dollars of tax savings in your pocket and keep the IRS out of your life.
1. Maintain a separate bank account for your business or self-employment activity.
Never use your personal bank account for business expenses. Having a separate bank account automatically creates the "shell" for the perfect documentation system.
If you don't have a separate business bank account, now is the time to get one.
2. Maintain a separate credit card account for your business. Same deal as the bank account -- pick one credit card that you use exclusively for business expenses.
3. These 2 accounts (one bank account and one credit card account) should only be used for business! Never "co-mingle" business and personal financial information.
The only income that goes into your business bank account is business income. The only expenses that are paid from the business bank account and business credit card account are business expenses.
4. For each major income and expense category, create a simple filing system each calendar year -- one file folder for each major category. Every time you write a check or use the credit card for a business expense, you assign that expense to the appropriate expense category and file the supporting documentation (receipt, invoice, cancelled check, or whatever) into the corresponding file folder.
5. Keep a separate file folder for all monthly bank account statements and credit card statements.
6. Use a simple bookkeeping software program to record all deposits, checks, and credit card charges. Once a week or once a month, input all transactions and assign each transaction to the appropriate income or expense category.
The importance of this "categorization" process cannot be stressed enough -- it's the key to the whole system!
There are any number of software programs out there for this purpose. I've used them all: Quicken, Quickbooks, Money, etc. Spreadsheet programs like Excel can also be used to automate business record-keeping.
But my favorite bookkeeping program for the Small Business Owner or Self-Employed Person is InternetTaxHelper -- it is by far the easiest to learn and simplest to use. If your business grows, you can always invest in a more sophisticated program later. For any small business owner, especially if you're just starting out, this is the best program I've ever seen.
Using a software program is a tremendous time-saver. Once you've input all your individual income and expense transactions, and assuming you've assigned each transaction to the appropriate category and filed the paperwork, you've already completed all the work necessary to audit-proof your income tax return!
For more information on InternetTaxHelper, go to: http://www.YouSaveOnTaxes.com/software
One final comment: If you aren't "computer-savvy", that's OK. You can still use good ole pencil and paper to categorize your business expenses.
I have clients who use nothing more sophisticated than a spiral notebook. Each year they buy a new notebook and label each page with a particular income or expense category.
Every transaction gets written down in the notebook on the appropriate page. At the end of the year, they add up the totals for each page, and presto, they give me an annual recap of all major income and expense categories. Get the picture? It doesn't have to be fancy. It just has to be in writing, accurate, and supported by actual paper documents.
Whether you use your computer or not, the end result is the same: Every single transaction has been assigned to the appropriate category, and every transaction has the corresponding "paper trail" -- every receipt, invoice, cancelled check and credit card charge has been filed into the appropriate file folder. Should the IRS question any income or expense amount on your return, you'll be ready!
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