How to Shop for Electronics When You Have Bad Credit

how-to-shop-for-electronics-when-you-have-bad-creditYour best bet is to skip making this purchase altogether, but some savvy deal searching or shopping refurbished could also work.

It seems like there are more and more cool gadgets and gizmos coming out every day. And you might feel like some sort of caveperson if you don’t have the newest thing. A lot of these devices even seem smart enough to make fun of you for not having them.

But what if your credit isn’t so great? Can you still gain access to the wonders of our digital, always online, Internet of Things age?

Read on and find out!


Why do I need credit for electronics?

If you have the cash to buy a device outright and it won’t hurt your budget and finances too badly, then it doesn’t really matter what your credit score is. You can walk right into the store, plunk down the money for an Alexa, and then ask that Alexa to play Money by Pink Floyd or Money by Barrett Strong.

But if you don’t have the cash on hand, your ability to get electronics is going to depend on your credit. If you have good credit, you’ll have a wide range of options. Obviously, if you qualify for a credit card, you can use that to purchase whatever electronics you need—so long as they’re within your credit limit.

However, if you want to keep your good credit, you should really make sure you’re paying off your credit card bill in full each month so you don’t start racking up interest.

Some electronics stores even have their own credit card that will provide specific benefits if you shop there regularly. Best Buy’s card offers cash back and financing options. Amazon, Target, and Office Depot all have similar card offers. These cards are easier to qualify for, but they usually have much higher interest rates, too. So be careful!

But if your credit still isn’t good enough to qualify for one of those cards, that isn’t likely to help.

If you have poor credit, be careful with “alternative financing” options.

If your credit isn’t great, you’re going to have fewer options when it comes to purchasing electronics, as is the case with purchasing most things. One bad credit option for purchasing an electronic device is, of course, to not buy that item.

Even if your credit is too low to work out a financing plan with the store, you could turn to a personal loan to get the item. But if your credit is too low for financing, the only loan you’ll be able to get will be a bad credit loan, which will come with a much higher annual percentage rate (APR) than a standard loan. And while the right bad credit loan can be a great solution for emergency expenses, it’s likely that a new laptop doesn’t qualify as an emergency.

Unless the electronic device in question is something vital to your job or another part of your day-to-day life, you’re probably better off waiting until your credit is in a better place before purchasing it. And if you’re considering taking out a no credit check loan like a payday loans or a cash advances to pay for electronics, then stop that immediately.

In the meantime, if you don’t qualify for a traditional credit card, consider a secured credit card. A secured credit card requires you to put down some cash as collateral, but you may be able to get one even with poor credit.

Then you can use that secured credit to make purchases (perhaps even cheaper electronics) and build up your credit. Just be sure to pay your bill in full each month and try to spend no more than 30 percent of your credit limit. Admittedly, with a cash deposit securing your credit limit, 30 percent of your total might not add up to very much.

Renting a film on a laptop is one thing, but renting a laptop?!

Even if your credit isn’t in a good enough place to purchase an expensive but necessary electric device like a computer, you could look into one of the services that let you rent a computer. Many of them are “rent-to-own” so you won’t just be throwing your money away. The payments will be applied towards eventual ownership.

If you do consider a rent-to-own agreement, you’re going to want to read the contract very, very carefully. Aside from being certain that you’ll be able to afford the payments, you need to know what the penalties for missing a payment and for getting out of the deal early. The last thing you want is to be hit with penalties that will cause your credit to get even worse.

Deals, deals, deals.

Another method to getting the electronics you need without the credit you want is to become a deal master. By keeping an eye out for deals and taking advantage of sales, you may be able to get a TV or even a computer for way less than you’d normally pay. Many apps will also provide you with virtual coupons or other deal opportunities.

It may also be worth looking into used or refurbished products as a cheaper alternative. For example, you may find that there are tablets that will be able to fill the role of a laptop for you right now—and that are hundreds of dollars cheaper.

Bad credit doesn’t mean you can’t purchase things you need or even want. But it does mean you should be very careful and thoughtful about how and on what you spend.

Want to learn more about living your life with bad credit? Check out these related posts and articles from OppLoans:

What else do you want to know about living with bad credit? We want to hear from you! You can find us on Facebook and Twitter.

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No Credit Card? Here Are 6 Ways You Can Still Fix Your Credit Score

no-credit-card-6-ways-you-can-fix-your-scoreStrategies include becoming an authorized user on someone else’s account, getting a cosigner, paying down your outstanding debts and more!

Traditional credit cards are a great way to rack up debt, but they are also perhaps the number one way to improve your credit score. By keeping your balances below 30 percent, making all your payments on time, and paying off every purchase within the 30-day interest-free grace period, your credit card can double as a ticket to the financial promised land.

There’s only one little catch. People with bad credit cannot usually get approved for a regular credit card. It can feel like a Catch-22: You need a credit card in order to improve your credit, but you need good credit in order to get a credit card! In the meantime, you’re stuck with high-interest cash advance loans that drain your bank account and don’t even do anything to improve your credit!

Here’s the good news: There are lots of other ways to improve your credit. That’s why Katie Ross, Education and Development Manager for the national financial education nonprofit American Consumer Credit Counseling (@TalkCentsBlog), offered us six great strategies for improving your credit without a traditional credit card.


1. Become an authorized user on someone else’s account.

“If possible,” said Ross, “become an authorized user on someone’s account—whether it’s a parent, spouse, sibling, or another family member or close friend. Note that you will be authorized to use this person’s credit card with your name. Becoming an authorized user can help (re)build credit in your name. Make sure that you act responsibly! Your misuse of this person’s card can cause financial ramifications on their end.”

Ross is dead on. Misusing another person’s credit card account is a perfect way to tank their credit, as well as your relationship. But the great thing about becoming an authorized user is that you don’t need to use the account in order to help your credit. So long as the credit card company reports information for authorized users (instead of just primary account holders), positive activity on the account will benefit your credit.

When it comes to being an authorized user, trust also goes both ways. Just as positive activity on the account will benefit your credit, negative activity on the account will hurt it. Make sure that the person you ask is someone who’s good with money and uses their credit responsibly. Borrowing money from friends and family comes with its own set of risks, and linking your credit histories together via a shared account is no different.

2.  Get someone with better credit to be your cosigner.

“Similar to becoming an authorized user,” Ross offered, “if you are looking to obtain a line of credit but do not qualify on your own, consider a cosigner with good credit to help you obtain the loan. Note that if you fail to make payments, the cosigner is legally responsible for the loan.”

While becoming an authorized user on an account is a two-way street in regards to trust, asking someone to be your cosigner is more of a one-way arrangement. You are asking the cosigner to put their own credit history on the line in order to help you secure a personal loan or line of credit. But they’re not the one who’s going to be making the payments on the loan—that’s all on you.

Falling behind on payments or defaulting on that loan will reward their trust in you with a big ol’ dent in their credit score. Really, “dent” is not the right word to describe what will happen to their score, any more than saying someone “dented” your car when in fact they “t-boned you and caved in the passenger-side door.”

Being on the hook for a loan that someone else took out is the reason that many people are extremely cautious about cosigning. And they are right to be wary. Getting a cosigner can be a fantastic way to help build your credit—it means being able to borrow larger amounts of money at more affordable rates—but screwing it up is an equally fantastic way to torpedo your close relationships.

3.  Take out a small loan.

“Take out a small credit-building loan from a bank” Ross advised. “Local institutions are often more likely to extend credit to those with little to no credit history. Acquire a small loan for an item that you already have money available for in another account. This way, you are sure to repay the loan in a timely manner and thus get good marks on your credit.”

Ross is right that local institutions are much better suited to these types of transactions then big multinationals. And while local banks are great, local credit unions could be even better for your borrowing needs. These are nonprofit institutions that seek to serve specific communities with better products and services than for-profit banks.

One thing that needs to be noted: The kinds of small loans you should be getting to help build your credit are vastly different from small-dollar no credit check loans like payday loans, and title loans. Even if that payday loan storefront down the street is a “local business,” it’s not one that’s going to be helping you out in this regard.

First of all, These loans come with extraordinarily high APRs—an average of almost 400 percent for payday loans and 300 percent for title loans—that can push borrowers into a dangerous cycle of debt. Second of all, most of these lenders don’t even report information to the credit bureaus. So even if you were to pay your loan off on time, you wouldn’t get any “credit” for it.

4. Get a store credit card.

“If you are unable to qualify for a regular, unsecured credit card, consider taking out a store credit card with a small limit and low APR,” said Ross. “Look into stores that you frequent and can make small, routine purchases that you can immediately repay to help build your credit. Having a card that you don’t use will not help rebuild your credit, but rather, responsibly using that credit can make a difference. Only charge what you can afford to pay in full each billing cycle.”

The great thing about store credit cards is that they are easier to get than regular credit cards. Stores have different incentives than traditional lenders, which means that their cut-off point for credit scores is going to be much lower. Simply put, someone with a lousy credit score stands a much better chance of being approved for a store card than for a regular one.

The trick with using a store credit card to rebuild your credit is the same trick as using any credit card to rebuild your credit: Do not put more money on the card than you actually have in your bank account. Racking up credit card balances well beyond what they can afford to pay off month-to-month is how many people end up with bad credit in the first place.

As Ross mentions, you have to use a credit card in order to improve your credit score, so keeping your purchases small and manageable is the way to go. Store cards come with an average APR that is roughly 50 percent higher than regular cards, so be very deliberate when shopping around and aim for the best rate you can. Then again, if you are paying the balance off in full every month, interest rates shouldn’t be a huge worry.

5. Take out a secured credit card. 

According to Ross, “A great option for those with poor credit are secured cards, Secured cards work similarly to regular credit cards, except they typically require a cash or collateral security deposit to ensure payment of the debt. The borrower will offer cash or collateral to the equivalent of whatever the loan amount is. Then, you will receive a secured card with that same limit. To get your security deposit back, you must repay the amount you’ve spent on the card. The larger the security deposit, the higher the limit granted.”

A secured credit card is even easier to get than a store card, and that’s because the lender assumes very little risk. By using the borrower’s cash collateral to set the credit limit, the lender basically ensures that the principal balance on the card is going to be repaid. Sure, they might miss out on some interest, but they won’t actually be losing money.

This is great news for people with bad credit. By building up a cash reserve and then using it to take out a secured card, you can set yourself on the path to an improved payment history and a higher score. Sure, saving up money isn’t the easiest thing when you don’t have a lot of income, but even several hundred dollars towards a secured credit card could be a huge boon to your financial wellbeing.

The general advice with using a secured credit card is pretty much the same as the advice for using the store credit cards—or any credit card at all. Do not use the card to live beyond your means, only take out what you can immediately pay off, and make all your payments on time. Secured credit cards can often have some pretty hefty fees attached for various services, so make sure you know those ahead of time and do your best to avoid them.

6.  Focus on loan repayment and paying down your debt.

“Loan repayment is considered on your credit report. Whether you have an auto loan, federal student loans, or other types of loans, repaying your lenders on-time and in full each month will help to (re)build your credit,” said Ross.

After your history of on-time payments, your amounts owed is the second most important factor in your score, making up 30 percent of the total. So if you have a lousy credit score, there is a fairly good chance that it’s because you have taken on large amounts of debt. That could include credit cards, but it could also mean, as Ross mentioned, stuff like auto loans and federal student loans.

And while nobody is exactly thrilled to be making payments on their car or student loans every month, those outstanding loans do provide you with a golden opportunity to work on your credit score. Every on-time payment that you make not only adds to your payment history, but it reduces that amounts that you owe. Even the right bad credit loan—one that reports payment information to the credit bureaus—can help improve your credit if you make your payments on time every month.

Lastly, if you have large amounts of outstanding consumer debt, and you want to improve your score, paying more than your monthly minimum amounts is the way to go. Our advice: Create a debt repayment plan that allows you to focus on one debt a time like the Debt Snowball or the Debt Avalanche. And once you’ve made that plan, all you need to do is stick to it.

Improving your credit score without a traditional credit card isn’t the easiest thing in the world, but it is most certainly doable. Whether it takes help from a family member, a secured credit card, or just a solid debt repayment plan, you have the power to take your score from zero to hero.

To learn more credit scores, check out these related posts and articles from OppLoans:

Were you able to build up your credit without using a credit card? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

Katie Ross, joined the American Consumer Credit Counseling, or ACCC (@TalkCentsBlog), management team in 2002 and is currently responsible for organizing and implementing high-performance development initiatives designed to increase consumer financial awareness. Ms. Ross’s main focus is to conceptualize the creative strategic programming for ACCC’s client base and national base to ensure a maximum level of educational programs that support and cultivate ACCC’s organization.

What Exactly Is A “Bad” Credit Score?

There’s no single definition as to what makes a “bad” credit score—but we can provide some handy signposts to help you decide whether your credit’s in trouble.

On this blog, we write a lot about how bad credit negatively affects people’s lives, and what these folks can do to improve their scores. We write about bad credit so much, in fact, that it’s easy for us to forget this very simple fact: Lots of people don’t know what a “bad” credit score is.

Like most things, we can tie this back to TV. Here’s an exchange from the beloved cult sitcom Brooklyn Nine-Nine:

Jake: But look at this credit score! 100!

Victor: Out of 850.

Jake: No, really?!

Obviously, that’s exaggerated for comedic effect— for instance, you can’t have a credit score below 300—but the point still stands. You can’t fix your bad credit if you don’t understand that you have bad credit in the first place.

Luckily, that’s where we come in. So sit back, relax, and enjoy this primer on what exactly constitutes “bad” credit.


How do credit scores work, again?

Your credit score is a three-digit number that expresses your creditworthiness. It’s the number that lenders, landlords, and other companies will pull in order to determine whether or not they should do business with you.

By looking at your credit score, these parties can determine how likely you are to pay them back. The better your score, the more personal loans and credit cards you will be approved for. Additionally, you’ll be able to score higher principals (or credit limits) and lower rates.

The most common type of credit score is the FICO score, which was introduced by Fair, Isaac and Company in the 1980s. (The company now just goes by FICO.) Your FICO score exists on a scale of 300 to 850. The higher your score, the better.

Your score is drawn from information on your credit reports, which contain records of your history as a borrower. Most of that information dates back seven years, but some info—like bankruptcies, for instance—stays on your report for longer.

And how do credit reports work?

Your credit reports are compiled by the three major credit bureaus: Experian, TransUnion, and Equifax. They consist of information reported to the bureau by lenders, landlords, utility, companies, debt collectors, and also information that’s on the public record. Not all of these parties report to all three credit bureaus, which means your info can vary from one report to another.

Those three bureaus keep records on hundreds of millions of Americans, which means that mistakes can and do happen. A mistake on your account could dramatically affect your credit score, so you’ll want to check your reports regularly and contest errors when you find them. Luckily, you can request a free copy from each of the bureaus once a year, just visit www.AnnualCreditReport.com.

If you think of your credit report as a test, then your credit score is the final grade you receive. Information about whether you pay your bills on time, how much you’ve borrowed, how long you’ve been borrowing for, and how many hard credit checks you’ve had is fed into the credit scoring formula to produce a single three-digit number that summarizes your creditworthiness.

Okay, so what is a bad credit score?

The reason that many folks don’t know what constitutes a “bad” credit score is that, well, there isn’t a hard and fast line between a “good” and a “bad” score. And while some definitions don’t make room for credit that’s neither good nor bad, we don’t believe in that. You’ll see below that we have a tier for “fair” credit, a range that some would simply write off as bad credit.

Phew. Okay. All that having been said, here are the five basic credit score tiers:

720-850Great Credit
680-719Good Credit
630-679Fair Credit
550-629Bad Credit
300-549Awful Credit

You can haggle over any of these designations. Some will tell you that “great” credit starts at 750, not 720; others will insist that any score below 650, or even 680 is “bad” credit. But while a score under 680 certainly qualifies as “subprime” credit, we believe that there’s enough of a difference between scores in this range and scores under 630 to classify them separately.

Anyway, there you have it: a bad credit score is a score between 550 and 629. Really, there is very little difference between having “bad” and “awful” credit. One way they do differ: Folks with bad credit can generally access bad credit loans and credit cards, while those with awful credit often have to rely solely on no credit check loans like payday loans, title loans, cash advances.

There’s a difference between bad credit and no credit.

In 2017, the average credit score in the United States was 700, but there are still over 100 million Americans with scores that are either subprime or worse. Having been locked out from traditional lenders, people with bad credit often have to rely on predatory lenders just to get by. Even those with fair credit can find borrowing from a traditional lender difficult.

There is, however, an important difference between people who have bad credit and those who have no credit. Simply put: Bad credit means you have a history of using credit poorly, while no credit means you don’t have enough credit history to build an accurate score. While both can result in very low credit scores, having no credit can just as easily result in no score at all.

The length of your credit history is one of the five main factors used in creating your credit score. And it makes sense: The longer your track record of using credit responsibly, the more likely you are to use it responsibly in the future. If you have no credit, getting a secured credit card and using it to slowly build your credit history is a great strategy to establish better credit.

How can you improve a bad credit score?

We mentioned in the previous section that the length of your credit history was one of the five main factors used in creating your credit score. The other four factors are payment history, amounts owed, credit mix, and new credit inquiries.

Of those five factors, your payment history and your amounts owed are by far the most important. Payment history makes up 35 percent of your score, while your amounts owed makes up 30 percent. Together, these two factors comprise 65 percent (almost two-thirds) of your total credit score!

So if you’re looking to take your score from bad/awful to fair/good/great, there are two things you need to do above all else: Start paying all your bills on time and pay down your outstanding debts. If you take care of those two things, everything else should fall into place.

Easier said than done, right? We know. To read more about how you can dig yourself out of debt,  check out these related posts and articles from OppLoans:

Have you been able to build your credit score from bad to great? We want to hear about it! You can find us on Facebook and Twitter.

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It’s True: Bad Credit Can Mean Paying More for Car Insurance

Turns out your credit history is a pretty good indicator of how many claims you’ll file.

When you borrow money, a bad credit score means higher rates. Sometimes, it might even mean that you can’t borrow from a traditional lender at all. Instead, you’ll be stuck with dangerous no credit check loans like payday loans, cash advances, and title loans. Not great!

But there are many other ways that bad credit increases your cost of living. As it turns out, having poor credit is expensive! It can mean larger deposits to secure an apartment or to sign up for utilities—it can even mean trouble getting hired for certain kinds of jobs!

One of the myriad ways that having poor credit adds to your cost of living is through your car insurance. As it turns out, the higher your credit score, the lower your insurance rates! Unfortunately, that means that the opposite is also true: bad credit means paying more for car insurance.


How does your credit score work?

Your credit score is a three-digit number that expresses your creditworthiness as a borrower. It’s a number that traditional lenders like banks, auto dealerships, and mortgage companies use to help determine whether to lend you money and what kind of rates you’ll have to pay. The better your score, the more loans you’ll able to qualify for and the lower your interest rates will be.

Credit scores are based on the information in your credit reports, which contain records of how you’ve handled credit over the past seven years. (Some information, like bankruptcies, stays on your report for longer.) Credit reports are created and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax.

The most common type of credit score is the FICO score. It’s based on a scale of 300 to 850, with 300 being the worst and 850 being the best. While definitions of “good,” fair,” and “bad” credit vary, generally any FICO score above 720 is great, any score between 719 and 630 is fair, and any score under 630 is bad.

There are five categories of information used to create your credit score: payment history, amounts owed, length of credit history, credit mix, and recent credit history. Your payment history and your amounts owed together make up 65 percent of your total score. For more on how each category works, check out our Know Your Credit Score blog series.

Why do insurers factor in your credit history?

Simply put, auto insurers look at your credit history when determining your insurance rates because …. that history is actually a pretty good indicator of how good a driver you are! We know, we were surprised too.

However, insurance companies don’t simply pluck out your regular credit score and use it determine your insurance rates. Instead, they take the same information that FICO takes from your credit reports and they use it to create a “credit-based insurance score.”

These credit-based insurance scores differ slightly from regular credit scores in that they aren’t designed to predict whether or not you’ll pay your bills. Instead, they are designed to predict how many claims you’ll file, as that’s the thing that insurers care most about when setting your rates. The more claims they think you’ll file, the higher your premiums will be.

In 2007, the Federal Trade Commission (FTC) released a report titled Credit-Based Insurance Scores: Impacts on Consumers of Automobile Insurance. According to that report:

“Credit-based insurance scores are effective predictors of risk under automobile policies. They are predictive of the number of claims consumers file and the total cost of those claims. The use of scores is therefore likely to make the price of insurance better match the risk of loss posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums and lower-risk consumers will pay lower premiums.”

Now, even though your credit-based insurance score is different from your regular FICO score, it’s safe to say that the two are also very similar. If you have a bad credit score, the odds are very good that you will also have a poor credit-based insurance score.

How can you improve your credit score?

Earlier in this post, we mentioned that your payment history and your amount owed are the two biggest factors in creating your credit score. Your payment history is the number one factor, making up 35 percent, with your amounts owed coming in a close second at 30 percent. Together, they make up 65 percent of your score, almost two-thirds of the total!

So, if you’re going to fix your score, you should focus on these two areas. The two most important things you can do to improve your credit score are paying all your bills on time and paying down your open balances. Furthermore, any open credit card balances you keep should stay under 30 percent of your total limit. This will help maintain a good credit utilization ratio.

If you don’t have your bills set up on autopay, you should go ahead and do that. Just make sure you’ve also budgeted properly so that your bill payments don’t result in bank overdrafts. And when it comes to paying down all that outstanding debt, we suggest either the debt snowball or the debt avalanche methods of debt repayment.

Fixing your credit score is hard. We know. But the benefits of having great credit will be felt all throughout your financial life. Lowering your insurance premiums could save hundreds or even thousands of dollars per year! What are you waiting for?!

To learn more about credit scores, check out these related posts and articles from OppLoans:

Did you see better insurance rates when you fixed your credit? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

Do You Still Need to Manage Your Credit Score as a Senior?

Pretending like your credit score doesn’t matter anymore could seriously tarnish your golden years.

Worrying about credit scores is a young person’s game, right? After all, it’s in your twenties to forties when you’re out buying houses and cars, racking up miles on your awesome rewards card, and purchasing thousands of fake followers for your Instagram account. You know, the three basic reasons that people care about their credit …

In theory, seniors shouldn’t have to worry about their credit scores. Once they’ve paid off their house, they’re pretty much done borrowing money. And if you don’t need to borrow money, then you don’t need to worry about your credit score. You can kick back, relax, and enjoy all those fake Instagram followers you bought those many decades ago.

Unfortunately, things aren’t that simple. Cost of living doesn’t magically plummet when you retire. There are still going to be situations where you need a good credit score in order to borrow money—plus situations where you wouldn’t even think a credit score is necessary, but it is! It could even affect your application for assisted living or long-term care.

If you’re a senior, you still need to worry about maintaining good credit.


4 reasons you’ll need good credit as a senior.

It’s easy to survey the golden years ahead of you and assume that everything will be finally a-okay—especially if you’ve spent the previous decades building up a sizeable nest egg to see you through. And while having more savings on hand is certainly going to help, there are still tons of situations where you might need a good credit score.

    1. Tickets and reservations: One of the great things about retirement is that you can finally travel more! Unfortunately, a bad or non-existent credit score could mean paying more for hotel reservations and plane tickets. Plus, not having a credit card means getting a hard credit check if you try to rent a car. Seriously, that’s a real thing. Maintaining your credit will help you stretch your travel budget even further.
    2. Downsizing: Many seniors decide to move to a smaller home or apartment after they’ve retired—after all, a house that you bought to raise a family in will often seem way too big once everyone’s grown. But whether you decide to buy or rent, you’ll still need good credit in order to secure that new home. Unless you can buy a home entirely in cash, you have to have good credit.
    3. Insurance: While health insurance can become more manageable in retirement due to Medicare, there are other types of insurance that won’t be so simple. Home, renters, and car insurance all take credit scores into account when determining your rates. For seniors living on a fixed income, they want all the savings they can get. Spending more money on homeowners and car insurance doesn’t make any sense.
    4. Basic living expenses: When you’re a senior without a sizeable nest egg and are relying on government benefits or another form of fixed income, cost of living can easily outpace your resources. In cases like this, a senior might need to borrow money in order to make ends meet. It’s not a good solution, but it might be the best one they have. Without a good credit score, these seniors might be forced to rely on sketchy no credit check loans like payday loans, title loans, and cash advances—driving themselves even deeper into debt.

Now you can see why maintaining a good credit score throughout your golden years is important. Here’s what you can do to make sure your credit stays golden, too.

5 ways seniors can maintain good credit.

Taking your credit score from bad to good can be a little tricky. It’s not impossible, by any means, but it is going to involve paying down a lot of open debt and keeping to a rigorous payment schedule. If your score is already good, however, maintaining your good credit is much simpler. Here are five things seniors can do to maintain their credit post-retirement.

  1. Check your credit report: You credit score is based off the information in your three credit reports from TransUnion, Experian, and Equifax. You can request one free copy of your report from each of them once a year. Check one report every couple of months to make sure there are aren’t any errors and to prevent someone from stealing your identity. Scammers love targeting seniors, and checking your report regularly will help keep you safe.
  2. Keep old accounts open: Paying off a credit card feels great, but that doesn’t mean that you should close the card out. A card that you’ve maintained for years in good standing is dynamite for your credit—as the length of your credit history is one of the five factors used in determining your score. Keep that old account open, and let the good credit vibes keep flowing. You can even request a higher balance, which will look even better. Just be careful that you don’t let those open balances tempt you into overspending.
  3. Use your credit cards responsibly: The best way to use credit cards is to never exceed your means. Only put money on your credit card that you already have in your bank account. If you use your card at the grocery store, for instance, make sure you pay that balance off immediately. And even if you do let a few purchases rack up, never exceed 30 percent of your total credit limit. In the meantime, you can rack up those rewards all while keeping your credit score in tip-top shape.
  4. Pay your bills on-time: This might seem like it’s obvious, but you know what they say about common sense: It ain’t really that common. Payment history is the number one factor in determining your score, making up 35 percent of the total. This means that paying your bills on time every month is the best thing you can do to maintain good credit. If you already have good credit, this is simply something you’ll want to keep up. If you don’t, well, there’s no time to start like the present.
  5. Be very careful about cosigning: Helping your kids, grandkids, or even a close family friend secure a loan might seem like the least you can do to help them out. However, cosigning a loan or a credit card means that those balances will show up on your credit report, which could tank your overall score. Plus, if the other party defaults on the loan, you’ll be the one who’s on the hook for repaying. Being a cosigner can be a very nice thing to do for someone, but it can wreak havoc on your credit. We aren’t going to tell you not to do it, but it’s something you should avoid if possible.

Once you’ve retired, you have to be careful with your money. Otherwise, you could find yourself relying on bad credit loans just to get by. Whether you’re fresh out of college or checking into a senior living community, maintaining your credit score is a major factor in your overall financial health.

To learn more about the ways your credit score can affect your everyday life, check out these related posts and articles from OppLoans:

What have you done to maintain your credit score in retirement? Let us know! You can find us on Facebook and Twitter.

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“Uh-Oh, I Need Money Now!” 4 Fast Cash Options for People With Bad Credit

There’s no perfect way to get money fast when you have bad credit, but these four choices can all be a good solution—so long as you’re careful.

Realizing that you need cash and need it yesterday is never a fun thought to have. But when surprise expenses or a financial emergency rear their ugly heads, that thought just might sum up your situation. Having an emergency fund for times like these is always the best way to go, but for folks who don’t have one, going on and on about the benefits of saving money isn’t going to help in the slightest.

Instead, you need some fast cash options that are going to help you right now—but that won’t leave your finances hurting in the long-term. And if you have bad credit, that second part can be a very tough ask. Getting the money is easy enough; escaping a predatory cycle of debt is much harder. This doesn’t mean that you can’t get the money you need, it just means that you’ll have to be careful when making your decision.

Here are four ways that you can get fast cash when you need it most. None of these options are perfect—and some are certainly riskier than others—but each of them can be useful in a pinch. No matter which option you choose, make sure you understand all the risks before signing up. Your future self, the one who has to live with consequences of the decision, will thank you.


1. Borrowing money from friends and family.

Look, nobody likes going to their friends and family, hat in hand, and asking for money. Even if they are more than happy to loan you the funds you need, it can still feel really embarrassing. And if they’re less than happy to loan you the money, well, then it feels a whole lot worse.

Still, this is your best option if you need fast cash. For one thing, friends and family are much less likely to charge you interest, which essentially means you’re borrowing that money for free. Plus, they are much more likely to be understanding if your repayment schedule is a little erratic—something that regular lenders tend not to be.

Borrowing money from friends and family, however, does come with some significant downsides. Screwing up your credit is one thing; screwing up your close relationships is something else entirely. Plus, there are lots of people whose friends and family members don’t have any more spare cash than they do, which makes this option a non-starter.

If you’re going to borrowing money in this fashion, make sure that both parties are crystal clear on the terms of the loan. You might even want to draw up your own loan agreement so that you both have something in writing. For a sample contract, and to learn more about this kind of casual borrowing, check out our blog post: How to Ask Friends and Family For Money.

2. Selling or pawning your stuff.

There are two ways that you can do this: You can outright sell your stuff, or you can pawn it with the plan to eventually get it back. Both of these options can be totally fine ways to get some extra cash, though they both have their risks and their downsides.

In order to sell your stuff, you’re probably going to have to do it online. That means using Craigslist, eBay, Facebook, or any one of numerous apps. There’s a lot of set-up involved when it comes to selling stuff online, which is time that you might not have available to spend. Plus, meeting with strangers from the internet is always a risky proposition.

For the most part, you aren’t going to sell your stuff for anywhere near what it’s really worth. And if you wait around for someone who’s willing to pay up, well, you need cash now, not later, right? And the more you are able to sell an item for, the more likely it is to be something you really don’t want to be selling.

Not getting full value will also come into play when you are pawning something. Plus, you’ll have to pay interest in order to get your item back. While most pawn shop loans are only a month-long, many of them will let you extend for several months at least. That means even more interest piling up.

If pawn shop loans had really low interest rates, this wouldn’t be so much of a problem. But they do. Pawn shop loans can have an average rate anywhere from 15 to 275 percent depending on the laws in your state. Yikes! To read more about pawning your valuables for some quick cash, head on over to our blog post: The Pros and Cons of Pawn Shop Cash Advances.

3. Take out a cash advance on your credit card.

Now, if you need emergency money and it doesn’t matter if it’s cash or not, then you can put the balance on your credit card. But this only applies if you already have a credit card with a low outstanding balance. Generally, you want to keep your credit card balances below thirty percent, but when an emergency strikes, you might not have any better options available.

If you don’t already have a credit card, however, then a poor credit score is going to limit your options for getting one. You might only be able to apply for a secured credit card, but that will require a cash deposit to set your credit limit, putting you right back where you started. Besides, it can take that card awhile to arrive, and by then it might be too late.

For emergency expenses that require cash, taking out a cash advance on your credit card might be your best bet. That doesn’t mean it doesn’t carry significant risks to your financial health, it just might be the least-bad option you have.

Credit card cash advances work a lot like using your debit card to get cash from an ATM. The main difference is that cash you get on a debit card is money you already have in your bank account, whereas a credit card cash advance is money that you’re borrowing. When you get an advance on your credit card, the amount you withdraw is then added your outstanding balance, just like when you use your card to make a purchase.

The biggest downside to credit card cash advances is that they are more expensive than regular credit card purchases. They come with an upfront fee just for making the transaction that averages $10 or 5 percent of the amount withdrawn, whichever is higher. The APRs for cash advances are also much higher than the APRs for regular transactions, and the lack of a 30-day grace period means that interest starts accruing immediately.

Lastly, there limits on credit card cash advances that, depending on the card, might be lower than the amount you need. These might be limits on the amount that you can withdraw per day or per transaction; your card also likely has an overall limit for cash advances. Even if a credit card cash advance is the best of your bad options, they’re still putting your finances at risk.

4. Shop around for the right bad credit loan.

When you have bad credit, you are likely going to be locked out of loans from traditional lenders. When they look at your credit score, what they see is a high likelihood that you won’t be able to pay them back. Instead, you will have to take out a bad credit loan that will come with much higher interest rates.

Still, some bad credit loans can be a great financial solution! So long as you can afford your payments, a higher interest rate can be an acceptable price to pay for access to credit you wouldn’t otherwise have. It’s all about finding the right bad credit loan and making sure you steer clear of the wrong ones.

There are three main types of bad credit loans out there, two of which should be avoided at pretty much all costs. payday loans and title loans risk trapping you in a predatory cycle of debt, while certain bad credit installment loans can actually help you improve your overall financial health.

Payday loans are a very common kind of short-term, small-dollar loan aimed at people with bad credit. They’re rarely larger than a few hundred dollars and are designed as an advance on the borrower’s next paycheck. The loan is often due on the customer’s next payday—that’s where the name comes from.

The average term for a payday loan is only two weeks, and the average interest charge for one of these loans is around $15 per $100 borrowed. That might seem like a reasonable cost, but it actually works out to an APR of 391 percent. Paying 15 percent to borrow money for only two weeks makes these loans much more expensive than standard personal loans.

The trouble with payday loans, however, isn’t just their cost; it’s the size of their payments. Payday loans are designed to be back in a single lump sum (principal plus interest) that can be very difficult for many people to afford. Only two weeks to pay back several hundred dollars can be tough when you don’t make that much money.

Trouble making those payments leads to some payday loan customers rolling over their loans, paying off the interest and getting an extension on their due date with even more interest added on. Customers can also reborrow their payday loans—paying off the original loan and then immediately taking out a new one to cover their other bills.

All of this can add up to a cycle of debt wherein the customer is trapped paying more and more interest on their loans without ever getting closer to paying off the loan itself or getting their finances stable enough where they don’t need a loan at all. Payday loans might seem like a good fit for short-term financial needs, but too often they end up presenting a long-term problem.

Title loans are another type of short-term no credit check loan, and they might even be more dangerous than payday loans. These loans get their name from the thing that they use as collateral: the title to borrower’s car, truck, or motor vehicle.

Since these loans use the borrower’s car as collateral, customers are often able to borrow more with a title loan than they could with a payday loan. But most title lenders will still lend their customers only a fraction of their vehicle’s true value. And if the person can’t pay it back, then the lender can repossess their car and sell it.

So how affordable are title loans? Well, Your average title loan has a repayment term of one month, and a monthly interest rate of 25 percent. Some quick math reveals that a 25 percent monthly rate adds up to an APR of 300 percent! Like payday loans, many title loan borrowers end up rolling over their title loan again and again, racking up thousands of dollars in fees and interest.

In the end, title loans don’t just put your finances at risk, they could endanger your very livelihood. Lots of folks out there need their cars in order to get to work, so having their car repossessed could very well lead to them getting fired. And according to the Consumer Financial Protection Bureau, one in five title loans ends in repossession. That number and those interest rates are much too high for a title loans to be a viable option.

Installment loans work a lot like regular personal loans. They are designed to be paid back in a series of regularly scheduled payments over a period of months or years. This gives them a leg up on payday and title loans, whose lump-sum payments make them far more difficult to pay back on time.

The main difference between regular loans and bad credit installment loans is the interest rates. And while these bad credit loans have much higher interest rates than regular loans, there are many installment lenders (like OppLoans) whose rates are much lower than the average payday or title lender.

What’s more, most installment loans are amortizing, which means that every payment you make goes towards both the principal and the interest. And since interest accrues on these loans over time—instead of being charged as a flat fee per loan period—paying your loan off early will save you money!

Overall, a long-term installment loan is a much better option than a short-term payday or title loan. Their payments are often more affordable, their principals are higher, and they let you save money by paying ahead of schedule. Plus, some installment lenders report payment information to the credit bureaus. That means that paying your loan back on-time could help your credit score!

But don’t let the relative security of an installment loan lull you into a sense of false security: You still have to make sure to do your research. There are a lot of untrustworthy lenders out their offering bad credit installment loans. Check out customer reviews and the lender’s BBB page, compare rates between lenders, and don’t sign anything before you fully understand the terms and conditions.

The best way to deal with emergency expenses is to already have money set aside. A well-stocked emergency fund will give you an interest-free solution to any surprise bills that come your way. But saving money is hard, especially if you’re living paycheck to paycheck. If you need fast cash, there are always solutions out there. It’s just about finding the one that’s right for you.

To learn more about living life with a bad credit score, check out these related posts and articles from OppLoans:

What did you do the last time you need some fast cash? We want to hear from you! Let us know on Facebook and Twitter.

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If You Have Bad Credit, Can You Qualify for a Debt Consolidation Loan?

If you want to consolidate your debt but you have a lousy credit score, you’re going to run into the same problems as you would trying to apply for any other loan.

Bad credit is like the worst kind of slope: a slippery one. Once you miss some payments, your credit score will start dropping and the fees and interest on that debt will keep growing.

So now you have more debt and a lower credit score which will make getting a personal loan harder. One way to help manage your debt is to take out a debt consolidation loan, where you get one big loan to pay off all your smaller ones. Then you only have one payment to make every month! And hopefully at a lower interest rate than you were paying previously!

But if you already have a poor credit score, is debt consolidation really a possibility for you? Read on and find out!


Payment history and amounts owed are the two most important parts of your score.

Before we continue, let’s make sure we’re all on the same page. Your history as a borrower is collected into documents called credit reports by the three major credit bureaus: Experian, TransUnion, and Equifax. That information is then fed through an algorithm created by the FICO corporation to create your credit score, a three-digit number that expresses your perceived trustworthiness as a borrower. Potential lenders use these scores to help determine whether they’ll lend to you and at what rates.

Your credit score is composed of five categories. The most important category, worth 35 percent of your total score, is your payment history. This is a measure of whether you’ve been paying your bills and paying them on time. When it comes to whether you’re likely to pay off your debts in the future, it’s not surprising that lenders will want to know whether you’ve paid your debts in the past.

The next factor, worth only a little less at 30 percent, is your amounts owed. This is, as the name suggests, the amount you currently owe to your various lenders. If you already have a lot of debt to manage, it stands to reason that you’ll have a tougher time managing new debt. In general, you’ll want to keep any credit card balances below 30 percent of your total credit limit to help this section of your score.

If you think you have a good credit score because you’ve never been in debt, you’re wrong. 

The last three factors are each less important on their own, but together they account for a little over a third of your credit score, as the math would suggest.

The length of your credit history is worth 15 percent. This is where some people can get hung up because they think having never gotten into debt in the first place will lead to a good credit score. That’s not the case. FICO’s algorithm does not look too kindly on people who’ve never borrowed money before because, well, they’ve never borrowed money before! The algorithm isn’t sure how they would handle it!

That’s why, even if you don’t qualify for a regular credit card, you should consider getting a secured credit card. This is a card that’s easier to qualify for but which requires you to put down cash as collateral. That way, you can start building up your credit by using the credit card and paying the bill in full each month. But you don’t want to use it too much since the next 10 percent is …

Your credit mix! This takes into account how your credit obligations are divided. Lenders want to see as diverse a mix as possible. So if all your debts are on credit cards or in the form of personal loans, you’ll get dinged for that.

Finally, the last 10 percent is recent credit inquiries. Hard credit checks, performed by most standard financial companies when you’re seeking a loan, will cause a temporary negative effect on your credit score. The effect isn’t huge and will only last a maximum of two years, but when you have bad credit, every little bit counts.

What is a debt consolidation loan, exactly?

Speaking of applying for a loan, just what is a debt consolidation loan? Basically, it’s a loan you take out for the express purpose of paying off the debts you want to consolidate. You take out the new loan, and then use those funds to pay your old debts off. There are certain loans that are advertised specifically as debt consolidation loans, and you include the other balances that you want to pay off as a part of the loan process.

Ideally, this new loan will have lower rates than the original loan or lower monthly payments. Or super duper ideally, both. Oftentimes, though, you’ll be asked to choose between the lower monthly payments and paying more in interest overall—even with lower rates. A longer term on a loan means lower payments, while a shorter term means less interest will accrue. In choosing between the two, it’s really about what’s right for you.

If you’re applying for a debt consolidation loan that has a higher interest rate than your current debts or monthly payments that you can’t afford, then you shouldn’t take out that loan. While simplifying your debts is a good thing—allowing you to make one payment each month instead of many—paying more money in order to do that is not.

So can you get a debt consolidation loan with bad credit? And should you?

Folks with bad credit will run into the same issues with a debt consolidation loan that they will with regular loans.

Getting a debt consolidation loan with bad credit is like getting any other loan with bad credit: less than ideal. Traditional lenders likely won’t lend to you at all, and the ones that will are going to charge you much higher interest rates. The rates might be so high that the loan isn’t even worth it. Loans or credit cards that were taken out before you had a bad credit score might have better rates than anything you’re able to qualify for right now.

You’ll also want to be very careful with any lender that does want to lend to you when you have bad credit. While there are many bad credit lenders out there that are totally legit, there are many others whose predatory products will trap you in a cycle of debt. Trying to consolidate your debt with one of these lenders could leave you in a worse situation than you were in before the consolidation.

Then again, even the higher rates from one bad credit loan might be far better than what you’re paying on your other bad credit debt. For instance, if you have multiple payday loans outstanding that you are struggling to pay, consolidating all of those loans into a single bad credit installment loan with longer terms and lower payments might just be the ticket to stabilizing your finances.

The solution to choosing the right bad credit debt consolidation loan is simple: Do your research. Make sure you compare different loans using their APR, or annual percentage rate, to determine which one is most affordable, and make sure to read all of the fine print before signing anything. Check the monthly payment amounts against your budget and see whether or not you’ll be able to afford them. Online reviews can also help you determine which lender is the right choice for you.

In a best-case scenario, you’ll find a debt consolidation loan with better terms that will report your payments to the credit bureaus. Then, not only will you be handling your debt, you’ll be building your credit score back up as well!

Having a bad credit score is always going to be tougher than having a good one. But it might still be worth looking into a debt consolidation loan. As long as you don’t have to agree to any hard credit checks, there isn’t a downside to exploring your options.

To learn more about getting out of debt, check out these related posts and articles from OppLoans:

What do you think is the best strategy for getting out of debt? Let us know on Facebook and Twitter.

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How Does Going to Prison Affect Your Credit?

how-does-prison-affect-creditGetting sent to prison will make it very hard to repay any money that you owe, and that’s going to hurt your credit score.

There are a lot of people in prison in America. In fact, our country has a higher prison population and higher incarceration rates than anywhere else in the world. And while there’s clearly a lot of work that needs to be done to bring down incarceration rates, a lot of that is a bit outside our wheelhouse. We’re more focused on helping your personal financial situation right now.

That’s why we’re here to answer a question you may, unfortunately, have wondered about: How will going to jail affect your credit score?


How do credit scores work, again?

First, let’s just go over what a credit score is and how it works.

Your credit score is a three-digit number produced from information on your credit report. You actually have three credit reports, each from one of the three major credit bureaus, Equifax, Experian, and TransUnion. Your score will differ depending on which credit report is used to create it.

The bureaus take information about your lending and credit use and create a three digit number that summarizes your reliability as a borrower. Potential lenders then use that score to determine how likely you are to pay back your loans on time.

Lenders and other creditors determine whether they will lend to you and at what rates based off this number. If the number is at 800 or above, you’ll get the (relatively) royal treatment, but if it’s below 700, you might start running into trouble. And if it’s below 630, then watch out.

In general, the most reliable way to get your credit score up is by using a credit card responsibly. That means using it regularly, but keeping it under one-third of your total credit limit and making sure to pay your bill in full every month. If you only pay the minimum each month, the interest will keep accumulating, and that debt will weigh down your credit score.

But all of this is day-to-day information for life on the outside. How will your credit be impacted by time behind bars?

Prison means no income to pay your debts

While a conviction and jail time may not directly destroy your credit score, all of the secondary effects are going to be an enormous weight.

“Criminal convictions and sentences are not automatically reported on a credit report (only a police report will include such information),” advised attorney Paul Mitassov. “Therefore, most credit score effects are indirect.”

Prison is also unsurprisingly bad for your job prospects in all sorts of ways, as Mitassov explained: “Being in jail will usually stop a person from being able to work and earn money. This will limit their ability to pay their existing obligations, which will be reflected poorly on a credit report. A criminal record will affect a person’s ability to find a job. Jail time will usually cause them to lose their previous job. Lacking a job (and the income it brings) will hurt your credit.”

Your assets can get seized as well. 

And it gets worse.

“Some or all of a person’s resources (money, vehicles, tools, etc) may be seized on arrest,” Mitassov warned. “These may not be returned for some time (or at all). The lack of such assets can prevent one from paying. Most accused will try to hire a lawyer as soon as possible. Criminal lawyers usually request large up-front retainers. This (presumably) unexpected expenditure can prevent a person from paying their other bills.”

Even keeping up with your regular payments could become impossible, as Mitassov told us: “Not all prisons have facilities for easy bill paying (i.e. easily accessible phones or computer terminals). Even if an inmate has the funds, he may find it difficult to arrange regular payments.”

So now that you’ve been warned, you know what to prepare for should you ever find yourself incarcerated.

But what comes after?

How to build your credit post-prison.

So prison is going to be hard on your credit (let alone every other aspect of your life) but how can you bring your score back up otherwise? It’s a lot like what you’d do otherwise but with a much higher level of difficulty.

“Pay off your outstanding obligations, or get them discharged via bankruptcy (bankruptcy is terrible for your credit rating, but at least it stems the bleeding),” suggested Mitassov concerning post-prison release to get your credit score back up. “Get a job. You need an income, to pay your obligations. Make sure to assume only manageable obligations, and make sure to pay on time. (i.e. to build up a good payment history).”

If there were debts you weren’t able to pay because of your incarceration, you can try getting in touch with the creditors and finding out if you can negotiate some sort of agreement.

In general, creditors would rather get some money than no money, and if you can get some of your debts settled or partially forgiven, you’ll already be on your way to better credit. If you can’t qualify for a traditional credit card after release, you can get a secured credit card, which requires you to put down some cash as collateral but can be a good way to build up your credit. Unlike no credit check loans, like payday loans or cash advances, most secured credit cards will report your payment activity to the bureaus.

It’s hard enough to maintain your credit score without going to jail, but with some dedication and a willingness to ask for help when you need it, you can put yourself on the path to credit redemption.

To learn more about credit scores, check out these related posts and articles from OppLoans:

What other questions do you have about credit scores? We want to hear from you! You can email us or you can find us on Facebook and Twitter.

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Contributors

Paul Mitassov graduated from the University of Toronto Faculty of Law in 2013. He also holds a Bachelor’s Degree in Mechanical Engineering from the University of Toronto. After working at a downtown law firm, he started his own practice in North York. As an engineer, Paul takes an analytical approach to every case, and has obtained results in various areas of law including civil litigation (including small claims), family law, wills and estates, corporate law, and criminal matters.  Paul’s dedication to perfection and transparency with his clients are the number one reason why most of our client’s come from prior client referrals. Paul speaks fluently in both Russian and English, and is a fully-licensed lawyer with the Law Society of Ontario.

Yes, You Might Need a Credit Check to Rent a Car

credit-check-rent-a-car

Car rental companies see debit cards as a red flag and will likely check your credit before they rent to you.

If you have a bad credit score, there are tons of ways that you’ll feel its effects in your everyday life. It will mean higher interest rates on your loans and credit cards, which cuts into your monthly budget. It might also mean paying more for utilities or at least needing to put down a deposit in order to secure them. It can even mean getting turned down for an apartment or a new job.

In short, having bad credit sucks. Luckily, there are things that you can do to help your score improve, like paying down your debts and making sure you pay your bills on time. Additionally, you should avoid any unnecessary credit checks, as they can negatively affect your score for up to two years. The damage won’t be that huge—more of a dent than a smoking crater—but when your score is in the dumps, every little bit can help or hurt.

Avoiding credit inquiries means not applying for loans or credit cards unless you absolutely need them, but it can also mean avoiding other things as well—or at least approaching them more cautiously. One of those things is renting a car. Depending on your circumstances, renting a car might mean needing a credit check, which could lower your score. And the answer to avoiding that check might surprise you.


How do credit checks work?

When a business checks your credit, it’s because they want to see whether you are a trustworthy borrower. While renting a car is a little different than taking out a loan or a credit card, the same basic rules apply. If you have a history of paying your bills and your rent on time, you are very likely to also pay for your rental car without any issues.

There are two types of credit checks that can be run: hard checks and soft checks. A hard credit check pulls a full copy of your credit report from one of the three major credit bureaus (TransUnion, Experian, and Equifax). Hard checks are also recorded on your report and will usually ding your score temporarily. In order for a hard check to be run, a company must have your express permission.

Soft credit checks, on the other hand, do not need your permission in order to be run. This is because soft checks return far less information than hard checks. And while soft checks can be recorded on your credit report, they do not affect your score. If you’ve ever received a “pre-approved” offer in the mail, that lender performed a soft check on your credit history.

With car rentals, they will perform a hard check on your credit. If you want to read more about the difference between soft and hard checks, check out our blog post: How are Soft Credit Checks Different From Hard Checks?

Renting a car with a debit card could mean a credit check.

On this blog, we write a great deal of personal finance advice. And one thing we consistently tell folks who lack good money habits is to avoid using their credit cards as much as possible. Credit cards with a good points or rewards plan can be a great financial tool if used properly, but the temptation to use them improperly and rack up a bunch of debt is too strong for many people.

So it feels a bit odd to say this but here we go: If you’re renting a car, you should do it with a credit card instead of a debit card. It’s only when customers are using a debit card that companies are going to (often, but not always) insist on running a credit check.

Debit cards mean additional risk for car rental companies.

Why do these companies insist on checking credit with a debit card? Well, most rental companies see debit cards as a bit of a red flag. With debit cards, they are much more likely to run into problems with insufficient funds to cover either the rental itself or additional costs that the renter might occur by damaging the car or forgetting to fill up the tank before they return it.

Still, this debit card red flag isn’t big enough to stop car rental companies from renting to debit card-users altogether. Instead, they simply need to run a credit check on the borrower before handing over the keys—in addition to a number of other small ways they try to disincentivize borrowers from using debit cards.

Beyond a credit check, renting a car with a debit card could mean needing additional ID, providing proof of insurance, having certain car classes made unavailable to you, and even certain age restrictions. In short: renting a car with a debit card is a hassle. If you need to rent a car, use a credit card.

To learn more about how credit works, check out these related posts and articles from OppLoans:

What else do you want to know about credit checks? We want to hear from you! You can email us or you can find us on Facebook and Twitter.

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Will a Cash Advance Show up on Your Credit Report?

While a cash advance won’t necessarily show up on your credit report, there are still ways that taking one out could hurt your credit score.

When you need cash during an emergency—and you don’t have an emergency fund—it’s easy to only think about the short-term. Who cares how much this sketchy online loan from RealLoansNotaScam.com costs? Forget that this “lender” you found on Craigslist is literally a guy handing wadded-up ones out of the back of a Winnebago—you need cash and you need it now!

And yet, those long-term considerations can really come around to bite you in the behind, so they are good to keep in mind. Take cash advances for example. If you take one out, will it end up on your credit report? How will it affect your score? What even is a cash advance anyway?

That’s why we’re here. So sit back, take a deep breath, and remain calm as we answer your questions about cash advances, credit reports, and how the two relate.


How do credit reports work?

Credit reports are documents that contain a record of your borrowing history. They include stuff like outstanding balances, history of on-time payment (and any late or missed payments), the types of loans and credit cards you’ve taken out, accounts that have been sent to collections, bankruptcy filings, hard credit checks, etc. Most of the information on your credit report remains there for seven years, although some information, like bankruptcies, will stay on your report for longer.

These reports are created and maintained by the three major credit bureaus: Experian, TransUnion, and Equifax. Since some lenders, debt collectors, landlords, etc. might report consumer data to some but not all of the bureaus, information can vary across the reports. For this reason, you don’t actually have one credit report; you have three. And your credit score can change depending on which credit report was used to create it.

What is a cash advance?

There are two types of cash advances. The first type is a feature on your credit card, where you can use the card to take out cash. The amount of cash that you withdraw (plus an extra fee and any ATM fees you might also incur) is then added to your credit card balance in the same way that a regular purchase would be added.

Aside from the additional cash advance fee, credit card cash advances differ in a couple key ways from regular credit card transactions. First, they come with a higher APR than standard transactions. Second, there is no 30-day grace period for interest on these transactions; once they are added to your balance, interest starts accruing immediately. All in all, taking out a cash advance on your credit card is a good deal more expensive than simply using your card to make a purchase.

The second type of cash advance is a type of short-term no credit check loan. Similar to payday loans, these cash advance loans are advertised as being an “advance” on the borrower’s next paycheck. The typical repayment term for these loans is approximately two weeks, after which time the loan is to be repaid in a single lump sum—unlike traditional installment loans, which are paid off in a series of smaller payments over time.

The interest rates for these payday cash advances are extremely high, with an average APR over 300 percent. While their interest rates look reasonable in the short-term, the difficulty that many customers have repaying these loans can often mean rolling their loan over or paying it off and immediately borrowing a new one. The more that a person rolls over or reborrows their loan in order to make their payments, the more likely they are to become trapped in a predatory cycle of debt.

Are credit card cash advances added to your credit report?

The answer to this question is: kinda. Anytime you add (or subtract) from your credit card balance, that change is noted on your credit report. So a credit card cash advance will show up on your report as an addition to your credit card balance, but it won’t be noted any differently than a regular transaction would be.

So can a credit card cash advance negatively affect your credit? It can, but it’s not likely to. When it comes to your credit card balances, it’s a good idea to keep them pretty low relative to your total credit limit—even if you pay off your balances in full every month. Keeping your debt utilization ratio beneath 30 percent (meaning that you never spend more than 30 percent of your credit limit) will mostly keep those balances from negatively affecting your credit.

In order for a credit card cash advance to negatively affect your credit score, it would have to either push your balances above 30 percent or it would have to be such a massive increase to your balances that it would reflect a major change to your total amounts owed. Unless you are right beneath that 30 percent ratio or are taking out thousands of dollars worth of cash advances in a short period of time, your score will be unaffected.

Will a payday cash advance loan show up on your credit report?

The answer here is “no” with a small caveat. Payday cash advances are part of a subset of bad credit loans called “no credit check loans.” This subset includes cash advance loans, payday loans, and title loans. Since these no credit check lenders do not run any checks on your credit history during their application process, they also do not report your payment information to the credit bureaus.

Regular lenders like banks will always run a hard credit check when you apply for a personal loan. That hard check returns a full copy of your credit report and gets noted on the report itself. These checks will often lower your score slightly and can do so for up to two years. Many bad credit lenders run what’s called a “soft” check on your score, which returns less information and won’t affect your score at all. Many of these lenders, like OppLoans, also report your payment information, which can help your score if those payments are being made on-time.

No credit check lenders, on the other hand, do not run any kind of credit check and do not report payment information. They do, however, send unpaid accounts to collection agencies. And those agencies will report those accounts to the credit bureaus. (The exception is title lenders, who will repossess your car in order to repay the amount owed.) So while a payday cash advance loan will not end up on your credit report and won’t affect your score, an unpaid cash advance loan will indeed show up on your report and hurt your credit score.

To learn more about credit reports, check out these related posts and articles from OppLoans:

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