So, if it’s that simple, why aren’t more people doing it?

One reason is that the difference in your monthly payments once you refinance isn’t nearly as significant as with a home mortgage, since the amount borrowed is less, and car loans are shorter-term loans. But, in certain circumstances, an auto refinance might be worth looking into, particularly if you’ve seen:

• A significant improvement in your credit score since you took out your original loan
• If you didn’t shop around for the best rate on financing the first time

Still unsure if it’s right for you? Let’s look at an example.

• If you took out a five-year, $20,000 loan two years ago at an interest rate of 12%, your monthly payment would have been $445. If you refinance the remaining amount – about $13,400 – into a three-year loan now, at 10% interest, that would drop your payment by about $13 a month. That means you’d save a little more than $400 over the life of the loan, and while that’s certainly enough for the refinancing to pay for itself, that amount might not be enough to get you excited.
• Let’s say you could decrease your interest rate to 5.34%. That would put you saving closer to $40, or $1,440 over the remainder of the loan — some serious cash.

Steps for Refinancing

1. Understand the Back Story

There are a couple of reasons why your rate might be higher than it should be. 

• The first is your credit score.
• The second could be an inflated rate if you financed through a dealer.

These days internet-savvy consumers know how much they should be paying for cars down to every last option. That’s trimmed profit on cars to dealers who make it up in profit on both financing and servicing your vehicle. That’s why it’s just as important to shop around for financing for your car as for the car itself. You’ll want to walk into the dealership having already secured financing from at least one credit union or bank

2. Mind Your Score

In the months leading up to your loan application, keep in mind that your credit score will directly affect your interest rate. So, be extra careful about paying your bills on time and keeping credit card usage at a minimum (preferably at 30% of your available balance or less.) Also, don’t apply for other cards or loans if you know a biggie — like an auto loan or mortgage — is in your near future. And don’t close old credit cards you’re not using right now. All of these moves will help make sure your score doesn’t drop before you apply.

3. Find Your Lender

Once you’re ready to refinance, start rate shopping the many banks and credit unions. Also, if you took dealer financing and think you could get a better rate, you can refinance immediately after you take out the original loan. Not all lenders who offer auto loans will also offer refinancing, so check again out the offerings at your bank or a local credit union.

4. Don’t Stretch Your Payment Term

Extending the life of your loan may indeed lower your monthly payments, but it will cost you more in interest over time — even if you’re able to lower your interest rate. You may be tempted to extend, but your new loan should never be longer than what was remaining on the original.

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Why You Might Consider Canceling an Inactive Card

Closing an account could mean you will have one less thing to worry about and could even save some money if you pay an annual fee for that card. Plus, if you can’t resist racking up new charges on a card with a zero balance, removing that temptation could be helpful.

Why You Shouldn’t Cancel Credit Cards

Depending on how you cancel a card, your credit score can take a hit, which will make it harder to obtain credit in the future for a home loan or another big-ticket item.  

Here’s what can happen when you close an inactive card.

• It may lower your total available credit. This might seem obvious, but closing an account takes away some of your total available credit. And that can have the unintended consequences of lowering your credit score. How does that work? The two main credit scoring agencies – VantageScore and FICO – take into consideration several factors when developing credit scores. One of those factors is how much available credit you have across all credit lines. So when one of those accounts is removed from the group you lower your available credit which can then, change your credit utilization rate.

• Change your credit utilization rate. Closing a card lowers your total available credit, which can raise your utilization rate, depending on the balances you carry on other cards. You want to stay at 30% utilization or below.

• It can change your credit history. Lenders like to see a long history of making on-time payments. Closing a card removes part of your history, which can ding your score. 

• It can impact your account mix. Credit card issuers and lenders also want to see that you can handle a variety of accounts such as installment loans like a mortgage or a car loan and also revolving credit (credit cards) at the same time. 

What to Do Instead of Closing an Account

Instead of canceling a card, you can keep the account active by using it to make one or two small purchases a month.

If keeping the card in your wallet is too much temptation:

• Cut up the card.
• If you don’t cut up your card, store it in a safe place where you won’t be tempted to use it.
• Leave the account open to make sure your credit score isn’t hurt by a cancellation.

When a Lender Wants to Close an Inactive Account

Sometimes, if your card has been inactive for six months or more, a credit card issuer may send you a letter telling you they want to close your account if it remains inactive. You have a few options here:

1. Make a small purchase. You can take the advice mentioned above and begin using the card again for a few small purchases a month. Or you can set the card up to pay a recurring account balance.
2. Pay a monthly bill. If you do this, of course, you will then need to make sure you continue to pay off the balance on time every month, so you won’t accrue any late fees or interest. Since not every lender will allow you to pay a bill on a credit card, choose a utility or a streaming service that charges a consistent amount to keep your credit card account active.

The Bottom Line

While canceling an inactive card might seem like a good idea, you should consider the added benefits of keeping the account open and using it to make a few small purchases or pay another monthly bill. Your credit score will thank you!

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STEPS TO OVERCOME IDENTITY THEFT

What to do if you’re the victim of identity theft.

Last year, Americans lost $23 billion due to identity fraud. That’s a 13 percent increase from the previous year. In other words, identity theft is rising rapidly. If you become a victim, it helps to know what to do next.

How to Recover After Identity Theft

Here are some steps to take:

1. Contact Companies 

The first thing you should do if you’re the victim of identity theft is to contact every impacted company.

• If someone has made fraudulent charges to a credit card, contact the lender.
• If someone has used your Social Security number, contact the IRS.
• If someone has used your debit card or accessed your savings, contact your bank or credit union.

You should also close any accounts that have been compromised.

2. Notify the Federal Trade Commission

While the FTC doesn’t have the ability to prosecute criminals, you should report your case to the agency so it can use the information to prevent further thefts. The FTC makes it easy too — just head to www.identitytheft.gov and fill out the required information.

3. Place an Alert or Freeze on Your Credit Accounts

If your identity is stolen, you’ll also want to contact all three credit bureaus and place a fraud alert on your credit reports.

Fraud Alert will stay on your credit reports for one year. With the fraud alert in place, a creditor will be notified that it needs to take extra steps to verify any credit pulls or loan requests.

Credit Freeze. You can also place a credit freeze on your credit reports for an extra layer of protection. A freeze blocks anyone from accessing your credit without you removing the freeze.

Do One Thing: If you are the victim of identity theft, contact all agencies involved immediately. 

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