Gardena Nissan

For individual financial counseling or specific advice, you may consider contacting a non-profit credit counseling organization that is a member of the National Foundation for Credit Counseling (800-388-2227).

You may also download the brochure below, which explains dealership financing and can serve as a guide as you evaluate your own financial situation before you finance a new or used car.

Understanding Car Financing
(Acrobat PDF 55k)

For ease of reference, we use the term "loan" on this website to refer to conventional retail auto financing available from car dealers. NMAC is not a direct lender and does not advance funds to car buyers for the purchase of a vehicle. NMAC financing is available only at participating Nissan dealers. When you finance a car at a Nissan dealer, you will enter into a retail installment contract with the dealer. If NMAC approves your credit application, your dealer may elect to assign the retail installment contract to NMAC.

Buying on credit allows you to take possession of something before paying for it in full, with the promise that you will pay back the remaining amount over an agreed-upon period of time along with additional charges, such as interest. As such, credit can offer you financial flexibility and power. Understanding the obligation and responsibility that comes with using credit will help you build a solid credit history and expand your financial freedom.

The Benefits of Credit 

With a good credit history, you are able to make purchases many people take for granted these days — such as borrowing money for a new car, home, or school tuition. You also use credit to reserve or rent a car, hotel room, or video. Credit enables you to order products and services by phone or on the Web. Whether you're just getting started in life, or you're ready to buy "big ticket" items, or trying to manage your cash flow wisely, credit gives you the flexibility to make purchases whenever and wherever you want. For more on the getting and keeping good credit, you can order a free brochure entitled, "How to Be Credit Smart" from www.afsaef.org.

The Cost of Credit 

As with most services, credit doesn't come free of charge. By granting you credit, creditors allow you the flexibility to make certain purchases, and charge you for this service. How and how much creditors charge you for credit will vary, but they must disclose these rates to you before you agree to borrow. You should always review the terms of your credit before entering into an agreement with a creditor. Typical charges can be measured in finance charges, the total sum of charges above the borrowed amount, and annual percentage rate, the cost of charges relative to the borrowed amount. Understanding these two figures can help you compare rates of different creditors. Make sure you also take into account how long you will be making payments. For example, you may get lower monthly payments at 14% APR over 3 years than if you pay the same APR over 2 years. However, the total finance charges over time will be higher if you make payments over a longer term.

With open-end credit, such as credit cards or overdraft checking accounts, where your balance may fluctuate from month to month, the creditor must also tell you how they will calculate your balance. These methods includes adjusted balance method, previous balance method, two-cycle average balance method, and, one of the most common, the average daily balance method.

Commonly Used Credit Vocabulary 

APR and finance charges are important to understand, but they aren't the only terms that come up when using credit. Here's some other valuable vocabulary to know:

Credit Protection Laws 

There are a number of federal and state laws in place to protect your privacy and to enforce fairness when using or applying for credit. Federal and State Banking Agencies, State Attorneys General, the Federal Reserve Board, and the Federal Trade Commission are responsible for enforcing these laws. American Financial Services Association Education Foundation (AFSAEF)'s brochure "How To Be Credit Smart" recommends you be aware of the following federal credit laws:

For more information on your rights under the current credit laws, visit www.federalreserve.gov/pubs/consumerhdbk/ for the Federal Reserve Board's online Consumer Handbook and www.ftc.gov/ftc/consumer.htm for the Federal Trade Commission's Consumer Information portal.

Ask most people and they'll tell you it's better to have good credit than bad credit. Yet there are many people who burden themselves, often out of ignorance, with a negative credit history. Read on to learn what exactly determines a good credit record and what you can do to improve yours.

Establish a Good Credit History

It may seem like the old chicken-and-the-egg dilemma but you need to get credit in order to build a good credit history. If you have never had credit before you may have trouble getting your first loan or credit card. AFSAEF's brochure "How to Be Credit Smart" recommends the following options for establishing credit for the first time:

Remember, your credit record begins once you have been granted credit, and this will form the basis upon which creditors evaluate you for credit in the future. For more on getting and keeping good credit, you can order a free brochure entitled, "How to Be Credit Smart" from www.afsaef.org. 

What Contributes to a Bad Credit History?

Your credit history records how well you have managed credit, going back as many as 10 years. It also contains information such as employment history and the number of inquiries that have been made about your credit record. Lack of recent or consistent employment, missed or late payments, a large number of open credit accounts, or a large number of recent credit inquiries (which is used to determine how many times you have applied for credit) could all raise concerns for creditors who are considering your application for credit.

Of course, it's better to catch yourself before you start developing a negative credit history. AFSAEF's "How to Be Credit Smart" suggests you look for the following "red flags" which might indicate that you are headed toward credit problems:

If you're seeing more than a few red flags in your behavior, it's time to contact your creditors and seek help from a credit counseling organization, such as Amerix [www.amerix.com/creditassistance] or Consumer Credit Counseling Service [www.cccsatl.org].

For more on getting and keeping good credit, you can order a free brochure entitled, "How to Be Credit Smart" from www.afsaef.org.

What Creditors Look For

If you lend a friend some money, you expect him to pay you back. And if he doesn't pay you back, you're much less likely to lend him money again — you may even warn others about the risk of lending your friend money. The same holds true of creditors, which is why establishing and maintaining a good credit history is so important. In general, creditors look for what the Federal Reserve Board calls "the three Cs": capacity, your ability to pay off the debt which can be based on income, employment history, and number of dependents; character, your historical tendency to pay off debt and keep your debts at a reasonable level; collateral, if you do default on a loan, whether or not you have assets that could be used to secure or repay the debt.

Bear in mind, creditors cannot use the following information to deny you credit:

• Age — though you must be old enough by state law to qualify for credit (18 or 21 years old depending on your state of residence)
• Gender
• Marital status
• Race
• Color
• Religion
• National origin — while you cannot be declined based on national origin, your immigration status may be considered
• Receipt of public assistance or Social Security — however, a creditor may consider related circumstances, such as age of dependents or other factors that might affect your likelihood to continue receiving such payments

For more information on your rights in applying for credit, visit the Federal Reserve Board's online Consumer Handbook at www.federalreserve.gov/pubs/consumerhdbk/.

Improving Your Credit Record

Only time and solid credit performance can improve a negative credit record. Here are some recommendations that can help you improve your credit standing:

• Make sure you pay off your debts promptly and reliably.
• If you have trouble controlling spending, look into a consolidation loan from your bank. Then you can save your credit cards for emergencies.
• Set and stick to a budget that helps you keep your debt at a manageable level.
• Ensure your credit reports are accurate by regularly checking it and rectifying discrepancies with the credit reporting agencies.
• If you're having trouble qualifying for credit, consider a secured credit card. These cards use collateral to alleviate risk for the lender.

If you have been denied credit, you are allowed by law to request the reason(s) you were denied and the name of the credit bureau that supplied the credit report. You are also entitled to a free copy of your credit report from that credit bureau within 30 days of the decision (this is usually limited to one request per year). Credit bureaus are sometimes able to recommend steps toward repairing your credit record (see their Web sites for details).

Understanding Credit Reports

A credit report, or credit history, is a record of the money you have borrowed and repaid, as well as relevant public records (such as bankruptcy records) and inquiries made to your credit history. Credit reports are maintained and supplied by credit bureaus, which gather personal and financial information about you and how you have handled credit. Individual creditors provide much of this information to credit bureaus and in turn rely on them for data about how credit applicants have handled their debts. As such, it's important to know what's on your credit report and to maintain its accuracy. To obtain a copy of your credit report or dispute information found on your credit report, contact one of the following major credit bureaus:

Understanding Credit Scores

Credit scores are a method creditors use to determine credit risk. They are typically provided to creditors by one of three major credit bureaus (Equifax, Experian, or Trans Union). Your score is a computer-generated number based on information from your credit report. Your score is then compared to the credit record of people with similar profiles to determine how likely you are to pay off your debt in a timely fashion. Bear in mind, not all creditors rely on credit scores to decide whether or not to approve your application. You can order your credit score from one of the credit bureaus mentioned above or from Fair, Isaac and Company, or FICO® [www.MyFICO.com], the institution which provides credit score formulas to all three major credit bureaus.

According to FICO®, the factors that contribute to your credit score may include:

Visit www.MyFICO.com or the Federal Reserve Board's online Consumer Handbook at www.federalreserve.gov/pubs/consumerhdbk/apply.htm for more detailed information on the factors that can contribute to your credit score and reasons why you may be declined for credit.

Maintaining an Accurate Credit Record

Your credit file will usually contain your current and former address, marital status, age, social security number, employment history, public record information, credit accounts, and the number of credit inquiries on your record. It is your responsibility to make sure that this information is accurate, especially before you apply for credit.

In order to maintain an accurate credit record, you should review your credit report at least once a year to verify the accuracy of the information provided. You can obtain a copy of your credit report from a company such as Equifax (800-685-1111); Trans Union (800-888-4213); or Experian (888-397-3742). If you see anything inaccurate on the report, contact the bureau which supplied your credit report and ask them to investigate the entry. You are better off catching billing errors before they make it to your credit report. According to AFSAEF's "How to Be Credit Smart," if you feel that a billing error has been made you should:

1. Write the creditor and explain what you believe to be an error within 60 days after the bill was mailed to you. Date your letter and keep a copy.
2. Explain why you believe the information is wrong.
3. Continue to pay for the correct charges on your bill.

If incorrect information does make it onto your record, you must first verify with the creditor that it was a mistake and then contact the credit bureau with notice from the creditor to rectify your credit record. If the first two methods do not resolve the issue you can file a complaint through the Federal Trade Commission (see www.ftc.gov for detailed instructions on filing a complaint).

For more on maintaining an accurate credit record, you can order a free brochure entitled, "How to Be Credit Smart" from www.afsaef.org.

Guard Against Credit and Identity Theft

Millions of dollars are lost each year due to credit and identity theft. Fortunately, your liability on lost or stolen cards is limited under the Truth in Lending Act. You do not have to pay for any unauthorized charges made after you notify the credit card company of loss or theft of your card. Keep a list of your credit card numbers to make it easier to notify card issuers when your cards are lost or stolen. The most you will have to pay for unauthorized charges is $50 on each card even if someone runs up several hundred dollars worth of charges before you report a card missing.

AFSAEF's "How to Be Credit Smart" recommends the following other safeguards to protect against fraud:

• Sign your credit card in ink immediately upon receipt and keep it in a safe place.
• Check to be sure your card is returned to you after you make a purchase at a store.
• Check the individual amounts and total before paying a credit card bill.
• Keep receipts so that you can check your monthly statement.
• If you receive a personalized credit card application in the mail and don't intend to apply, destroy the application.
• Avoid writing your credit card number on return cards or mailers that can be pulled open easily.
• Refuse to give your credit card number to a telephone solicitor unless you have initiated the call or you know that the company is a legitimate business.
• Do not sign a blank charge slip. Draw a line through the lines above the total line.
• Keep any documents containing sensitive information, including receipts, in a safe place.
• Select a unique personal identification number (PIN), not an obvious number such as birthday or part of your Social Security number.

For more advice on guarding against or reporting credit or identity fraud visit the Federal Trade Commission's Consumer Information portal at www.ftc.gov/ftc/consumer.htm or order a free copy of "How to Be Credit Smart" from www.afsaef.org.

Quite a few questions may run through your mind when you consider purchasing on credit or when you evaluate your credit standing. We might not have answers to all of them, but we have answers to quite a few. If you still have questions after reviewing the Credit Basics section, we recommend contacting one of the government or non-profit agencies we've mentioned or talking to a trusted lender if your question is about a specific loan or account.

Establishing Credit

Maintaining Credit

• How do I maintain good credit?
• How can I improve my credit rating?
• How do I avoid large debt?
• If I do have credit problems, is there some place where I can get advice and assistance?
• What are "credit repair" clinics?
• What should I do if I believe I have been a victim of credit fraud?

Credit Score

• What is a credit report?
• What factors contribute to your credit score?
• Where can I get a copy of my credit report?
• I was turned down for a loan because of bad credit. What can I do?
• What is the Fair Credit Reporting Act?
• Can I challenge a blemish on my credit report?
• Can I share my spouse's credit rating?

General

• How should I determine how much I can afford when buying a vehicle?
• How can I reduce the monthly payment for my new vehicle?
• Should I finance or lease my new vehicle?
• What should I do if I can't make a payment?

Why do I need credit? 

You need credit to purchase important things that you cannot pay for in full at the time of purchase, e.g., cars, homes, and tuition. Also, you often need a credit card to serve as collateral when you rent or reserve cars, hotel rooms, etc. Without credit you would have to pay in full with cash for every purchase, which can be very inconvenient and even impossible in some cases. With a solid credit history, creditors will not consider you a risk and are more likely to approve your request even if they have never done business with you before.

How do I establish credit? 

Start small. This is a good way you can show yourself and others that you can manage money responsibly. From there, you should be able to qualify for a low-limit credit card which, if you make timely payments, can lead to higher credit limits and a more established credit history.  

How old do I have to be before establishing credit? 

The typical ages at which one can apply for credit are 18 or 21. This age varies according to state law. To establish credit you might have to apply for a secured credit card or have a responsible party co-sign (i.e., take responsibility) for your credit. Visit www.jumpstart.org for more advice and information on how to establish and maintain good credit. Bear in mind, at any age it takes time and effort to build a solid credit history. Fair, Isaac and Company (FICO) gives the following guidelines:

"In order for a FICO® score to be calculated on your credit report, the report must contain at least one account which has been open for six months or greater. In addition, the report must contain at least one account that has been updated in the past six months. This ensures that there is enough information and enough recent information in your report on which to base a score."

How much debt should I have? 

Common wisdom says that your non-mortgage monthly installment payments (i.e., credit card, car, student loan payments) should not total more than 20% of your monthly take-home pay. In other words, if your paychecks come out to $1000 a month, your total payments shouldn't be more than $200. If you plan on qualifying for a home or making some other major purchase in the near future, you will probably want to further reduce your monthly payments.

Do credit cards help or hurt my credit standing? 

The answer depends on how you use your credit cards. If used wisely and in moderation, credit cards can help you build a solid credit history. Make regular payments and keep your monthly balance well below your credit limit in the months when you can't pay in full. Try to reduce the number of credit cards you use to avoid confusion and potential missed payments. Discontinue credit cards you aren't using. Watch your statement closely to protect against ID fraud. If you follow these guidelines credit cards can be a great convenience and a boost to your credit standing.

Live by a realistic budget. Let your budget be your guide to spending, not your credit limit. Make timely payments at or above your minimum required payment. Don't overextend yourself. Maintain steady employment. Keep close track of your expenditures and your bills to guard against credit fraud. If you plan on making a major purchase on credit, order a copy of your credit report beforehand and review it for negative entries that might need to be resolved.

How can I improve my credit rating? 

Only time and solid credit performance can improve a negative credit rating. Here are some recommendations that can help you improve your credit rating:

How do I avoid large debt? 

The key is to live within your means. Track your spending and see what expenses you might be able to cut back on. Look for sales or coupons to help you save wherever possible. A lot of overspending is due to laziness. If you have trouble with credit cards, cut them up until you can reduce you credit card debt to a manageable level. For most people, a little debt is necessary but keep it as low as possible. Lowering debt is one of the best keys to financial security.

For more information, visit www.afsaef.org for a free copy of the brochure, "How to Be Credit Smart."

If I do have credit problems, is there some place where I can get advice and assistance? 

Avoid "credit repair" clinics that charge you money with the promise of giving you a "fresh start." Only time and proper credit use will improve your credit record. However, you can get free, or very inexpensive, help from respected credit counseling organizations such as Amerix [www.amerix.com/creditassistance or 800-699-5688] or Consumer Credit Counseling Services [www.cccsatl.org or 800-251-2227].

If you co-sign a loan or authorize someone to charge to your credit cards, you are still responsible for the debt. Even if your friend or relative promises to pay you back, the debt is still your responsibility and failure to pay will affect your credit rating.

What are "credit repair" clinics? 

Beware of "credit repair" clinics that claim to be able to wipe your record clean or give you a "fresh start." Only time and proper use of credit can improve your credit standing. If you feel there is incorrect information in your credit report that is hurting your credit rating, contact the credit bureau directly.

What should I do if I believe I have been a victim of credit fraud? 

Credit fraud can occur when a credit card or credit card number is stolen and used by an unauthorized consumer. Another form of credit fraud is ID theft, where the perpetrator assumes the identity (and hence, credit history) of someone else to open an account. If you have lost a credit card or suspect that it has been stolen, notify the issuer of the card immediately. If the issuer determines that improper or illegal activity has occurred you may need to contact the credit bureau's fraud department as well. Visit www.ftc.gov/bcp/conline/pubs/credit/cards.htm to read the Federal Trade Commission's instructions on guarding against and reporting credit fraud.

What is a credit report? 

A credit report, or credit history, is a record of the money you have borrowed and repaid, as well as relevant public records (such as bankruptcies) and inquiries made to your credit history. This information is contributed by participating creditors. Your credit report is often used by creditors to determine your eligibility for credit.

What factors contribute to your credit score? 

According to Fair, Isaac and Company (FICO), the institution which provides score information to all three major credit bureaus, the factors that contribute to your FICO® credit score may include:

• Payment history
• Amounts owed
• Length of credit history
• New credit and credit inquiries
• Types of credit use

Visit www.MyFICO.com or www.federalreserve.gov/pubs/consumerhdbk/apply.htm for more detailed information on the factors that can contribute to your credit score.

Where can I get a copy of my credit report? 

You can order a copy of your credit report from one of the three national credit-reporting agencies: Experian, Equifax, or Trans Union. You may be able to get a free copy of your report if you have been denied credit within the past 30 days. Otherwise, each agency sets its own retrieval fee.

I was turned down for a loan because of bad credit. What can I do? 

You should ask the creditor for the main reason(s) you were declined and the credit bureau that supplied the credit report. If you feel that these reasons are unfounded, you should request a copy of your credit report from the credit bureau (typically Equifax, Experian, or Trans Union). You may want to ask a responsible friend or relative to co-sign for the loan (remember, you can't build your own credit on a co-signed loan). Also, as each creditor has its own criteria for accepting or declining credit, you may consider approaching a different creditor to see if you can qualify under different terms. Otherwise, make a plan to rectify your credit standing and put off your purchase for a while.

What is the Fair Credit Reporting Act? 

The Fair Credit Reporting Act (FCRA) was passed by Congress to ensure that credit reporting agencies keep accurate, fair, and private records of your credit history. According to the Federal Trade Commission (www.ftc.gov), the FCRA entitles you to following rights:

• You must be told if information in your file has been used against you.
• You can find out what is in your file.
• You can dispute inaccurate information with the credit reporting agency.
• Inaccurate information must be corrected or deleted.
• However, the credit reporting agency is not required to remove accurate data from your file unless it is outdated or cannot be verified.
• You can dispute inaccurate items with the source of the information.
• Outdated information may not be reported.
• Access to your file is limited.
• Your consent is required for reports that are provided to employers, or reports that contain medical information.
• You may choose to exclude your name from credit reporting agency lists for unsolicited credit and insurance offers.
• You may seek damages from violators in some circumstances.

Visit www.ftc.gov/credit/ for more information on the FCRA and how to file a complaint.

Can I challenge a blemish on my credit report? 

If you feel that a negative entry has been made unfairly or accidentally to your credit report, there are a number of methods of recourse. First, try to resolve the situation first with the creditor in question. Keep detailed documentation of all your correspondence with the creditor. Second, ask the bureau which supplied your credit report to investigate the entry. Third, if the first two methods do not resolve the issue you can file a complaint through the Federal Trade Commission (see www.ftc.gov for detailed instructions on filing a complaint).

Can I share my spouse's credit rating? 

You and your spouse each have your own personal credit rating. If you apply jointly for a credit card or loan, creditors may consider both credit ratings in evaluating the risk of lending you money. For this reason, you should establish your own credit, based on your own credit records and earnings. Your own credit means a separate account or loan in your own name, not a joint account with your spouse or a duplicate card on his/her account. If you are widowed or divorced and feel that it is hurting your ability to get credit in your name, you have certain protections under the law. To learn more, visit www.federalreserve.gov/pubs/consumerhdbk/apply.htm.

You should assess your income and expenses to determine how much you can afford. Make sure you take into account all monthly payments and expenses including rent or mortgage payments, utilities, and insurance, as well as variable items such as food, clothing, credit card payments, and recreation. Whatever money is left over should be used to determine what kind of monthly payment you can afford. Also, be sure to get an insurance quote on the vehicle you're considering and include that in your estimation.

How can I reduce the monthly payment for my new vehicle? 

You can save more money with a larger down payment, which will typically help to lower your monthly payment. You can also consider trading in your current vehicle in place of or in addition to your down payment. Also, leasing plans will generally carry lower monthly payments -- check with your auto financing provider for more details. For more information, you can request a free brochure entitled "Keys to Vehicle Leasing" from www.afsaef.org.

Should I finance or lease my new vehicle? 

There's no right or wrong answer. You need to determine what better fits your needs. Generally, leases are better for those who drive 15,000 or fewer miles per year, take excellent care of their vehicles, and want a new car every 2-4 years. Leases also enable you to get a bigger, better-equipped car than you could afford to purchase, and you only have to pay for the portion of the car's life that you use. Financing is ideal for those who drive a lot of miles, put their vehicles to heavy or rough use, and want to build equity through ownership of a vehicle. Financing also gives you the freedom to treat your car as you please: sell, customize, trade, etc. As for maintenance and operating costs, there's no difference at all. For more information, you can request a free brochure entitled "Keys to Vehicle Leasing" from www.afsaef.org.

What should I do if I can't make a payment? 

Notify your creditor immediately and explain your situation. In some cases, you may be able to arrange alternate payment plans at a different interest rate. If you wait until you miss a payment it could negatively affect your credit record, which is much harder to rectify.