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Trying to Lease a Car With Bad Credit? Here’s What You Need to Know



Leasing a car isn’t impossible when you have bad credit, but it’s not the easiest process either. If you’re not sure where to start your journey toward a lease vehicle, let us point the way.

4 Leasing Basics

Firstly, leasing is a whole different process from financing an auto loan. Sure, there are some similarities, such as how you choose your car, negotiating your contract, and needing full coverage auto insurance, but that’s about where they end.

Leasing a vehicle means that you never actually own the car unless you purchase it at the end. Leased vehicles are typically only new, which means that they may start at a higher price than cars you could finance with a loan. But, since you never actually own the vehicle, you’re only paying for the time you have it.

Here are four basic leasing terms you need to know:

  1. Capitalized cost – Also called the cap cost, this equates to the purchase price of a car in a loan. It’s the cost of the depreciation plus taxes and fees that make up the cost of your lease. This is a precalculated price which you work to pay over your lease term, which is typically 24 to 36 months.
  2. Cap cost reduction – This is similar to a down payment in a loan, however, it’s not a requirement for leasing. If you use a cap cost reduction, you save money on your monthly payment, but it doesn’t decrease the overall cost of the lease. All you’re doing when you use a cap cost reduction is prepaying the lease.
  3. Residual value – This is the value of the vehicle at lease turn-in time. Residual value is set at the start of the lease. If your lease is calculated correctly, and there haven’t been any major changes to increase or reduce the car’s value, the residual value should be equal to the equity.
  4. Money factor – This is comparable to the interest rate of a loan. It’s expressed as a decimal number, 0.0024 for example. To see what this would equal as an APR, multiple the decimal by 2,400. In this case a lease with a money factor of 0.0024 is equivalent to having a 5.76% interest rate. The money factor is also sometimes referred to as the lease factor or lease fee.

Now that you know the basic lease terminology, let’s look at why bad credit leasing can be difficult.

Difficulties of Leasing a Car With Bad Credit

Trying to Lease a Car With Bad Credit? Here's What You Need to KnowEven though leasing a car may seem like a better deal than an auto loan on the surface, this isn’t always the case. It’s true that leased vehicles typically carry a lower monthly payment than their car loan counterparts. If you always want to drive a new vehicle, or need to have the latest bells and whistles in your car, leasing could also be appealing.

However, because they’re new vehicles, the starting price is often higher than it would be on other cars, such as used or certified pre-owned vehicles. If you’re leasing a car for 36 months which is more expensive than one you could buy with a loan in 60 months, you’re probably not saving too much cash by having a lower monthly payment.

Additionally, since a lease approval is typically based on your credit score, a credit-challenged consumer may not be able to find a lessor willing to work with them. When you’re struggling with credit issues, you may have trouble getting credit for many things. Available credit, as well as overall financial stability, are big factors in leasing.

And, when your lease is up, you either have to start the process over and lease again or purchase the vehicle for its precalculated residual value. Then, there are the extra costs associated with leasing that may tip the scales out of favor with bad credit borrowers.

This is because lease cars aren’t yours to keep, so they have strict rules imposed on them while you’re using them.

The Extra Costs of Leasing

Any condition that doesn’t meet the lessor’s standards when you return the vehicle has to be paid for out of your pocket unless you plan to buy the car. Either way, it’s more money that you may not be prepared to spend. These could include over mileage charges, wear and tear fees, and cleaning costs.

All leased vehicles have mileage limits, and if you drive more than your allotted miles you usually pay around 25 cents or more per extra mile. You can purchase extra miles at a lower cost up front, but there’s no refund if you don’t end up using them.

Your car also has to be kept in as good of condition as possible – any wear and tear to the vehicle that’s considered excessive by the lessor could incur a charge. You also have to keep the car clean inside, and can’t make any modifications to its original equipment while you have it.

If something happens to the vehicle that isn’t covered under warranty, you may also be responsible for the repair bills of any issues that you were unable, or unwilling, to fix. Leased cars also generally carry a higher auto insurance deductible than vehicles with a loan, which could increase the cost of your insurance significantly.

Lastly, there are many fees associated with leasing that you may not have to worry about in a car loan, such as an inception fee, security deposit, and early termination fees. In fact, it may not be possible to get out of a lease early without paying the entire cost of the lease.

Auto Loans and Bad Credit

Though an auto loan may not be what you set out to find, they can be much easier to achieve with poor credit. There are lenders that work specifically with credit-challenged consumers, called subprime lenders. They’re found through special finance dealerships and use more than just your credit score to get you approved for financing.

With a car loan through a subprime lender, you have the chance to get the vehicle you need, and there’s no going back to turn in the car once the term is over – you own it! Other advantages include keeping the vehicle in whatever condition you choose. These include being able to put as many miles on it as you want, the ability to customize your car, and possibly big savings on auto insurance over leasing.

Perhaps one of the biggest advantages to a car loan over a lease is that you have a better chance at getting a loan. Subprime loans can help you build credit with each on-time payment, and if you have enough of a credit score boost by the end, you can set yourself up to be in a position to lease the next time around.

Ready to Get Started?

If you’re dealing with bad credit and need a vehicle, getting an auto loan is a great way to improve your credit and get the car you’re searching for. Looking for the special finance dealer that has the lenders you need can be hard, though, especially if you aren’t sure where to start. Not all dealerships have the resources to assist people who have damaged credit.

At Auto Credit Express, we know where to find the dealers you’re looking for and have been connecting borrowers to lending opportunities for over 20 years. Why drive around town looking for the right place, when you could start right here? Simply fill out our quick auto loan request form, and we’ll work to match you to a local dealership. The process is free and there’s never any obligation, so get started now!

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Bad Credit

If You Want Consumers to Lose, Network Regulation is a Must – Digital Transactions



After the current U.S. Congress was sworn in, a predictable chorus of merchants, lobbyists, and lawmakers demanded new interchange price caps and other government mandates to decrease credit card interchange fees for merchants. The tired attacks on credit cards are an easy narrative that focuses almost exclusively on the cost side of the ledger, while completely ignoring the cards’ important role in the economy and the regressive effects of interchange regulation. 

To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents. For decades, they have promised these interventions would eventually benefit consumers. But the lessons from the Durbin Amendment in the United States and price cap regulation in Australia is clear. Although some policymakers bemoan the current economic model, arbitrarily “cutting” rates for the sake of cuts completely ignores the economic reality that as billions of dollars move to merchants, billions are lost by consumers. 

For the uninitiated, let’s break down what credit interchange funds: 1) the cost of fraud; 2) more than $40 billion in consumers rewards; 3) the cost of nonpayment by consumers, which is typically 4% of revolving credit; 4) more than $300 billion in credit floats to U.S. consumers; and 5) drastically higher “ticket lift” for merchants. 

Johnson: “To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents.”

These are just some of the benefits. If costs were all that mattered, American Express wouldn’t exist. Until recently, it was by far the most expensive U.S. network. Yet, merchants still took AmEx because they knew the average AmEx “swipe” was around $140, far more than Visa and Mastercard. 

Put simply, for a few basis points, interchange functions as a small insurance policy to safeguard retailers from the threat of fraud and nonpayment by consumers. Consider the amount of ink spilled on interchange when no one mentions that the chargeoff rate for issuing banks on bad credit card debt exceeds credit interchange.

Looking abroad, interchange opponents cite Australia, which halved interchange fees nearly 20 years ago, as a glowing example of how to regulate credit cards. In truth, Australia’s regulations have harmed consumers, reduced their options, and forced Australians to pay more for less appealing credit card products. 

First, the cost of a basic credit card is $60 USD in many Australian banks. How many millions of Americans would lose access to credit if the annual cost went from $0 to $60? Can you imagine the consumer outrage? 

In a two-sided market like credit cards, any regulated shift to one side acts a massive tax on the other. For Australians, the new tax fell on cardholders. There, annual fees for standard cards rose by nearly 25%, according to an analysis by global consulting firm CRA International. Fees for rewards cards skyrocketed by as much as 77%.

Many no-fee credit cards were no longer financially viable. As a result, they were pulled from the market, leaving lower income Australians, as well as young people working to establish credit, with few viable options in the credit card market.

Even the benefits that lead many people to sign up for credit cards in the first place have been substantially diluted in Australia because of the reduction of interchange fees. In fact, the value of rewards points fell by approximately 23% after the country cut interchange fees.

Efforts to add interchange price caps would have a similar effect here in the U.S. A 50% cut would amount to a $40 billion to $50 billion wealth transfer from consumers and issuers to merchants. For the 20 million or so financially marginalized Americans, what will their access to credit be when issuers find a $50 billion hole in their balance sheets? 

The average American generates $167 per year in rewards, according to the Consumer Financial Protection Bureau. Perks like airline miles, hotel points, and cashback rewards would be decimated and would likely be just the province of the rich after regulation. Many middle-class consumers could say goodbye to family vacations booked at almost no cost thanks to credit card rewards.

As the travel industry and retailers fight to bounce back from the impact of the pandemic, slashing consumer rewards and reducing the attractiveness of already-fragile businesses is the last thing lawmakers and regulators in Washington should undertake.

Proposals to follow Australia’s misguided lead in capping interchange may allow retailers to snatch a few extra basis points, but the consequences would be disastrous for consumers. Cards would simply be less valuable and more expensive for Americans, and millions of consumers would lose access to credit. University of Pennsylvania Professor Natasha Sarin estimates debit price caps alone cost consumers $3 billion. How much more would consumers have to pay under Durbin 2.0?

Members of Congress and other leaders should learn from Australia and Durbin 1.0 to avoid making the same mistake twice.

—Drew Johnson is a senior fellow at the National Center for Public Policy Research, Washington, D.C.

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Increase Your Credit Score With Michael Carrington



More than ever before, your debt and credit records can negatively impact you or your family’s life if left unmanaged. Sadly, many Americans feel entirely helpless about their credit score’s present state and the steps they need to take to fix a less-than-perfect score. This is where Michael Carrington, founder of Tier 1 Credit Specialist, comes in. Michael is determined to offer thousands of Americans an educated, informed approach towards credit restoration.

Michael understands the plight that having a bad credit score can bring into your life. His first financial industry job was working as a home mortgage loan analyst for one of the nation’s largest lenders. Early on, he had to work a grueling schedule which included several jobs seven days a week while putting in almost 12-hour days to make $5,000 monthly to get by barely.

“I was tired of living a mediocre life and was determined to increase the value that I can offer others through my knowledge of the finance industry – I started reading all of the necessary books, networking with industry professionals, and investing in mentorship,” shares Michael Carrington. “I got my break when I was able to grow a seven-figure credit repair and funding organization that is flexible enough to address the financial needs of thousands of Americans.”

With his vast experience in the business world, establishing himself as a well-respected business leader, Michael Carrington felt he had the power to help millions of Americas in restoring their credit. Michael learned the FICO system, stayed up to date on the Fair Credit Reporting Act (FCRA), found ways to improve his credit score, and started showing others.

The Tier 1 Credit Specialist uses a tested and proven approach to educate their clients on everything credit scores. Michael is leveraging his experience as a home mortgage professional, marketing executive, and global business coach to inform his clients. He and his team take their time to carefully go through their client’s credit records as they try to find the root of their problem and find suitable financial solutions.

The company is changing lives all over America as it helps families and individuals to repair their credit scores, gain access to lower interest rates on loans and get better jobs. What Tier 1 Credit Specialists is offering many Americans is a chance at financial freedom.

Michael Carrington has repaired over $8 million in debt write-ups and has helped fund American’s with over $4 million through thousands of fixed reports. “I credit our success to being people-focused,” he often says. “The amount of success that we create is going to be in direct proportion to the amount of value that we provide people – not just our customers – people.”

Because of its ‘people-focused goals, the Tier 1 Credit Specialist is determined to help millions of Americans achieve financial literacy. It is currently receiving raving reviews from clients who are completely happy with the credit repair solutions that the company has provided them.

Today, Michael Carrington is continuing with a new initiative to serve more Americans who suffer from bad credit due to little or no access to affordable resources for repair.

The Tier 1 Credit Socialist brand is changing the outlook of many families across America. To do this, the company has created an affiliate system that will provide more people with ways of earning during these tough economic times.

As a well-respected international business leader and entrepreneur with numerous achievements to his name Michael Carrington aims to help millions of Americans achieve the financial freedom, he is experiencing today. Tier 1 Credit Socialist is one of the most effective credit repair brands on the market right now, and they have no plans for slowing down in 2021!

Learn more about Michael Carrington by visiting his Instagram account or checking out the Tier 1 Credit Specialist website.

Published April 17th, 2021

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Does Having a Bank Account With an Issuer Make Credit Card Approval Easier?



Better the risk you know than the one you don’t.

When it comes to personal finance, nothing is guaranteed. That goes double for credit. That’s why, no matter how perfect your credit or how many times you’ve applied for a new credit card, there’s always that moment of doubt while you wait for a decision.

Issuing banks look at a wide range of factors when making a decision — and your credit score is only one of them. They look at your entire credit history, and consider things like your income and even your history with the bank itself.

For example, if you defaulted on a credit card with a given bank 15 years ago, that mistake is likely long gone from your credit reports. To you and the three major credit bureaus, it is ancient history. But banks are like elephants — they never forget. And that mistake could be enough to stop your approval.

But does it go the other way, too? Does having a bank account that’s in good standing with an issuer make you more likely to get approved? While there’s no clear-cut answer, there are a few cases when it could help.

A good relationship may weigh in your favor

Credit card issuers rarely come right out and say much about their approval processes, so we often have to rely on anecdotal evidence to get an idea of what works. That said, you can find a number of stories of folks who have been approved for a credit card they were previously denied for after they opened a savings or checking account with the issuer.

These types of stories are more common at the extreme ends of the card range. If you have a borderline bad credit score, for instance, having a long, positive banking history with the issuer — like no overdrafts or other problems — may weigh in your favor when applying for a credit card. That’s because the bank is able to see that you have regular income and don’t overspend.

Similarly, a healthy savings or investment account with a bank could be a helpful factor when applying for a high-end rewards credit card. This allows the bank to see that you can afford its product and that you have the type of funds required to put some serious spend on it.

Having a good banking relationship with an issuer can be particularly helpful when the economy is questionable and banks are tightening their proverbial pursestrings. When trying to minimize risk, going with applicants you’ve known for years simply makes more sense than starting fresh with a stranger.

Some banks provide targeted offers

Another way having a previous banking relationship with an issuer can help is when you can receive targeted credit card offers. These are sort of like invitations to apply for a card that the bank thinks will be a good fit for you. While approval for targeted offers is still not guaranteed, some types of targeted offers can be almost as good.

For example, the only confirmed way to get around Chase’s 5/24 rule (which is that any card application will be automatically denied if you’ve opened five or more cards in the last 24 months) is to receive a special “just for you” offer through your online Chase account. When these offers show up — they’re marked with a special black star — they will generally lead to an approval, no matter what your current 5/24 status.

Credit unions require membership

For the most part, you aren’t usually required to have a bank account with a particular issuer to get a credit card with that bank. However, there is one big exception: credit unions. Due to the different structure of a credit union vs. a bank, credit unions only offer their products to current members of the credit union.

To become a member, you need to actually have a stake in that credit union. In most cases, this is done by opening a savings account and maintaining a small balance — $5 is a common minimum.

You can only apply for a credit union credit card once you’ve joined, so a bank account is an actual requirement in this case. That said, your chances of being approved once you’re a member aren’t necessarily impacted by how much money you have in the account.

In general, while having a bank account with an issuer may be helpful in some cases, it’s not a cure-all for bad credit. Your credit history will always have more impact than your banking history when it comes to getting approved for a credit card.

For more information on bad credit, check out our guide to learn how to rebuild your credit.

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