Subprime Lending News 7/13/17:
How companies are using smartphone data to underwrite loans, banks lobbying to repeal consumer protection laws, and what your credit score means for your insurance premiums.
By Caroline Thompson
Today’s financial news roundup includes information on how being a landlord could help you get out of debt, why having no credit is no good, and why banks want to start making payday loans again. Read on for more!
Having no credit can drastically increase your car insurance premiums.
According to a case study done by WalletHub, Americans who have no credit pay 65 percent more for car insurance than those who have excellent credit (a score of 800 or above). Drivers with no credit in Pennsylvania, New Jersey and Michigan have it worst of all, paying at least twice as much as drivers with excellent credit. The bottom line? Building credit before you buy a car can save you thousands!
Companies are using smartphone data to underwrite loans.
Consumers with no credit may have a brand new way to qualify for loans — their smartphone data! Financial companies around the world are beginning to analyze smartphone activity, and use that to decide creditworthiness. The data being used includes payment history, social media activity, phone calls, texts, and location based data, among other things. It might sound like something out of Black Mirror, but it’s a process that could help millions of people get access to a line of credit for the first time in their lives.
Being a landlord could help you get out of debt.
Millions of Americans pay the bills by working multiple jobs, and yet many are stuck living paycheck to paycheck. But those who discover the magic of passive income often find a way out of that weekly struggle. One way to start earning some passive income? Become a landlord! Although renting out property you own is hardly a passive experience (you’ll be on the hook for any broken appliances, and need to be on call for those late-night emergencies), Aaron Norris, a California-based real estate investor, says it’s a smart financial decision: “There are very few assets in the world that offer principal protection, inflation protection and cash flow other than real estate.”
Banks push for ability to make payday loans again.
A new policy analysis from the Center for Responsible Lending says that many banks are pushing for the consumer protection laws — which were established in 2013 and prohibit banks from making payday loans — to be repealed. Before the law went into place, six major U.S. banks were offering payday loans, and making $500 million from borrowers, many of whom found themselves stuck in a high-interest debt trap with no way out.