Millennials Aren’t Concerned With Credit

Millennials Selfie

There’s a stigma attached to credit with my generation—the Millennials. A recent study from Bankrate surveyed over 1,161 Millennials and found six out of 10 don’t own a single credit card. Compared to 35 percent of Americans who are over the age of 30.

As a Millennial myself, I was shocked by this number. I was raised to become aware of your credit and  your savings. This will help lead you to financial security. My mom works in the financial services industry, so it was important to her all six of her children understand personal finances. I’ve always had that influence around me. I also have friends who didn’t have this type of influence growing up, but they got the message that credit isn’t bad when used responsibly by observing what happens when credit isn’t used the right way.

What social impacts have Millennials been influenced by to not place an importance on credit? I believe we can attribute the Great Recession, societal changes and partly how you were raised.

I remember not being phased by the Great Recession when I was younger, but as I got closer to graduating college at the tender age of 22, I was hit in the face with it. Your priorities can change when trying to enter a job market when means are hard to come by. Especially for those who leave college with huge student loans. I’m sure those who are waist deep in student loan debt don’t want to entertain the thought of adding more debt with credit cards. Young Americans are now taking on more student loan debt. Whereas our predecessors who took on mortgage debt at our age.

Young Americans have grown up in a different society than their parents and grandparents. We’re getting married and having kids at later ages. We are overwhelmed with a different type of debt than our parents and grandparents (student loan debt vs. mortgage debts). Millennials debt generally far exceeds their assets. We don’t place a priority on owning a home of our own. We’re perfectly happy with renting until our late twenties and early thirties.

One of our partners from LendingTree, SVP and General Manager Rick Finch, says he noticed Millennials seem to be less interested in home ownership than they are in other things—like the latest technology. Finch says he noticed there is a jump in home ownership for the 29-31 age bracket.

Think about this: If you aren’t interested in credit, you’re going to suffer from high interest rates with any financial loan. This costs you thousands of dollars alone.  Also, you’ll have a harder time obtaining a loan. What should you do? Where do you start to build your credit? Credit is actually pretty straightforward.

What You Need to Know About The Two Types of Debt
The Reality of Improving your Credit Score
4 Reasons to Refinance Your Auto Loan

The Road to Credit Success
If you don’t have any credit built up, open a credit card and only use it once a month for gas or a few things at the grocery store. Basically, put a dollar amount on there each month (or as often as you like) that you know you can quickly pay off. Sometimes I use my card, then go home and pay it right off that same day. Continue this cycle, and it will be the gateway to building your credit. Your first credit card may have a high interest rate, but you don’t get charged the interest if you pay your bill in full at the time it’s due. Pay your credit card bills on time, and you don’t have to worry about the interest.

The infographic below shows what determines your credit score.

credit-score-make-up (2)

 

The Reality of Credit
First and foremost, do not expect your credit score to immediately jump. You have to work at it to build it, but I’m not saying it’ll take you a lifetime. Be patient, do what you’re supposed to do, and I’m sure you’ll be happy with the results you see within months. You are entitled to a FREE annual credit report at annualcreditreport.com. Check this report to monitor your credit.

There’s an overwhelming amount of noise people hear in regards to credit. Most of it comes from friends and family. Bad information gets passed around and around. I’m here to tell you credit is actually quite simple: It pays to pay your bills. Pay your bills on time, every time. Don’t rack up debt you can’t pay off within the allotted time frame. You’ll start boosting your credit score.

Now for the fine tuning of your credit score: Don’t make numerous inquiries into your credit. Inquiries happen anytime you apply for a loan or open a credit card. Don’t close credit lines you no longer use, because you need a credit history to make the best credit score. Finally, having different types of credit available to you helps your score. For instance, a car loan is a different type of credit line than a credit card or furniture you financed or a mortgage or student loans. Obviously, these different types of credit come over time.

Who Looks At Your Credit Score?
Lenders check credit history to determine the risk level of the borrower. After determining a risk level, the interest rate is determined. Interest rates are what the lender charges for letting you borrow money from them. Therefore, the less risky the borrower, the lower the interest rate and more likely the borrower will obtain a loan from that particular lender.

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9 Tips for Identity Protection

Unless you’re living under a rock, you’ve probably been made aware of at least one identity security breach for consumers and their personal identity within the last year. Remember the Target fiasco? Identity theft is on the rise.

The most recent large hack was Community Health Systems, which operates 206 hospitals across the country. The data breach happened August 18th. Hackers stole 4.5 million patients’ data. Hackers have gained access to their names, Social Security numbers, physical addresses, birthdays and telephone numbers.

Then, this week, Home Depot announced they have noticed “unusual activity” and are investing a possible data breach. No confirmation on an actual breach….yet.

Our infographic pinpoints nine things to keep you from becoming an identity theft victim.

9 tips for ID theft protection

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VIDEO: Thank You for Helping Us Grow 628% in 3 Years

rateGenius was recently named in the 2014 top 15 percent of the Inc. 5000 fastest growing private companies in America. We grew 628 percent in the last three years, and we want to thank all our customers for helping us get there. We have the best customers!

 

About rateGenius
The rateGenius group of companies includes rateGenius Loan Services, Inc., a nationwide, Web-based automobile refinance loan broker, which hosts a virtual marketplace to bring together qualified borrowers and its network of more than 200 competitive lenders to save consumers money by refinancing their auto loans at more favorable terms. rateGenius Insurance Agency, Inc. is a quickly growing independent agency, which brokers policies for multiple national providers.  rateGenius also provides loan origination software and mobile loan application products in a SAAS model through financeGenius, Inc.

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4 Reasons to Refinance Your Auto Loan

Did you know you can refinance your car, truck, RV or motorcycle for a lower interest rate? Many consumers think of refinancing their home, but refinancing your auto loan is a great way to slash your auto payments  and enjoy savings each month!

See our blog entry on how your interest rate is costing you thousands.

Questions? Leave us a comment here, FB or Twitter.

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What You Need to Know About The Two Types of Debt

debt

Typically, lenders become more wary about your debt when 45% or more of your debt payments each month take up your pre-taxed income. This is referred to as your debt-to-income ratio. Once you reach a point where 45% or more of your income each month is for debt payments, it’s time to start pumping the brakes.

 

There are two different types of debt: Revolving debt and installment debt.

Revolving debt: Something without fixed payments, like credit cards. Your amount due at the end of each billing cycle varies. When consumers don’t pay their credit card, the credit card debt is sent to a debt collector. The debt collector will try to collect the unpaid funds from the consumer.

Defaulting on a credit card will result in a debt collector coming after your payments, since there is nothing is repossess. Because there is nothing to reposes, this type of debt is considered more risky for the lender.

When you default, this will show as a collection on your credit score. The collection hurts your score and makes it hard for lenders to loan to you. A collection will continue to show as long as the debt is unpaid. Even after you pay the debt off, the fact you had a collection will remain on your credit file for seven years.

Installment debt: Something with fixed payments, like an auto loan or mortgage payment. The amount due at the end of each billing cycle for your auto loan or mortgage payment is the same.

This type of debt is considered less risky for lenders because there is less exposure for the lender. A lender will repossess your car or home when you stop paying your monthly bill. As with revolving debt, the default/collection will show on your credit report, harming your score and credibility with lenders.

See our latest blog entries about the reality of improving your credit score and how your interest rate really works.

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The Reality of Improving Your Credit Score

If you’re someone with a less than stellar credit score, you’ve probably felt the effects of it. Less than stellar credit means facing higher interest rates and maybe more problems obtaining a loan. American consumers feel overwhelmed when it comes to credit education. I believe this stems from basic credit conversations consumers have with one another, but neither is properly informed about the straightforwardness of credit improvement. Where do you start?

Improving your credit history needs to take priority. Why?

Lenders check credit history to determine the risk level of the borrower. After determining a risk level, the interest rate is determined. Interest rates are what the lender charges for letting you borrow money from them. Therefore, the less risky the borrower, the lower the interest rate and more likely the borrower will obtain a loan from that particular lender.

Improving your credit score—tied directly to your credit history— is the only way to improve your interest rates, which improves your savings. Financial security is something to strive for. Facing high interest rates makes it hard to be financially secure when you have a 500 or 600 dollar car payment, and nearly half of it doesn’t go towards your principal amount. (See our previous blog touching on understanding how your principal amount and interest rates work.)

When you think about it, does it seem okay to pay half your car payment directly to the lender for loaning you the money for the car?

FICO Scale Graphic

What are the best ways to improve your credit score?

There are a couple things: First: You will always face an improved credit score when you pay off a loan or credit card balance on time. If you’re struggling with your credit score, the number one way to increase your score and better your history is to pay your bills on time, every time. Second: The second biggest way to increase your credit score is to keep your amounts owed lower. A lot of different types of debt can impact your score. Different types of debt being a lot of money owed on credit cards, while also have a lot of money owed on your auto and home loan, etc.

How long does it take to see a drastic improvement of your credit score?

Everyone is different. Some people have an outstanding loan balance, pay off the few thousand dollars and their score dramatically raises. Some people do the same thing and there’s not as much improvement. (Hey, some improvement is better than none or negative.)Why? Because your credit score is made up of five things.

credit-score-make-up (2)

I stress paying all your loans on time and don’t rack up your debt—aka amounts owed—for optimal results.

How do lenders determine your credit worthiness?

It’s important to know lenders each have their own set of criteria for how to determine which risk tier each borrower will fall into. For example, some lenders won’t loan money to borrowers below a certain credit score. Each lender has their own criteria to determine who they will and will not loan to. One thing remains constant though: Borrowers with better credit history and credit scores receive the better interest rates and savings.

It pays to pay your bills.

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Your Interest Rate Is Costing You Thousands of Dollars

The interest rate the lender charges is a percent of the total amount loaned. Your total amount loaned is called the principal loan amount.

principal loan amount definition

It’s important to remember every car payment you’re making isn’t all going towards your principal amount, but to pay the lender for letting you borrow that money.

Example:

Mr. Borrower owes $20,000 on his auto loan with a 10% interest rate. Mr. Borrower’s monthly car payment is $424.94. After five months, Mr. Borrower’s paid $2,124.70 towards his auto loan. But a staggering $811.63 of the $2,124.70 has gone towards paying the lender, bringing Mr. Borrower’s total auto loan amount (principal loan amount) down to only $18,686.93.

If Mr. Borrower has a 60 month loan term, he will pay the lender almost an extra $5,500 on top of the $20,000 he owes. Over the course of one year, Mr. Borrower has paid $1,853.93 in interest costs.

See this breakdown of what every individual auto loan payment costs Mr. Borrower here on this amortization table. This tool is also helpful to see what your auto loan costs you.

Mr. Borrow refinanced his car and dropped his interest rate by 3%. This makes it a 7% interest rate. He saves almost $30 a month on his car payment. He will pay $1290.33 (savings of $563.60) in interest charges over the course of one year and $3761.44 over the entire 60-month loan term.

The interest rate is applied to the total unpaid portion of your loan or bill. It’s important to know what your interest rate is, and how much it adds to your outstanding debt. If your interest rate adds more to your debt than the amount you are paying, your debt could actually increase even though you are making payments.

What are ways to save when you have a high interest rate like Mr. Borrower’s?

Refinance for a lower rate. Services like rateGenius don’t charge you to refinance your auto loan. Also, overpaying on your car payment each month will save you money, because the interest charged each month is only on the principal loan amount.

Have questions about your interest rate? Comment below or call us. 1 866 728 3436.

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INFOGRAPHIC: 5 Signs of Tire Wear

Do you know what signals tire wear? Have you noticed bulges on the sides of your tire, low PSI or tread wear? These are all signs it may be time for a new tire. Don’t get caught in rush hour (like me) with a flat tire.

InfoGraphic-TireWear-big

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VIDEO: Is a Bank or Credit Union Better for You?

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Financial & Auto Trends in Texas: Travis & Williamson County

Your credit history and  score mean the difference between a bad, good and a great interest rate. FICO credit scores are the most widely used scores for lenders. Because we are in the line of business of saving people money on loans and interest, the FICO score is a big part of that. Did you know your payment history and amounts owed on credit make up 65% of your credit score?

We’ve looked at multiple factors including interest rates, credit scores and age relating to autos to discover trends relating to Texas and Austinites.

We recently took a look at the FICO scores for our home state of Texas and compared them to our home counties of Travis and Williamson county. Some highlights include:

  • Travis Country residents see an average 4.35% rate drop when refinancing their vehicle.
  • The Chevy Silverado is the most refinanced vehicle.
  • The older generations have better credit scores in Williamson County than the rest of the state.

How do you compare? Do you have a part of the country you would like to see specific numbers on? Tell us in the comments!

Auto Refinance Texas Travis Williamson

Use this infographic!

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