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Don?t be Afraid of Your Credit
Friends have on occasion confided to me that they feel stressed when visiting a new car dealership. Some even delay the experience for as long as possible.
When asked why, an interesting reply is, ?I don?t know if my credit is good enough to buy the car I want.? Uncertainty about credit approvals is a normal reaction these days. But it doesn?t have to turn into fear.
Credit concerns shouldn?t stop you from exploring the possibilities of buying a new or used vehicle. Whether it?s a late credit card payment, an overdrawn account or an NSF cheque, many of us have experienced these types of problems. Most of our financial transactions today are recorded by credit bureaus, and this information is used to determine our credit ratings.
Many factors come into play when financial institutions consider extending credit. They look for stability factors: How long has the customer worked for his/her current employer? If the time on job is short has his/her employment been in the same industry? How long has he/she lived at the current address? Has the customer ever borrowed before and what was the repayment history? Does the customer use credit cards responsibly? And most important, can the customer service his/her debt ratio?
Let?s examine a common scenario. José and Maria emigrated from Argentina to Canada five years ago and are now full Canadian citizens. Since arriving in Canada, this couple has always driven used cars. They wanted to trade up to a brand new vehicle.
Two years ago, José and Maria had difficulty paying off a personal loan. Although they missed a few payments and were subjected to some nasty phone calls from collection agencies, they eventually saved the money and paid off their loan in full.
The couple has never forgotten the embarrassment and humiliation of that experience. They assumed that those missed payments represented a black mark on their credit history and so, as a consequence, they shied away from exploring the possibility of buying that dream car. Fear of rejection is a normal human reaction, and in this case, it denied them the enjoyment of driving and experiencing a new car.
I would advise José and Maria (or anyone who is unsure about his credit worthiness) to research their credit history. If you want to check your credit rating yourself, you are entitled under the Consumer Reporting Act to a copy of all the information that a credit agency has on file about you. You can find out what credit bureaus are telling people about you and who has been enquiring.
A wealth of personal information is collected about you by Canadian credit bureaus. As consumers, we can only presume that the collection, retention and disposal of this information occur within the guidelines of the Privacy Act. The Privacy Act is supposed to protect the privacy of individuals that related to personal information about themselves. But who knows?
Alternatively, contact a bank or financing institution and you should be able to negotiate a loan on a ?pre-approved? basis.? Or, simply select your vehicle and talk to a Business Manager at your new car dealership of choice. Most dealerships have a Business Manager, who would be more than happy to discuss your purchasing options in strictest confidence.
The Business Manager is a middleman between the financing institutions and you, the consumer. He/she has good training and maintains strong relationships with financial institutions, and therefore can assist you in securing the necessary financing.
In my experience, I?d say that 98% of all people do honour their financial commitments. That?s why approval rates are so high. Did you know that up to 90% of all leases and loan applications are quickly approved by new car dealerships? Even if you do have poor credit, or have recently declared bankruptcy, other financing options might be available to you.
What do you do if you become aware of errors in your Credit Report? You can attempt to have the information changed, but this is an uphill battle. Sometimes a poor credit rating isn?t even your fault. It could have been caused by someone impersonating you -- using your identification to make purchases that you are unaware of. This is identity theft, which is a growing crime in Canada. More than 5,500 Canadians have had their identities stolen so far this year.
If you become a victim of identify theft, or if your personal information has been compromised, it is important that you quickly advise the credit bureaus and notify the police, your financial institutions, and all creditors. It is imperative that you obtain a copy of your police report as this will help you to demonstrate that you have been a victim of fraud.
Submitting to a credit approval is part of the car buying process. Hearing ?you?ve been approved? is satisfying for the dealership. In this case, it was also satisfying for José and Maria who, despite it all, were delighted to learn that with a little bit of effort, they could get approved for that brand new car.
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Paul Stern is President of the Toronto Automobile Dealers Association and is a new-car dealer in Toronto. E-mail comments to president@tada.ca
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