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Repossession Credit Scores: What You Need to Know
One of the harsh truths of secured loans is that your asset can be repossessed if you fail to make the payments. In the words of the FTC, âyour consumer rights may be limitedâ if you miss your monthly payments, and when that happens, both your financial situation and your bank balance will take a hit.
On this guide, weâll look at what can happen when you fall behind on your car payments, and how much damage it can do to your credit score.
What is a Car Repossession?
An auto loan is a loan acquired for the sole purpose of purchasing a car. The lender covers the cost of the car, you get the vehicle you want, and in return you pay a fixed monthly sum until the loan balance is repaid.
If you fail to make to make a payment or youâre late, the lender may assume possession of your car and sell it to offset the losses. At the same time, they will report your missed and late payments to the main credit bureaus, and your credit score will take a hit. Whatâs more, if the sale is not enough to cover the remainder of the debt, you may be asked to pay the residual balance.
The same process applies to a title loan, whereby your car is used as collateral for a loan but isnât actually the purpose of the loan.
To avoid repossession, you need to make your car payments on time every month. If you are late or make a partial payment, you may incur penalties and itâs possible that your credit score will suffer as well. If you continue to delay payment, the lender will seek to cover their costs as quickly and painlessly as possible.
How a Repossession Can Impact Your Credit Score
Car repossession can impact your credit history and credit score in several ways. Firstly, all missed and late car payments will be reported to the credit bureaus and will remain on your account for up to 7 years. They can also reduce your credit score.Â
Secondly, if your car is repossessed on top of late payments, you could lose up to 100 points from your credit score, significantly reducing your chances of being accepted for a credit card, loan or mortgage in the future.Â
And thatâs not the end of it. If you have had your car for less than a couple of years, thereâs a good chance the sale price will be much less than the loan balance. Car repossession doesnât wipe the slate clean and could still leave you with a sizable issue. If you have a $10,000 balance and the car is sold for $5,000, you will owe $5,000 on the loan and the lender may also hit you with towing charges.
Donât assume that the car is worth more than the value of the loan and that everything will be okay. The lender isnât selling it direct; they wonât get the best price. Repossessed vehicles are sold cheaply, often for much less than their value, and in most cases, a balance remains.Â
Lenders may be lenient with this balance as itâs not secured, so their options are limited. However, they can also file a judgment or sell it to a collection agency, at which point your problems increase and your credit score drops even further.
How Does a Repo Take Place?
If you have a substantial credit card debt and miss a payment, your creditor will typically take it easy on you. They canât legally report the missed payment until at least 30-days have passed and most creditors wonât sell the account to a collection agency until it is at least 180-days overdue.
This leads many borrowers into a false sense of security, believing that an auto loan lender will be just as forgiving. But this is simply not true. Some lenders will repo your car just 90-days after your last payment, others will do it after 60 days. They donât make as many allowances because they donât need toâthey can simply seize your asset, get most of the money back, and then chase the rest as needed.
Most repossessions happen quickly and with little warning. The lender will contact you beforehand and request that you pay what you owe, but the actual repo process doesnât work quite like what you may have seen on TV.Â
Theyâre not allowed to break down your door or threaten you; theyâre not allowed to use force. And, most of the time, they donât need to. If they see your car, they will load it onto their truck and disappear. Theyâre so used to this process that they can typically do it in less than 60-seconds.
It doesnât matter whether youâre at home or at workâyou just lost your ride.
What Can You Do Before a Repo Hits Your Credit Score?
Fortunately, there are ways to avoid the repo process and escape the damage. You just need to act quickly and donât bury your head in the sand, as many borrowers do.
Request a Deferment
An auto loan lender wonât waste as much time as a creditor, simply because they donât need to. However, they still understand that they wonât get top dollar for the car and are generally happy to make a few allowances if it means you have more chance of meeting your payments.
If you sense that your financial situation is on the decline, contact your lender and request a deferment. This should be done as soon as possible, preferably before you miss a payment.
A deferment buys you a little extra time, allowing you to take the next month or two off and adding these payments onto the end of the term. The FTC recommends that you get any agreement in writing, just in case they renege on their promise.
Refinance
One of the best ways to avoid car repossession, is to refinance your loan and secure more favorable terms. The balance may increase, and youâll likely find yourself paying more interest over the long-term, but in the short-term, youâll have smaller monthly payments to contend with and this makes the loan more manageable.
You will need a good credit score for this to work (although there are some bad credit lenders) but it will allow you to tweak the terms in your favor and potentially improve your credit situation.
Sell the Car Yourself
Desperate times call for desperate measures; if youâre on the brink of facing repossession, you should consider selling the car yourself. Youâll likely get more than your lender would and you can use this to clear the balance.Â
Before you sell, calculate how much is left and make sure the sale will cover it. If not, you will need to find the additional funds yourself, preferably without acquiring additional debt. Ask friends or family members if they can help you out.
How Long a Repo Can Affect Your Credit Score
The damage caused by a repossession can remain on your credit score for 7 years, causing some financial difficulty. However, the damage will lessen over time and within three or four years it will be negligible at best.
Derogatory marks cease to have an impact on your credit score a long time before it disappears off your credit report, and itâs the same for late payments and repossessions.
Still, that doesnât mean you should take things lightly. The lender can make life very difficult for you if you donât meet your payments every month and donât work with them to find a solution.
What About Voluntary Repossession?
If youâre missing payments because youâve lost your job or suffered a major change in your financial circumstances, it may be time to consider voluntary repossession, in which case there are no missed payments and you donât need to worry about repo men knocking on your door or coming to your workplace.
With voluntary repossession, the borrower contacts the lender, informs them they can no longer afford the payments, and arranges a time and a place to return the car. However, while this is a better option, it can do similar damage to the borrowerâs credit score as a voluntary repossession, like a traditional repossession, is still a defaulted loan.
Missed payments aside, the only difference concerns how the repossession shows on the borrowerâs credit report. Voluntary repossession will look better to a creditor who manually scans the report, but the majority of lenders run automatic checks and wonât notice a difference.
Summary: Act Quickly
If you have student loan, credit card, and other unsecured debt, a repo could reduce your chances of a successful debt payoff and potentially prevent you from getting a mortgage. But itâs not the end of the world. You can get a deferment, refinance or reinstate the loan, and even if the worst does happen, it may only take a year or so to get back on track after you fix your financial woes.
Repossession Credit Scores: What You Need to Know is a post from Pocket Your Dollars.
Source: pocketyourdollars.com
Wondering What to Do With Overripe Pears? Try These 11 Recipes
Few things compare to the deliciously sweet taste of a perfectly ripe pear.
But what happens when theyâre past that point of ripeness? You know â when they start to form brown spots and become mushy and unappealing.
Donât throw away those mushy pieces of fruit! Here are 11 recipes that are perfect if youâre wondering what to do with overripe pears.
1. Freeze for Smoothies
Do you love to make smoothies? Yes? OK, good, because overripe fruit is perfect for freezing and using in smoothies. Cut off any parts of the pear that have gone bad, cut up the rest, seal it in a zip-close bag and put it in the freezer.
2. Pear Jam
If your pears are just slightly overripe, you can cook them into a pear jam. You need a lot of pears for this recipe â about three pounds â but the only other two ingredients are lemon juice and sugar.
Store the finished product in Mason jars, and spread it on toast, add it to desserts or yogurt or even cook it with meat. There are so many ways to use jam itâs not even funny.
3. Pear Crumble
Pear crumble is not only delicious, itâs also easy to make. Besides pears, the rest of the ingredients are staples you probably already have in your pantry or fridge. For this recipe, the mushier the pears, the better.
Save money on groceries with these savvy shopping tips.
4. Mash Into a Pancake Topping
Kitchn.com suggests mashing your browning pears and using them as a pancake topping or folding them into your batter. Fruit is always a delicious complement to breakfast foods.
You could also use the mashed pear on top of ice cream. Sundaes, anyone?
5. Blend Them Into a Salad Dressing
Blend them with some olive oil, vinegar and seasoning for a salad dressing thatâs a little on the sweet side. Perhaps try out this delicious pear vinaigrette. Hint: The sweetness pairs well with salty toppings.
6. Bake Into Fruit Leather
This is pretty much a homemade Fruit Roll-Up.
Slow-bake your fruit into pear and cinnamon fruit leather. Although it does take a while in the oven (six to seven hours), itâs worth it.
7. Pear Ice Pops
Who doesnât love ice pops? Thereâs no baking required for this recipe â these spiced ginger pear frozen pops only require a blender and some ice pop molds. You could also get creative and add in whatever fruits or flavors you want.
Do you like fruit and wine? Make some adult frozen pops with Riesling and overripe pears. These boozy popsicles sound amazing for a party or even just an afternoon treat.
8. Vanilla Spiced Pear Butter
This vanilla spiced pear butter goes perfectly on toast, muffins, oatmeal and ice cream. This recipe uses seven pounds of pears and yields four pints of butter, but you could halve or quarter the recipe.
If youâre feeling ambitious and decide to make the full recipe, you can freeze the rest and have pear butter year-round.
9. Pear Muffins and Bread
If you love to bake, use your overripe pears for pear and cinnamon muffins â this oneâs fun to make with kids.
Much like mushy brown bananas make for delicious banana bread, mushy pears are great for pear bread.
10. Pear Bourbon Cocktail
Iâm not one for baking, so Iâm not sure I could conquer pear muffins and bread, but this cocktail? It looks too delicious to not give it a try.
Using the past-its-prime pear, smash and strain your way to this pear bourbon smash cocktail.
11.Pear Sauce
Instead of applesauce, try some homemade pear sauce. All you need besides pears is sugar, water, lemon juice and (optional) cinnamon spice. You could make a large batch and freeze some to use as easy healthy snacks.
Jacquelyn Pica is a former SEO specialist at The Penny Hoarder.Â
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Source: thepennyhoarder.com
By: Cherise Romero
In reply to Jeanine Skowronski.
The debt was already sold to collections before I could make any kind of payment. Ive been getting calls left and right on it. It went from a few hundred dollars to 2 grande due to all the. Collections ridiculous interests.
Source: credit.com
Credit 101: What Is Revolving Utilization?
According to Experian, the average credit score in the United States was just over 700 in 2019. Thatâs considered a good credit scoreâand if you want a good credit score, you have to consider your revolving utilization. Revolving utilization measures the amount of revolving credit limits that you are currently using, and it accounts for a large portion of your credit score.
Find out more about what revolving utilization is, how to manage it, and how it impacts your credit score below.
What Is Revolving Credit?
To understand revolving utilization, you first have to understand revolving credit. Revolving credit accounts are those that have a “revolving” balance, such as credit cards.
When you are approved for a credit card, you are given a credit limit. If you have a credit card with a limit of $1,000 and you use it to buy $200 worth of goods, you now have a $200 balance and an $800 remaining credit limit.
Now, if you pay that $200, you again have $1,000 of open credit. If you pay $150, you have $950 of open credit. But your credit revolves between balance owed and how much open credit you have available to use. How much you have to pay each monthâknown as the minimum paymentâdepends on how much your balance owed is.
Other forms of revolving credit include lines of credit and home equity lines of credit. They work similar to credit cards.
What Isn’t Revolving Credit?
Unlike revolving credit, installment loans involve taking out a lump sum and paying it back in an agreed-upon fashion over a set term of months or years. Typically, you agree to pay a certain amount per month for a certain number of months to cover the amount you borrowed plus any interest.
With an installment loan, the amount of your monthly payment is determined by your loan agreement, not the balance due. Common types of installment loans include vehicle loans, personal loans, student loans, and mortgages.
What Is Revolving Utilization?
Revolving utilization, also known as âcredit utilizationâ or your âdebt-to-limit ratio,â relates only to revolving credit and isn’t a factor with installment loans. Utilization refers to how much of your credit balance you’re using at a given time.
Hereâs how to determine your individual and overall credit utilization:
- Look at your credit reports and identify all of your revolving accounts. Each of these accounts has a credit limit (the most you can spend on that account) and a balance (how much you have spent).
- To calculate individual utilization percentage on an account, divide the balance by the credit limit, and multiply that number by 100.
- $500/$1,000 = 0.5
- 5*100 = 50%
- To calculate overall utilization (all revolving accounts), add up all of the credit limits (total credit limit) and all of the balances (total spent) on your revolving accounts. Divide the total balance by total credit limit, and multiply that number by 100.
If you have a credit card with a $1,000 credit limit and a balance of $500, your utilization rate is 50%, for example. For the same card, if you have a balance of $100, your utilization rate is 10%.
When it comes to your credit score, revolving utilization is typically calculated in total. For example:
- You have one card with a limit of $1,000 and a balance of $500.
- You have a second card with a limit of $4,000 and a balance of $400.
- You have a third card with a limit of $3,000 and a balance of $600.
- Your total credit limit across all three cards is $8,000.
- Your total utilization across all three cards is $1,500.
- Your revolving utilization is around 19%.
How Can You Reduce Revolving Utilization?
You can reduce revolving utilization in two ways. First, you can pay down your balances. The less you owe, the less your utilization will be.
Second, you can increase your credit limit. If you apply for a new credit card but don’t use it, you’ll have more open credit, and that can reduce your utilization. You might also be able to ask your credit card company to review your account for a credit increase if you’re an account holder in good standing.
What Is Revolving Utilization’s Impact on Your Credit Score?
Your revolving utilization rate does impact your credit. It’s the second-largest factor in the calculation of your credit score. Your utilization rate accounts for around 30% of your score. The only factor more important is whether you make your payments on time.
Why is credit utilization so important to your score? Because to lenders, it can say a lot about you as a borrower.
If you’re currently maxed out on all your existing credit, you may be struggling to pay your debts. Or you might not be managing your debts in the most responsible fashion. Either way, lenders might see you as a riskier investment and be less inclined to approve you for loans or other credit.
How Do You Know If You Have a Revolving Utilization Problem?
Sign up for Credit.comâs free Credit Report Card. It provides a snapshot of your credit report and gives you a grade for each of the five areas that make up your score. That includes payment history, credit utilization, age of credit, credit mix, and inquiries. The credit report card makes it easy for you to see what might be negatively affecting your credit score.
You can also sign up for ExtraCredit, an exciting new product from Credit.com. With an ExtraCredit account, you get a look at 28 of your FICO scores from all three credit bureausâplus exclusive discounts and cashback offers as well as other featuresâfor less than $25 a month.
The post Credit 101: What Is Revolving Utilization? appeared first on Credit.com.
Source: credit.com
How Does Being An Authorized User Affect Your Credit Score?
Whether youâre looking to lengthen your credit history or increase your credit score, becoming an authorized user can help establish better personal credit. And anyone with a credit card may have an authorized user added…
The post How Does Being an Authorized User Affect Your Credit Score? appeared first on Crediful.
Should You Listen To Financial Gurus?
Financial gurus are telling you how to get out of debt, and what to do with your money and investments. The question is, should you follow their advice?
The post Should You Listen To Financial Gurus? appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.
Source: biblemoneymatters.com
Best Credit Cards for Bad Credit
When it comes to excuses consumers give for their poor credit scores, banks and lenders have heard it all.Â
Maybe you lost your job and couldnât pay your student loan payment for a few months. Or perhaps you thought youâd gotten a deferment but were too busy job hunting to find out for sure.Â
Maybe you thought you paid your credit card bill but itâs actually sitting on your kitchen counter waiting for the mail.
Whatever the reason for your low credit score, one thing is for certain â lenders donât care.
In fact, banks and other lenders lean on your credit score and other factors to determine whether they should approve you for a credit card or a loan â and thatâs about it. Your personal situation is never considered, nor should it be.
It would be wonderful if credit card companies understood that âlife happensâ and made special exceptions to help people out, but that’s not the world we live in. As most of us already know, thatâs not typically how credit works. Credit cards are backed by banks, and banks have rules for a reason.
Now, hereâs the good news: Credit cards can help rebuild your credit, earn cash back for each dollar you spend, make travel easier, and serve as an emergency fund if youâre stuck paying a huge bill at the last minute. This is true even if you have poor credit, although the selection of credit cards you can qualify for may be somewhat limited.Â
Keep reading to learn about the best credit cards for bad credit, how they work, and how you can get approved.
Best Cards for Bad Credit This Year
Before you give up on building credit, you should check out all the credit cards that are available to consumers who need some help. Our list of the best credit cards for bad credit includes some of the top offers with the lowest fees and fair terms.
- Total Visa®
- Discover it® Secured
- Credit One Bank® Visa® Credit Card
- Secured Mastercard® from Capital One®
- Milestone® Gold Mastercard®
- Credit One Bank® Unsecured Visa® with Cash Back Rewards
#1: Total Visa®
The Total Visa® is one of the easiest credit cards to get approved for in today’s market, and itâs easy to use all over the world since itâs a true Visa credit card. However, this card does come with high rates and fees since itâs available to consumers with poor credit or a limited credit history.
Processing your application will cost $89, which is extremely high when you consider the fact that most credit cards donât charge an application fee. Youâll also pay an initial annual fee of $75 and a $48 annual fee for each year thereafter.
Once you sign up, youâll be able to pick your preferred card design and your credit card payments will be reported to all three credit reporting agencies â Experian, Equifax, and TransUnion. This is the main benefit of this card since your on-time payments can easily help boost your credit score over time.Â
For the most part, the Total Visa® is best for consumers who donât mind paying a few fees to access an unsecured line of credit. Since this card doesnât dole out rewards, however, there are few cardholder perks to look forward to.Â
- APR: 35.99% APR
- Fees: Application fee and annual fee
- Minimum Credit Score: Not specified
- Rewards: No
#2: Discover it® Secured
While secured cards donât offer an unsecured line of credit like unsecured credit cards do, they are extremely easy to qualify for. The Discover it® Secured may not be ideal for everyone, but it does offer a simple online application process and the ability to get approved with little to no credit history.
Keep in mind, however, that secured cards do work differently than traditional credit cards. With a secured credit card, youâre required to put down a cash deposit upfront as collateral. However, you will get your cash deposit back when you close your account in good standing.
Amazingly, the Discover it® Secured lets you earn rewards with no annual fee. Youâll start by earning 2% back on up to $1,000 spent each quarter in dining and gas. Youâll also earn an unlimited 1% back on everything else you buy.
The Discover it® Secured doesnât charge an application fee or an annual fee, although youâll need to come up with the cash for your initial deposit upfront. For the most part, this card is best for consumers who have little to no credit and want to build their credit history while earning rewards.
- APR: 24.74%
- Fees: No annual fee or monthly fees
- Minimum Credit Score: Not specified
- Rewards: Yes
#3: Credit One Bank® Visa® Credit Card
The Credit One Bank® Visa® Credit Card is another credit card for bad credit that lets you earn rewards on your everyday spending. Youâll earn a flat 1% cash back for every dollar you spend with this credit card, and since itâs unsecured, you donât have to put down a cash deposit to get started.
Other benefits include the fact you can get pre-qualified for this card online without a hard inquiry on your credit report â and that you get a free copy of your Experian credit score on your online account management page.
You may be required to pay an annual fee up to $95 for this card for the first year, but it depends on your creditworthiness. After that, your annual fee could be between $0 and $99.
- APR: 19.99% to 25.99%
- Fees: Annual fee up to $95 the first year depending on creditworthiness; after that $0 to $99
- Minimum Credit Score: Not specified
- Rewards: Yes
#4: Secured Mastercard® from Capital One®
The Secured Mastercard® from Capital One® is another secured credit card that extends a line of credit to consumers who can put down a cash deposit as collateral. This card is geared to people with bad credit or no credit history, so itâs easy to get approved for. One downside, however, is that your initial line of credit will likely be just $200 â and that doesn’t give you much to work with.Â
On the upside, this card doesnât charge an annual fee or any application fees. That makes it a good option if you donât want to pay any fees you wonât get back.
Youâll also get access to 24/7 customer service, $0 fraud liability, and other cardholder perks.
- APR: 26.49%
- Fees: No ongoing fees
- Minimum Credit Score: Not specified
- Rewards: No
#5: Milestone® Gold Mastercard®
The Milestone® Gold Mastercard® is an unsecured credit card that lets you get pre-qualified online without a hard inquiry on your credit report. You wonât earn any rewards on your purchases, but you do get benefits like the ability to select your cardâs design, chip and pin technology, and easy online account access.
You will have to pay a one-time fee of $25 to open your account, and thereâs an annual fee of $50 the first year and $99 for each year after that.
- APR: 24.90%
- Fees: Account opening fee and annual fees
- Minimum Credit Score: Not specified
- Rewards: No
#6: Credit One Bank® Unsecured Visa® with Cash Back Rewards
The Credit One Bank® Unsecured Visa® with Cash Back Rewards lets you earn 1% back on every purchase you make with no limits or exclusions. Thereâs no annual fee or application fee either, which makes this card a winner for consumers who donât want to get hit with a lot of out-of-pocket costs.
As a cardholder, youâll get free access to your Experian credit score, zero fraud liability, and access to a mobile app that makes tracking your purchases and rewards a breeze. You can also get pre-qualified online without a hard inquiry on your credit report.
- APR: 25.99%
- Fees: No annual fee or application fee
- Minimum Credit Score: Not specified
- Rewards: Yes
The Downside of Credit Cards with Bad Credit
While your odds of getting approved for one of the credit cards for bad credit listed above are high, you should be aware that there are plenty of pitfalls to be aware of. Here are the major downsides youâll find with these credit cards for bad credit and others comparable cards:
- Higher fees: While someone with excellent credit can shop around for credit cards without any fees, this isnât the case of you have bad credit. If your credit score is poor or you have a thin credit profile, you should expect to pay higher fees and more of them.
- Higher interest rates: While some credit cards come with 0% interest for a limited time or lower interest rates overall, consumers with poor credit typically have to pay the highest interest rates available today. Some credit cards for bad credit even come with APRs as high as 35%.
- No perks: Looking for cardholder benefits like cash back on purchases or points toward airfare or movie tickets? Youâll need to wait until your credit score climbs back into âgoodâ or âgreatâ territory. Even if you can find a card for applicants with bad credit that offers cash back, your rewards may not make up for the higher fees.
- No balance transfers: If youâre looking for relief from other out-of-control credit card balances, look elsewhere. Credit cards for bad credit typically donât offer balance transfers. If they do, the terms make them cost-prohibitive.
- Low credit limits: Credit cards for bad credit tend to offer initial credit limits in the $300 to $500 range with the possibility of increasing to $2,000 after a year of on-time monthly payments. If you need to borrow a lot more than that, youâll have to consider other options.
- Security deposit requirement: Secured credit cards require you to put down a cash deposit to secure your line of credit. While this shouldnât necessarily be a deal-breaker â and it may be required if you canât get approved for an unsecured credit card â youâll need to come up with a few hundred dollars before you apply.
- Checking account requirement: Most new credit card accounts now require cardholders to pay bills online, which means youâll need a checking account. If youâre mostly âunbanked,â you may need to open a traditional bank account before you apply.
Benefits of Improving Your Credit Score
People with bad credit often consider their personal finances a lost cause. The road to better credit can seem long and stressful, and itâs sometimes easier to give up then it is to try to fix credit mistakes youâve made in the past.
But, there are some real advantages that come with having at least âgoodâ credit, which typically means any FICO score of 670 or above. Here are some of the real-life benefits better credit can mean for your life and your lifestyle:
- Higher credit limits: The higher your credit score goes, the more money banks are typically willing to lend. With good credit, youâll have a better chance at qualifying for a car loan, taking out a personal loan, or getting a credit card with a reasonable limit.
- Lower interest rates: A higher credit score tells lenders youâre not as risky as a borrower âa sign that typically translates into lower interest rates. When you pay a lower APR each time you borrow, you can save huge amounts of money on interest over time.
- Lower payments: Borrowing money with a lower interest rate typically means you can usually get lower payments all your loans, including a home loan or a car loan.
- Ability to shop around: When youâre an ideal candidate for a loan, you can shop around to get the best deals on credit cards, mortgages, personal loans, and more.
- Ability to help others: If your kid wants to buy a car but doesnât have any credit history, better credit puts you in the position to help him or her out. If your credit is poor, you wonât be in the position to help anyone.
- More options in life: Your credit score can also impact your ability to open a bank account or rent a new apartment. Since employers can request to see a modified version of your credit report before they hire you, excellent credit can also give you a leg up when it comes to beating out other candidates for a job.Â
In addition to the benefits listed above, most insurance companies now consider your credit score when you apply for coverage. For that reason, life, auto, and home insurance rates tend to be lower for people with higher credit scores.
This may seem unfair, but you have to remember that research has shown people with high credit scores tend to file fewer insurance claims.
How to Improve Your Credit: Slow and Steady
When you have a low credit score, there are two ways to handle it. If you don’t mind the consequences of poor credit enough to do anything about it, you can wait a decade until the bad marks age off your credit report. Depending on when your creditors give up and write off your debt, you may not even need to wait that long.
If you donât like the idea of letting your credit decay while you wait it out, you can also try to fix your past credit mistakes. This typically means paying off debt â and especially delinquent debts â but it can also mean applying for new loan products that are geared to people who need to repair their credit.
If you decide to take actionable steps to build credit fast, the credit cards on this page can help. Theyâll give you an opportunity to show the credit bureaus that youâve changed your ways.
Before you take steps to improve your credit score, however, keep in mind all the different factors used to determine your standing in the first place. The FICO scoring method considers the following factors when assigning your score:
- On-time payments: Paying all your bills on time, including credit cards, makes up 35% of your FICO score. For that reason, paying all your bills early or on time is absolutely essential.
- Outstanding debts: How much you owe matters, which is why paying off your credit cards each month or as often as possible helps your score. According to myFICO.com, the amounts you owe in relation to your credit limits make up another 30% of your FICO score.
- New credit: Apply for too many new cards or accounts at once can impact your score in a negative way. In fact, this determinant makes up another 10% of your FICO score.
- Credit mix: Having a variety of open accounts impresses the credit bureau algorithm Gods. If all you have are personal loans right now, mixing in a credit card can help. If you already have four or five credit cards, it may be wise to back off a little.
- Length of credit history: The length of your credit history also plays a role in your score. The longer your credit history, the better off you are.
If you want to improve your credit score, consider all the factors above and how you can change your behavior to score higher in each category. Itâs pretty easy to see how paying all your bills early or on time and paying off debt could make a big positive impact on your credit score when you consider that these two factors alone make up 65% of your FICO score.
If you want a way to track your progress, also look into an app like Credit Karma, one of my favorite tools. This app lets you monitor your credit progress over time and even receive notifications when your score has changed. Best of all, itâs free.
Should You Use a Credit Card to Rebuild Your Credit Score?
If youâre on the fence about picking up a credit card for bad credit, your first step should be thinking over your goals. What exactly are you trying to accomplish?
If youâre looking for spending power, the cards on this list probably wonât help. Some are secured cards, meaning you need a cash deposit to put down as collateral. Others offer low credit limits and high fees and interest rates, making them costly to use over the long-term.
If you really want to start over from scratch and repair credit mistakes made in the past, on the other hand, one of these cards may be exactly what you need. If youâre determined to improve your score, they can speed things along.
You may pay higher fees and interest rates along the way, but itâs important to remember that none of the cards on this list need to be your top card forever. Ideally, youâll use a credit card for poor credit to rebuild your credit and boost your score. Once youâve reached your goal, you can upgrade to a new card with better benefits and terms.
The post Best Credit Cards for Bad Credit appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
What’s a Good Credit Score?
Your credit score is incredibly important. In fact, this number is so influential on various financial aspects of life that it can determine your eligibility to be approved for credit cards, car loans, home mortgages, apartment rentals, and even certain jobs. Knowing what your credit score is, and what range it falls under, is important so you can decide what loans you can to apply for, and if necessary, if steps need to be taken to improve your score.
So what constitutes a good credit score?
The Credit Score Range Scale
The most common credit score used by lenders and other business entities is the FICO score, which ranges from 300 to 850. The bigger the number, the better. To create credit scores, FICO uses information from one of the three major credit bureau agencies – Equifax, Experian or TransUnion. Knowing this range is important because it will help you understand where your specific number fits in.
As far as lenders are concerned, the lower a consumer’s number on this scale, the higher the risk. Lenders will often deny a loan application for those with a lower credit score because of this risk. If they do approve a loan application, they’ll make consumers pay for such risk by means of a much higher interest rate.
Understand Your Credit Score
Within the credit score range are different categories, ranging from bad to excellent. Here is how credit score ranges are broken down:
Bad credit: 630 or Lower
Lenders generally consider a credit score of 630 or lower as bad credit. A number of past activities could have landed you in this category, including a string of late or missed credit card payments, maxed out credit cards, or even bankruptcy. Younger people who have no credit history will probably find themselves in this category until they have had time to develop their credit. If you’re in this bracket, you’ll be faced with higher interest rates and fees, and your selection of credit cards will be restricted.
Fair Credit: 630-689
This is considered an average score. Lingering within this range is most likely the result of having too much “bad” debt, such as high credit card debt that’s grazing the limit. Within this bracket, lenders will have a harder time trusting you with their loan.
Good Credit: 690-719
Having a credit score within this range will afford you more choices when it comes to credit cards, an easier time getting approved for various loans, and being charged much lower interest rates on such loans.
Excellent Credit: 720-850
Consider your credit score excellent if your number falls within this bracket. You’ll be able to take advantage of all the fringe benefits that come with credit cards, and will almost certainly be approved for loans at the lowest interest rates possible.
What’s Your Credit Score?
Federal law allows consumers to check their credit score for free once every 12 months. But if you want to check more often than this, a fee is typically charged. Luckily, there are other avenues to take to check your credit score.
Mint has recently launched an online tool that allows you to check your credit score for free without the need for a credit card. Here you’ll be able to learn the different components that affect your score, and how you can improve it.
You’ll be able to see your score with your other accounts to give you a complete picture of your finances. Knowing what your credit score is can help determine if you need to improve it to help you get the things you need or want. Visit Mint.com to find out more about how you can access your credit score – for free.
Lisa Simonelli Rennie is a freelance web content creator who enjoys writing on all sorts of topics, including personal finance, investing in stocks, mortgages, real estate investments, and anything else to do with the world of economics.
The post What’s a Good Credit Score? appeared first on MintLife Blog.
Source: mint.intuit.com
Freezing Your Credit
In the age of paperless transactions, identify theft is something that virtually all of us are susceptible to. If your identity is stolen, the consequences can be severe, and in some cases, can take years to recover from. One way to be proactive against fraud and defend yourself from identity theft, is to freeze your credit report with each of the three major credit bureausâExperian, TransUnion, and Equifax.Â
Placing a credit freeze on your credit report will stop identity thieves from being able to open new accounts, lines of credit, or make any large purchases in your name, regardless of whether or not they have your Social Security number or any other sensitive information.Â
What a credit freeze means
A credit freeze is a process that shuts off access to your credit reports at your request. Without your verified consent, your delicate information cannot be acquired. This means that if someone were to attempt to apply for credit in your name, your report would come up as âfrozen,â and therefore the creditor would not be able to see the information needed for the application to be approved.
You can unfreeze your credit at any time by using a PIN or a password.Â
Reasons to freeze your credit
It might be a good idea to freeze your credit if youâre experiencing any of the following situations:
- Your data has been compromised in a data breach: It happens. If youâve been a victim of a data breach and personal information related to your identity has been leaked or made vulnerable to cyber criminals, a credit freeze can offer you some extra protection.Â
- You have reason to think youâve been a victim of identity theft: Perhaps youâve checked your credit recently and noticed open accounts that you donât recognize. Maybe youâve been getting phone calls from collections agencies requesting payments from accounts you know you didnât open. While a credit freeze wonât be able to stop them from using accounts a thief has already opened, it can stop them from opening any more.Â
- You want to protect your child from identity theft: According to the Economic Growth, Regulatory Relief and Consumer Protection Act, parents and legally guardians of children 16 years old and younger have the right to open a credit account for their child with the sole purpose of putting a freeze on it to protect them from identity theft.Â
How to freeze your creditÂ
The process of freezing your credit is simple but does require a few steps. You will need to get in touch with each of the three major credit bureaus one by one and request a credit freeze:
- Experian: Contact by phone at 800-349-9960 or go to their website.
- Equifax: Contact by phone at 888-397-3742 or go to their website.
- TransUnion: Contact by phone at 888-909-8872 or go to their website. Â
The credit bureaus will ask you for your Social Security number, your date of birth and other information to verify your identity.
Once you freeze your credit, your file will be unattainable even if a thief has sensitive information such as your social security number or date of birth. If you need to use your credit file, you can unfreeze your credit report at any time.Â
How to unfreeze your credit
Once youâve frozen your credit file, it will be remain blocked until you decide that you would like to unfreeze it. You will need to unfreeze your credit report in order to open a new line of credit or make a major purchase.Â
Unfreezing your credit file is simple. All you will need to do is go online to each credit bureau website and use the personal identification number (PIN) that you used to place the freeze on the account. If you donât want to complete this task online, you can also unfreeze your credit file over the phone or through postal mail.Â
When the unfreezing process is done online or by phone, it is completed within minutes of submitting the request. However, if you send your request via mail, it will take much longer.Â
Keep in mind that you donât necessarily need to unfreeze your credit through all three of the major credit bureaus if you donât want to. For instance, letâs say you plan to apply for credit somewhere. You can ask the creditor which credit bureau it will go through to pull up your report, and only unfreeze that one credit bureau.Â
You may also have the option to unfreeze for a specific amount of time. Once the time is up, your credit file will automatically freeze again.Â
Credit freeze pros and cons
There are a few reasons why you might want to freeze your credit in this day and age, but just like with anything else, there are pros and cons to credit freezing. Here is a general breakdown of the benefits and downfalls of putting a freeze on your credit report:
Pros:
- It prevents thieves from opening new lines of credit: With a credit freeze placed on your account, no one will be able to open a new line of credit or any other type of account requiring a credit check using your personal data. Anyone trying to commit fraud will be stopped in their tracks as soon as lenders notice that the report is frozen.Â
- It wonât affect your credit score: Freezing your credit report will not damage your credit score. Additionally, if youâve been a victim of identity theft, freezing your credit report could actually protect your credit score from being damaged due to fraud.Â
- Itâs free: It used to be the case that some credit freezes would cost a fee, but that is no longer the way it works.Â
Cons
- It requires some effort: Putting a credit freeze on your credit report takes some effort. You will need to get in touch with all three credit bureaus.Â
- You will need to remember your PINs: A PIN is required to lift or freeze your credit report. If you lose it, you will need to jump through extra hoops to create a new one.
It canât stop thieves from accessing your existing accounts: Credit freezes can only stop fraudsters from opening new accounts using your information. If youâve already been a victim of identity theft, a credit freeze canât block thieves from committing fraud with your current accounts. This means that thieves can still make a purchase using a credit card they stole from you.
Freezing Your Credit is a post from Pocket Your Dollars.
Source: pocketyourdollars.com
8 Safe Investments for People Who Hate Risking Their Money
Think back to what the stock market looked like to you in March 2020, aka, the apocalypse. Did it look like:
A.) The biggest bargain sale youâve ever seen in your lifetime?Â
or
B.) A burning pit of money that was about to incinerate your lifeâs savings?
If you answered âB,â you probably have a low risk tolerance. You worry more about losing money than missing out on the opportunity to make more of it.
Being cautious about how you invest your money is a good thing. But if youâre so risk-averse that you avoid investing altogether, youâre putting your money at greater risk than you think.
Do Safe Investments Actually Exist?
When you think about the risks of investing, you probably think about losing principal, i.e., the original amount you invested. If you keep your money in a bank account, thereâs virtually no chance of that happening because deposits of up to $250,000 are FDIC insured.Â
But consider that the average savings account pays just 0.05% APY, while in 2019, inflation was about 2.3%.
So while youâre not at risk of losing principal, you still face purchasing power risk, which is the risk that your money loses value. Your money needs to earn enough to keep up with inflation to avoid losing purchasing power. If inflation continues at 2.3%, buying $100 worth of groceries will cost you $102.30 a year from now. If youâre saving over decades toward retirement, youâll be able to buy a whole lot less groceries in your golden years.
Thereâs also the risk of missed opportunity. By playing it too safe, youâre unlikely to earn the returns you need to grow into a sufficient nest egg.
Though thereâs no such thing as a risk-free investment, there are plenty of safe ways to invest your money.
8 Low-Risk Investments for People Who Hate Losing Money
Here are eight options that are good for conservative investors. (Spoiler: Gold, bitcoin and penny stocks did not make our list.
1. CDs
If you have cash you wonât need for a while, investing in a CD, or certificate of deposit, is a good way to earn more interest than youâd get with a regular bank account.
You get a fixed interest rate as long as you donât withdraw your money before the maturity date. Typically, the longer the duration, the higher the interest rate.Â
Since theyâre FDIC insured, CDs are among the safest investments in existence. But low risk translates to low rewards. Those low interest rates for borrowers translate to lower APYs for money we save at a bank. Even for five-year CDs, the best APYs are just over 1%.
You also risk losing your interest and even some principal if you need to withdraw money early.
2. Money Market Funds
Not to be confused with money market accounts, money market funds are actually mutual funds that invest in low-risk, short-term debts, such as CDs and U.S. Treasurys. (More on those shortly.)
The returns are often on par with CD interest rates. One advantage: Itâs a liquid investment, which means you can cash out at any time. But because they arenât FDIC insured, they can technically lose principal, though theyâre considered extraordinarily safe.
3. Treasury Inflation Protected Securities (TIPS)
The U.S. government finances its debt by issuing Treasurys. When you buy Treasurys, youâre investing in bonds backed by the âfull faith and credit of the U.S. government.â Unless the federal government defaults on its debt for the first time in history, investors get paid.
The price of that safety: pathetically low yields that often donât keep up with inflation.
TIPS offer built-in inflation protection â as the name âTreasury Inflation Protected Securitiesâ implies. Available in five-, 10- and 30-year increments, their principal is adjusted based on changes to the Consumer Price Index. The twice-a-year interest payments are adjusted accordingly, as well.
If your principal is $1,000 and the CPI showed inflation of 3%, your new principal is $1,030, and your interest payment is based on the adjusted amount.Â
On the flip side, if thereâs deflation, your principal is adjusted downward.
4. Municipal Bonds
Municipal bonds, or âmunis,â are bonds issued by a state or local government. Theyâre popular with retirees because the income they generate is tax-free at the federal level. Sometimes when you buy muni bonds in your state, the state doesnât tax them either.
There are two basic types of munis: General obligation bonds, which are issued for general public works projects, and revenue bonds, which are backed by specific projects, like a hospital or toll road.
General obligation bonds have the lowest risk because the issuing government pledges to raise taxes if necessary to make sure bondholders get paid. With revenue bonds, bondholders get paid from the income generated by the project, so thereâs a higher risk of default.
5. Investment-Grade Bonds
Bonds issued by corporations are inherently riskier than bonds issued by governments, because even a stable corporation is at higher risk of defaulting on its debt. But you can mitigate the risks by choosing investment-grade bonds, which are issued by corporations with good to excellent credit ratings.
Because investment-grade bonds are low risk, the yields are low compared to higher-risk âjunk bonds.â Thatâs because corporations with low credit ratings have to pay investors more to compensate them for the extra risk.
6. Target-Date Funds
When you compare bonds vs. stocks, bonds are generally safer, while stocks offer more growth. Thatâs why as a general rule, your retirement portfolio starts out mostly invested in stocks and then gradually allocates more to bonds.
Target-date funds make that reallocation automatic. Theyâre commonly found in 401(k)s, IRAs and 529 plans. You choose the date thatâs closest to the year you plan to retire or send your child to college. Then the fund gradually shifts more toward safer investments, like bonds and money market funds as that date gets nearer.
7. Total Market ETFs
While having a small percentage of your money in super low-risk investments like CDs,
money market funds and Treasurys is OK, there really is no avoiding the stock market if
you want your money to grow.
If youâre playing day trader, the stock market is a risky place. But when youâre committed to investing in stocks for the long haul, youâre way less exposed to risk. While downturns can cause you to lose money in the short term, the stock market historically ticks upward over time.
A total stock market exchange-traded fund will invest you in hundreds or thousands of companies. Usually, they reflect the makeup of a major stock index, like the Wilshire 5000. If the stock market is up 5%, youâd expect your investment to be up by roughly the same amount. Same goes for if the market drops 5%.
By investing in a huge range of companies, you get an instantly diversified portfolio, which is far less risky than picking your own stocks.
8. Dividend Stocks
If you opt to invest in individual companies, sticking with dividend-paying stock is a smart move. When a companyâs board of directors votes to approve a dividend, theyâre redistributing part of the profit back to investors.
Dividends are commonly offered by companies that are stable and have a track record of earning a profit. Younger companies are less likely to offer a dividend because they need to reinvest their profits. They have more growth potential, but theyâre also a higher risk because theyâre less-established.
The best part: Many companies allow shareholders to automatically reinvest their dividends, which means even more compound returns.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Source: thepennyhoarder.com