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When it comes to your credit, you may have heard the terms “hard credit check” or “soft credit check” – but what do they mean?

Soft Credit Check

When potential creditors request your credit report, they may use a soft check or inquiry. This type of inquiry provides a basic check of your credit score. A soft credit check will not have a negative impact on your credit score. Creditors don’t need your explicit permission to request this information, as it just shows what you would see on your own credit report.

For an example of a soft inquiry, say you received an application for student loan refinancing in the mail from a company like U-fi. Before you received those offers, the lender likely pre-screened your credit with a soft check. U-fi uses soft credit checks to see if you meet the minimum criteria for refinancing and find out what rates you qualify for. Getting your rate with U-fi won’t impact your credit score and it won’t cost you a cent.

Soft checks of your credit score are typically done by employers, insurance companies, landlords, and utility companies. They do soft checks on your credit report to understand how responsible you are with your finances. These organizations use your credit score and history to determine the likelihood that you’ll pay on time. This type of information can sometimes factor into whether you’ll have to pay a deposit for utility services.

Hard Credit Check

A hard credit check or inquiry is different than a soft check as it does have an impact on your credit score.  Because a hard credit check will affect your credit, it does require your permission.

A hard credit check is usually triggered by your active request (i.e., application) for a loan or extension of credit. When you apply for a student loan or another type of loan, the creditor checks your credit report to evaluate your eligibility. With a hard credit inquiry, the lender looks at your credit report in much more depth to determine your creditworthiness before granting or denying you that loan.

Hard credit checks are often done by mortgage lenders, auto lenders, and credit card companies. These types of credit checks do have an impact on your credit score because they show you are actively seeking new credit. While a hard check usually has a limited impact on your credit score, its impact depends on your individual circumstances. You may still want to minimize the number of hard inquiries on your credit report just to be safe, since a high number of hard checks in a short time shows potential lenders that you might need a lot of money. This can be seen as a bad indicator if you are looking for a student loan.

If you’re considering refinancing your student loans, U-fi can identify the best rate you qualify for using a soft credit check and we’ll only trigger a hard check when you’re ready to accept the loan.

Credit Score Tip: When you’re looking for a loan pre-qualification or a rate quote, make sure to read the fine print to find out what type of initial check the lender will make on your credit report. Just remember that once you formally apply for the loan, the creditor needs to make a hard credit inquiry and review your credit score and history in much greater detail.

If you need to borrow private loans to help pay for college, be smart about it. That’s what U-fi is here for, and we’ll only use a soft inquiry to check the rates you qualify for. Get started with U-fi today.

Recent surveys and studies suggest that many young adults lack basic money management skills. Too often, students enter college at a loss for managing their personal finances. College may be the first opportunity you have to experience some independence, and may be the first time you are faced with budgeting and making financial decisions on your own.

One of the simplest, yet most important steps to controlling your finances is budgeting. To start the process, determine your take home income and total expenses. Then break it down to a simple formula:

Income – Expenses = Positive or Negative Outcome

As you can probably guess, you want to end up with a positive outcome. To accomplish this, you need to spend less than you earn. It may sound easy, but it can be difficult. In order to calculate this number, you’ll want to sit down with a list of your monthly expenses. Worksheets like this one can help ensure that you’re accounting for everything – even that daily latte.

Here are some steps to get you on track to creating a budget and taking control of your financial future.

Know your income sources.

This is usually pretty straight forward. It’s typically money you earn from a job, but if you’re a student it can also be money you’re receiving from financial aid sources (grants, scholarships, or loans), money from your parents or other family members. To ensure your funds last the entire semester, you may need to average out your financial aid to a monthly amount.

Identify your expenses by using a daily spending diary.

Fixed monthly expenses like rent, car payments, insurance, and any other expenses you pay every month are easy to identify. The daily spending diary can help you track your variable expenses like food, entertainment, and clothing. After tracking of all of your expenses for a month, you may be surprised at where your money is going.

Figure out needs vs. wants.

When looking at your expenses or potential purchases, it’s important to make a distinction between “needs” and “wants.” There are some things you absolutely need – like housing and food. However, some things may fall into the “wants” category, like frequently eating out.

Find room for improvement.

After you’ve identified all of your expenses, find areas that can be reduced or even eliminated. Remember, you want to spend less than you earn. That goes for credit cards, too. It’s easy to spend what feels like “free money” but that debt can catch up with you quickly with interest.

Stick to it.

The last step, and possibly the most difficult, is to stick to your budget and resist the temptation of unnecessary spending.

After you’ve crafted your budget, stick to it each month, then evaluate how you’re doing. Are you staying within your budget? Are there problem areas you need to address with some of your expenses? You can find more money saving tips here to keep your expenses under control.

After you’ve created your budget, you’ll start to experience the benefits.

  • Ensure you don’t spend money you don’t have
    • Far too many of us spend money we don’t have using credit cards or student loans. A good tip is to only use credit cards when you can pay the balance each month and only use student loans for what you need (not want).
  • Shed light on bad spending habits
    • Building a budget forces you to look at your spending habits. You may find areas where you are spending money on things you don’t really need.
  • Leads to a brighter future
    • Budgeting allows you to position yourself for a more successful future. It’s far easier to “live like a student” when you’re actually a college student as opposed to trying to climb out from under a mountain of debt later.

Budgeting doesn’t mean spending as little money as possible or feeling guilty about every purchase. It’s about knowing your limits and making sure you have control of your finances.