If you’ve ever visited a car rental agency, then you’ve encountered the cumbersome list of rules and requirements rental agencies subject their customers to. It all starts when you hand them your debit card for the car that you reserved well in advance of your trip, only to have the clerk notify you that they require a deposit of twice the amount of your rental. Furthermore, they will be running a credit check to ensure that you meet their minimum qualification criteria. Now in addition to eating into your trip money, you’re going to incur an unwanted “pull” on your credit report.
Why do Car Rentals Care About Your Credit Score?
Unless you’re paying with a debit card, car rentals don’t really care about your credit score. In fact, it’s not likely that a car rental company will pull your credit score if you are renting with a credit card, rather than a debit. From the rental agency’s perspective, potential borrowers with an active credit card pose less of a risk. It is assumed that consumers with only a debit card at their disposal are at the lower end of the credit spectrum and it may be more difficult for the agency to recover their losses if the vehicle becomes damaged in any way.
For this reason, an agency will run a credit check if you are using a debit card for your rental.
How a Credit Check Impacts Your Score
For various reasons, consumers don’t always have a credit card at their disposal. If you decide to move forward renting with a debit card, the rental company will run a credit check. Depending on the type of credit check that the company does, it could show up as a hard inquiry on your credit report. This may temporarily decrease your score a few points but won’t have a lasting effect on your report.
Hard inquiries typically only show on your report for a 12 month period. However, if you are planning to apply with a primary lender in the near future, it’s a good idea to keep your hard inquiries to a minimum. Too many inquiries could show potential lenders that you are of higher borrowing risk and could result in a denial.
Can I Avoid a Credit Check?
The best way to bypass the credit check requirement during your car rental process is to use a credit card. Most companies will give you the option to secure the vehicle with a credit card but later pay with debit or cash once returned. This will help you avoid the waiting period for a refund on your deposit, and prevent an unnecessary credit check.
If you have an upcoming trip and you’re not confident about your ability to be approved for a credit card, talk to your bank about obtaining a secured credit card. Secured cards require the cardholder to deposit funds to be able to access the credit line. Because your own money backs the card, there is no credit screening requirement. If managed responsibly, this type of card can also help in rebuilding your credit profile.
Streamlining the Rental Process
The last thing you want is to think you have a rental planned, only to get to your destination and realize that you are stranded without a vehicle. Before you get to the location, call ahead and confirm what types of payment they accept. Inquire about credit, deposit, and documentation requirements, along with any age and mileage restrictions, so you know what to expect. Renting with a debit card isn’t necessarily the cheapest option, so shop around and find the best deal for you and your situation.
Managing Your Finances When Living Paycheck to Paycheck (Tips)
It is never ideal for a person to live paycheck to paycheck. And if the idea of living paycheck to paycheck sounds stressful, imagine actually living life this way. Many people who don’t have a high-paying job have to find a way to live comfortably, and learning to manage your finances is a great start.
Managing your finances may seem like a difficult task when you live paycheck to paycheck, but there are things you can do to ensure your success.
Create a budget
When you have a limited income and live paycheck to paycheck, it is important for you to create a budget. The reason being you can successfully manage your finances when you keep a close eye on your income and expenses. Additionally, you can cut out unnecessary expenses and have some extra cash.
Use the half method
The half method requires you to pay bills in two separate payments rather than one lump sum. For example, if your cell-phone bill is $100, rather than pay the full balance on the due date, you can pay $50 with one paycheck before the due date, and the last $50 with another paycheck on or around the due date. With each check, you will then have $50 to save or spend.
Pay the minimum balance
If you have credit cards, consider paying at least the minimum balance when the bill comes due. It may be tempting to just not pay it, but ignoring your credit card payment will only result in you owing more money and damaging your credit score. Between the additional amount you could pay in interest and late fees, it makes sense to just pay the minimum balance and keep your account in good standing. Of course, if you can comfortably pay the full balance, that is always an option.
Renegotiate your bills
Renegotiating your bills doesn’t mean you have to eliminate the expense but find a more affordable option for you. For example, you may be able to reduce your auto insurance payment by a few dollars if you change coverage or inquire about discounts. If you have both internet and cable, perhaps you could change the plan or discuss the possibility of a more reasonable price for your budget with your provider. Maybe even dropping cable and using online streaming services is an appealing option.
Put your savings on auto
Just because you live paycheck to paycheck, doesn’t mean you can’t save. Even if it is a small amount that you are putting away every payday, over time it will add up. Whether you are building an emergency fund in preparation for the unexpected or just saving for life, you can put your savings on auto and select an amount to automatically be withdrawn from your checking and deposited into your savings.
Why managing your finances is necessary
So, why is managing your finances necessary? Poor management of your finances will do more harm than good. In fact, if you don’t properly manage your finances, you could end up spending more money than necessary and even damage your credit score. And when your credit score is poor, you will have a difficult time getting approved for credit cards, loans, and even an apartment.
When you think about the issues that can arise when you don’t have a handle on your finances, you may think twice about your situation and what you can do to change it. When you are living paycheck to paycheck, you may feel helpless, but you have options. And with all of the financial troubles you could face leading to more stress, it could easily be avoided if you take the time to manage your finances.
Made poor financial decisions in the past that negatively impacted your credit? We can help! Contact Credit Absolute today for a free consultation.
Tips to Help Manage & Maintain a Good Credit Utilization Rate
When you think of your credit score, you may not consider how this number is calculated or how your actions play a role. Simply put, every credit score is made up of certain criteria, and each criteria can cause an increase or decrease in credit score. With credit utilization being one of the things that can impact your score, it may be time to learn how to manage your credit utilization.
In order to successfully manage your credit utilization rate, you’ll need to understand what it is and how it can negatively or positively impact your life.
What is credit utilization rate and how is it calculated?
Credit utilization rate is a number used to compare the amount of debt you owe to the amount of credit you have available. By dividing the amount of credit that you use by the amount of credit available, you can determine your credit utilization rate. The more of your available credit you use the higher your credit utilization rate.
For example, if you have several credit cards, one with a credit limit of $500, one with a credit limit of $200, and another with a credit limit of $300, your total available revolving credit amount is $1,000. If you use $400 of the $1,000 of available credit, your credit utilization rate will be 40%. Whereas if you were to use $100 of your available credit, your credit utilization rate would be 10%.
Why does your credit utilization rate matter?
Credit utilization is one of the many factors that can affect your credit score. It actually makes up 30% of your FICO credit score, which means it is one of the most important factors that influence your credit score. Depending on the number, creditors and lenders may or may not approve your application. This is because your credit utilization rate is another way for creditors and lenders to measure your ability to manage your finances.
If you have $2,000 of revolving credit available to you between one or multiple credit cards, in order to keep your credit utilization at or below 30%, you’ll want to use no more than $600 if you don’t want to see your credit score drop significantly.
Managing your credit utilization
Since your credit utilization rate accounts for 30% of your credit score, you want to pay close attention to this number to ensure it doesn’t start to negatively impact your score. This is especially true when you want to improve your score to increase your chances of being approved for things that require good credit such as applying for a home loan or apartment.
You can successfully manage your credit utilization rate by:
- Increasing your credit card limit
- Paying your credit balance in full instead of just the minimum balance
- Keeping credit accounts open even when there is little to no use
- Pay down debts
- Actively monitor your credit usage
Keep in mind that the goal of managing your credit utilization rate is to keep it at 30% or less. This doesn’t mean that you have to completely stop accessing your revolving credit, but you want to do so responsibly if you don’t want to see your credit score suffer.
For credit repair assistance and financial advice, contact Credit Absolute today for a free consultation!
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