How to Build Credit When You Have No Credit at All

Fixing a bad credit score is one thing, but what if you don’t have any credit score at all? Can you really make credit from nothing? Of course, you can!

We’re not breaking any news here when we tell you that your credit score is very important. But it’s still very important! At some point, you’re probably going to need a personal loan or a credit card or you’re going to want to sign a lease. Unless of course, you can just afford to purchase everything with giant suitcases of cash.

But if you could, you probably wouldn’t be reading this article. You’d be too busy working with top engineers in an effort to make your solid gold jet plane actually capable of flight.

Still, don’t believe credit is important? Here’s an example of why it’s so valuable, from certified financial planner and Founder and CEO of Doing Money Right, Byron Ellis (@byronellistweet):

“Have you ever noticed how companies brag about how long they’ve been around? Restaurants, banks, construction companies… they include ‘Est.’ in their logos and proudly announce the first year they opened their doors. Why?

“Because they want to give you a sense of enduring quality, and more importantly, consistency. If a business has managed to survive for decades, it implies that they have been able to keep loyal customers coming back. And they want you to become a loyal customer too!

“That’s sort of how credit works. What makes a good credit score is a long history of consistent, regular payments on debt, which reassures lenders that you will make consistent payments in the future.”

Now, fixing a bad credit score is one thing, but what if you don’t have a credit score in the first place? Can you really make credit from nothing? Of course, you can! We asked the experts and now we bring the answers to you!


Here’s how credit scores work.

Your credit score is a number between 300 and 850 that is generated using information from your credit reports, which track your history of borrowing money. You have three different credit reports, one each from the three major credit bureaus, TransUnion, Experian, and Equifax.

The higher the number, the more likely lenders will be to believe that you’ll pay back a loan you’ve taken out. It can also be used when you’re applying for a lease and, in rare cases, when you’re being considered for a job.

There are five factors that go into your credit score. In order from most to least important, those factors are payment history, amounts owed, length of credit history, credit mix, and new credit inquiries.

So how can you use your knowledge of those factors to create a good credit score out of thin air?

Pay your bills on time!

As we just told you in the previous section, payment history is the single largest factor in shaping your credit score. That’s why it’s important that, as soon as you have bills, you’re paying those bills on time, right out of the gate.

“First, pay your bills on time,” advised financial coach and author Karen Ford. “Any medical bills, utilities, rent, should all be paid on time. Although these aren’t car payments or credit cards, they can still affect any credit you may trying to build.”

Avoid overborrowing.

You need credit to have a credit history, and that means taking on debt. But not too much debt!

“The number one rule of credit is this: Only borrow what you can pay back!” warned Ellis.

“Once you’ve started to build up your credit score, lenders will take notice. Keep in mind that they want to loan you money, so they can earn interest, and if you’ve proven that you can make consistent payments, you’re a perfect candidate!

“Credit cards, mortgages, vehicle loans … you’ll be approved to borrow much, much more than you can realistically afford to pay back. The average American family carries around $135,000 in debt, $7,000 of which is revolving credit card debt. On top of that, one in 11 say that they don’t think they will ever be completely free of credit card debt. Don’t fall into the debt trap!”

“Remember that success is about balance,” he added. “Figure out how much you can afford to spend on a monthly basis—AFTER doing things like saving for retirement—and then whatever is left over can go towards debt payments.”

You’ll need to start slow.

If you don’t have any credit, you may not be able to qualify for personal installment loans with reasonable interest rates. But there is a way to take on good debt to build up your credit without having to deal with sky-high Annual Percentage Ratings (APRs), which is the full cost of a loan in a given year including fees and interest.

“Get a secured credit card,” recommended Smart Shopping Expert Trae Bodge (@truetrae). “Building credit is all about using credit and a secured credit card is a good way to do that. With secured cards, you start with funds you deposit, and then you pay back what you spend.”

You can also hop onto an already existing card.

“Become an authorized user,” suggested Katie Ross, Education and Development Manager at American Consumer Credit Counseling, or ACCC (@TalkCentsBlog). “Obtain credit in your name as an authorized user on a parent/guardian’s account. This will help you build credit until you are able to qualify for credit on your own.”

However, even if you’re paying off your credit card bill in full each month, as you should, you still don’t want to charge too much on it.

“Don’t max out your cards,” Ross told us. “Maintain a good credit utilization ratio (don’t exceed 30 percent of the credit that’s available to you).”

Be careful how many accounts you open.

While you may be tempted to open as many accounts as possible to grow your credit score as soon as possible, this is not a good move!

“We’ve mentioned several great options for building your credit score up from zero, but they all have one thing in common: they take time,” Ellis explained. “If you’re impatient like I am, you might think ‘hey, if I open two or three of these accounts at once, that will build my credit twice as fast!’ Right?

“Let me tell you … definitely not! Here’s why. Every time you apply for new credit, the lender will pull your full credit report from the credit bureaus I mentioned earlier. This is called a Hard Inquiry and it’s visible to other lenders. “When lenders see multiple Hard Inquiries back-to-back, they know that you have added additional debt in a short period of time.

“And that makes them nervous! Their primary concern is getting their money back, and the more debt you add at once, the higher the likelihood that you will stop paying on at least one of those loans.

“Have you ever had a favorite local restaurant that tried to grow too fast, opened up a bunch of new locations at once, and failed because they couldn’t maintain the same quality as before Bingo! Don’t stretch yourself too thin.”

Ross echoed that advice: “Limit the number of open accounts. Apply for and open new credit card accounts only when it is truly necessary. Too many opened accounts can send a negative message to your potential lenders.”

Don’t get ahead of yourself.

You’re not suddenly going to have a great credit score overnight. And that’s OK.

“Start small,” advised Ford. “The amount you end of charging is small in comparison to you paying on time. Whether you charge a lot or a little, make the payments on time as this will build credit.”

It isn’t always easy to build up your credit, but it’ll be worth it in the long run. When a financial emergency strikes, nonexistent or bad credit could leave you stuck with predatory bad credit loans and no credit check loans like payday loans, title loans, and cash advances in order to make ends meet.

To learn more about how your credit score works—and what you can do to improve it—check out these related posts and articles from OppLoans:

Do you have a question about credit scores you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Contributors

Trae Bodge (@truetrae) is an accomplished lifestyle journalist and TV commentator who specializes in smart shopping, personal finance, beauty, toys, parenting, and retail. In addition to monthly “Best Buys” segments on CBS2 NY, Fox 5 NY and ABC/WJLA in DC, she has appeared on dozens of TV shows, including Rachael Ray, Inside Edition, CNBC and network affiliates nationwide. Trae has been named a Top Voice in Retail by LinkedIn and a top personal finance expert by GoBankingRates and FlexJobs. She is a contributing editor at Woman’s Day magazine and her writing and expert commentary have also appeared in Forbes, USNews.com, Kiplingers, Marketwatch, MSN Money, Yahoo Finance, VICE Guide to Life and numerous others.
Byron Ellis (@byronellistweet) is the Managing Director at United Capital Financial Life Management (@United_Capital) and the Founder/CEO of Doing Money Right.  He has been helping families with their Financial Life Management since 1989 and has built and grown one of the most successful firms in the entire country! Byron lives in Woodland Texas where he has a weekly financial column in The Villager and Courier, two local newspapers.
Karen Ford is a Master Financial Coach, Public Speaker, Entrepreneur, and Best- Selling Author. Her #1 Amazon Best Selling Book “Money Matters” is a discovery for many.  In “Money Matters” she provides keys to demolishing debt, shares how to budget correctly, and gives principles in wealth building.
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.

Need to Pay for Auto Repairs But You’re Short on Extra Cash? Consider All Your Options

If you have bad credit and meager savings, you might think that a predatory no credit check loan is the only way you’ll get back on the road. It’s not.

Winter isn’t coming. It’s here. And much like how the good people of Westeros now have to deal with ice zombies, dragons, and zombie ice dragons, winter arriving can make taking care of your vehicle even more challenging. Ice zombies might not be a big problem for you, but icy roads sure can be.

Unless you’re well-versed in auto-mechanics, your car breaking down is going to mean paying someone else to repair it. That can get pricey, and fast.


Auto repairs are expensive, but people need their cars.

For most people, reliable access to transportation is essential for maintaining a job. According to data from the U.S. Census Bureau, about 85.4 percent of workers commute to work in an automobile. And while the rate is lower in major cities due to more options for getting around, 45 percent of Americans still don’t have access to public transportation.

If your car breaks down, the financial burden is twofold. Repairs can be costly, and 40 percent of Americans don’t have $400 saved to cover an emergency expense. Plus, if you can’t access your vehicle to get to work, you’ll miss out on that needed income as well.

Enter predatory payday loans.

It’s common for people who have bad credit are short on extra cash to turn to payday loans to cover auto repairs. These short-term, small-dollar loans are quick and easy to obtain, but they carry high interest rates and fees that most borrowers can’t afford, according to research from Pew Charitable Trusts.

With payday loans, you typically don’t have to undergo a credit check when you apply for one. This might seem like a great boon for folks whose poor credit scores have locked them out from traditional lending institutions. And it really can be, depending on the lender

The problem with many payday lenders isn’t that they skip traditional credit checks. It’s that they don’t perform any due diligence on their customers and whether or not they can afford the loan they’re borrowing.

When your lender doesn’t care whether or not you can repay your loan, it’s all too easy to fall into a predatory cycle of debt. The same doesn’t just apply to payday loans, but to any bad credit loan offered by a lender who doesn’t check your ability to repay.

If you need your car repaired but are strapped for cash, consider all other options before taking out a risky no credit check loan or cash advance. Here are some of the ways you can get back on the road without sending your finances into a tailspin.

Apply for government assistance.

The Department of Health & Human Services in each state offers assistance to low-income families for a variety of needs. Only a few states provide car repair assistance, but other programs can help defray costs that will help you save more of your income for an emergency.

Check your eligibility for healthcare assistance, food assistance, and housing assistance at your local office or state’s website.

Ask family or friends for help.

It can be difficult to ask for help, but getting financial assistance from a friend or family member will likely be the quickest option that’s feasible for you to pay back. Explain your situation and why you need the money.

If you ask respectfully and demonstrate a repayment plan, you might be surprised to find people willing to assist you, especially in the case of an emergency.

Contact a charitable organization.

There are many local and national nonprofit organizations that assist low-income families with low-interest loans and grants for a car purchase or repair, and some that even donate free cars. The following resources may help:

Take out a lower-cost loan.

If you can’t get a low-cost personal loan or charitable grant, consider other options that are less costly than payday and title loans. You can try applying for a credit card or talking to local banks or credit unions about low-interest loan options.

Many local credit unions offer Payday Alternative Loans (PALs) that would be a great fit for your situation. However, you have to have been a member of the credit union for one month in order to apply for one. Joining a credit union now so that you can access a PAL later would be a wise financial decision.

If you have bad credit and can’t access these alternatives, you could also consider taking out an installment loan to cover your auto repair. These loans have longer terms and lower interest rates than payday loans. Spreading out the cost of your loan also means smaller, more manageable payments that are usually easier to repay.

The right installment loan could also help your credit. Installment lenders like OppLoans report online loan payments to the credit bureaus, something that most payday lenders don’t do. This means that on-time payments get recorded on your credit report. Your payment history is the single biggest factor in determining your score.

Plan ahead.

The best way to pay for a car repair is to avoid borrowing altogether. This will mean building up an emergency fund that you can tap when times are tough and you need cash fast.

Once your car is fixed and you’re back to work, set up a budget and savings plan or secure additional income to prepare for future emergencies.

Better yet, start building your emergency fund now while your car is running perfectly fine. That way, you’ll be prepared for when disaster strikes.

We’d compare it to how the people on Game of Thrones built The Wall to keep out the ice zombies … which it did! Now, it didn’t keep out the zombie ice dragon, sure, but that’s not something you’ll have to worry about. Anyway, this metaphor’s falling apart. Drive safe!

To learn more about how you can improve your financial situation, check out these related posts and articles from OppLoans:

Have a personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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A Brief History of Credit Cards

Diners Club cards weren’t the first type of credit card, but they were the first to find success on a large scale—even though their inventor wrote them off as a “fad.”

Credit cards. Few items are as capable of both fixing and ruining a financial situation.

Properly using a credit card is one of the best ways to raise your credit score. By paying your bills on time and keeping your debt loads low—with balances that never exceed 30 percent of your credit limit—you can gradually build up better and better credit.

However, misusing a credit card by taking on more debt than you can handle and/or missing your payments will totally land your score in the tank. That’s how you end up in a situation where you’re taking out predatory no credit check loans like payday loans and cash advances to make ends meet during a financial emergency.

But how did these polarizing plastics come to be? This is the story of how the humble credit card came to rule over so many financial transactions.


Before money, there was grain and cattle.

Loans have existed for almost as long as civilization. In ancient Egypt, Sumeria, China, India, and elsewhere, early banking systems developed based on food loans. By borrowing cattle or seeds, farmers could breed or grow additional plants or animals. They’d then be required to pay back interest on the loan they took out.

This was one of the earliest forms of credit. But you couldn’t take your cows to a movie theater and swipe them in a machine to get some popcorn. There had to be another way!

Credit continued to exist and grow as coins and paper money became the dominant form of currency, edging out cows due to their greater portability. But the classic credit card wouldn’t hit the scene until the 20th century. We take you now to post-war Brooklyn …

The Diners Club card changed everything

The first “charge” card didn’t swipe or insert. And no, it wasn’t touchless either.

“Bank issued cards came on the scene in 1946, when John Biggins, a Brooklyn bank started the ‘Charg-It’ card,” explained financial coach and author Karen Ford. “The bank would pay the stores and be responsible for collecting the debt from the card-holders.

“Biggins’ idea was implemented on a small scale—only available for residents and merchants within a few blocks of the bank, but the idea caught on quickly. Four years later, the Diners Club Card was instituted by Frank McNamara.”

And now, to learn how McNamara came up with the idea for the Diners Club Card, let lawyer and author Steve Weisman of Scamicide (@Scamicide) take you back to a restaurant in New York City in the middle of the last century:

“The evolution of the modern credit card began in 1950 with the issuance of the first Diners Club cards. Diners Club cards were the brainchild of Frank McNamara who, while out for dinner with his lawyer Ralph Schneider and his friend Alfred Bloomingdale, was embarrassed to find he had forgotten his wallet.

“A short phone call later, his wife brought him the necessary cash to pay for dinner, but the proverbial light bulb went off in his head. He came up with the idea for the Diners Club card through which businesses could offer credit to customers with Diners Club billing the customers and paying the businesses.

“This business model was the basis for Diners Club and then all credit cards. Interest was not charged on the initial Diners Club card with payment in full required each month. Schneider and Bloomingdale jointed with McNamara to form Diners Club. Diners Club made its profit from annual fees to cardholders and a surcharge to the merchants on each purchase.

“The first businesses that accepted Diners Club cards were fittingly fourteen New York restaurants.  Diners Club rapidly expanded from an initial 200 cardholders to 20,000 in the first year. Within two years, Diners Club was profitable and Frank McNamara sold his interest in the company to his friends Schneider and Bloomingdale for $200,000 because he was convinced that credit cards were merely a fad.”

As you might have guessed, McNamara was not correct!

“American Express followed the lead of Diners Club eight years later, but the credit card boom really took off when the bank credit card system operated by MasterCard and Visa (then known as BankAmericard) got into the credit card business by setting up a system by which individual banks would set up accounts with merchants and pay the stores immediately upon receiving the bill,” explained Weisman. “The customer got a monthly statement and then could either pay the bill in its entirety or pay a minimum amount with interest on the unpaid balance.”

The Supreme Court gave interest rates a big assist.

Every good biopic needs a climactic court scene. Here comes the one for Credit Cards: The True Story. We’ll let Weisman present it:

“Another key year in the development of credit cards was 1978 when the Supreme Court ruled that credit card issuers would be able to charge their out-of-state customers the highest interest rate permitted in the bank’s home state. This enabled banks to set up shop in states like South Dakota, Nevada, or Delaware where they could charge interest rates that exceeded the usury rates in the states where their customers lived.”

That’s why credit cards became so widespread but also perilous to use if you aren’t careful. Now you understand a little more about the history in your wallet! To learn more about the financial side of history, check out these related posts and articles from OppLoans:

What else do you want to know about the history of money? Let us know! You can find us on Facebook and Twitter.

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Contributors

Karen Ford is a Master Financial Coach, Public Speaker, Entrepreneur, and Best- Selling Author. Her #1 Amazon Best Selling Book “Money Matters” is a discovery for many.  In “Money Matters” she provides keys to demolishing debt, shares how to budget correctly, and gives principles in wealth building.
Steve Weisman is a lawyer, college professor at Bentley University and author.  He is one of the country’s leading experts in identity theft.  His most recent book is “Identity Theft Alert.”  He also writes the blog Scamicide.com (@Scamicide) where he provides daily updated information about the latest scams and identity theft schemes.

Want to Pay Off Your Debt? Try Building a Better Budget!

If you try and pay down your debt without a strict budget, you’ll have a really hard time coming up with the extra money—even if you’re working a second job.

For many people, the best way they can make their money go further is by paying down the pile of high-interest consumer debt that’s weighing down their everyday life. What better way to improve your financial outlook than by freeing up all that money that’s going towards monthly minimums?!

Well, if you’re looking to pay down excess debt, then one of the best things you can do is build better budget—or build a budget in the first place. Even if you’re working one or two extra jobs to bring in extra funds, you’re going to need a budget to make sure all that newfound cash doesn’t splurge itself out of existence.

For all those aspiring budgeteers out there looking to pound their debt into oblivion, here are some helpful steps you can take.


Dream big.

“We’re all motivated by the ‘What Ifs?’ Of life. Asking yourself what you would do if you didn’t have debt might be the impetus you need to jump in feet first,” said personal finance blogger and Queen of Free Cherie Lowe (@Thequeenoffree).

“Rather than paying off debt for the purposes of paying off debt in itself, build a focused dream of what you’ll do once you’re on the other side of debt. Will you travel? Buy a new home? Go back to school?”

“Knowing why you’re doing what you’re doing will keep you refreshed and strong on days that are long,” she said.

Use a no-spend month to jumpstart your saving. 

Saving money to pay down debt is sometimes a game of momentum. It’s difficult to at first, but once you get going, everything starts to click. That’s why Carla Dearing, CEO of online financial wellness service Sum180 (@mysum180), recommended starting things off with a “no-spend” month to really get you in the groove.

“It’s simple,” said Dearing. “Commit to a 30-day period of spending ONLY on necessities. Walk or bike to everywhere instead of driving; take lunch to work every day; embrace free entertainment options, like exploring local parks.

“Not only will you save a lot of money during this one month period, you may find yourself re-evaluating old spending habits altogether and deciding you prefer your own creative, low-cost alternatives.”

Figure out your expenses.

The first step to building a budget is getting a handle on your expenses and on how much you’re spending every month. Once you know that, you’ll have a very clear idea for where you can cut back.

“Many of us have no idea what our expenses add up to every month,” said Dearing. “When you know where your money goes, you are in control and can be thoughtful about aligning spending with priorities.”

She suggested that you create your first-time budget use an online money tracking service, like Mint or Quicken, as they’ll help you more easily get all of your financial information in one place. You can find more budgeting apps in our App Directory, and any first-time budgeters out there should also check out our Beginner’s Guide to Budgeting.

Review your subscriptions and auto-payments.

Cutting down expenses is going to mean cutting out lots of extraneous things like ordering takeout three nights a week. But a good place for you to start cutting is with your hidden expenses, the kind of stuff that leaves your bank account every month without you even thinking about it.

“Look at your recurring or automatically enrolled payments and see if you can cut any streaming services, gym memberships, or delivery plans.” offered Bryce Lloyd, Phoenix Market President for FirstBank (@efirstbank).

According to Dearing, there might even be subscriptions you’re paying for every month that you’ve completely forgotten about!

“For example,” she said, “if you haven’t done a serious credit card review in a while, you may be surprised to see how many charges are automatically showing up on your credit card every month and every year. They’re not necessarily fraudulent; they may be charges you legitimately signed up for long ago, and then never thought about again.

“You may not notice right away,” she added, “but automatic charges like these all add up, especially over time. The expenses may be fine if you truly need and can afford them, but often it’s a case of out of sight, out of mind.”

Canceling all these subscriptions one-by-one could be a bit time intensive, but it’ll definitely be worth the time and effort. As Dearing points out, there are also services like Trim and Truebill that will help you monitor your subscriptions and cancel them when you want out.

Gameify the experience.

Budgeting and paying down debt aren’t fun. But that doesn’t mean you can’t add some little celebrations to make the process more enjoyable! And rather than only celebrating big accomplishments, Lowe recommends that you add in a larger number of smaller celebrations all along the way.

“You have to have a system of rewards in place in order to help you be successful,” she said.” That means rather than focusing on a goal of paying off debt in its entirety, break down the enormous process into smaller goals. And when you hit those micro-goals, celebrate.”

“The initial goals should be minor—go a day or two without eating at a restaurant. The more success you have, the more the process becomes pleasant and even fun.”

Cut out two or three regular expenses.

Speaking of takeout, Dearing recommends that you try identifying two or three monthly expenses that you can do without … and then doing without them!

“For one person, the eliminated expense may be premium cable and a too-generous data plan,” she said. “For another, it may be online shopping and extra spending on eating out.”

“Be creative so you don’t feel deprived,” she added. “If you love to eat out, challenge yourself to make delicious meals at home six nights a week. Your one restaurant meal per week will feel more special and you’ll save a ton of money.

Budget every dollar.

Lowe recommends going above and beyond in your budgeting and creating a “zero-based” budget. Simply put, this means you budget every last penny that you bring in. That way, you’ll avoid frittering away extra cash.

“Aim to budget every single dollar— whether you’re paying off debts, handling expenses, or saving money for a specific purchase—in your checking account each month,” she said.

“If you leave any extra cash no matter how small, you’ll spend it. If you move it out as quickly as possible, you’ll have greater success.”

Prioritize your high-interest credit cards.

Once you’re rolling with your new budget and you’re building up extra funds to pay off debt, you can turn your attention to strategy; Namely, what’s the best way to pay off your debt?

While there are always going to be caveats, you can’t really go wrong by starting with your credit cards—especially the ones that carry the highest interest rates.

“Whenever possible, pay more than your monthly minimum balance, focusing first on the cards with the highest interest rates,” said Lloyd. “There are interest rate calculators available on multiple sites that help you calculate payments to keep you on track to becoming debt free.”

“Once your payments are back on track,” he continued, “resist adding to that balance going forward. Some cards also offer balance transfers at lower interest rates, but be wary of fees.”

Paying off debt through balance transfers can have its dangers beside fees—namely, all that extra space you created on your old card can be overly tempting. Plus, closing the old card might have a negative impact on your credit score. Until you build up a solid practice of financial discipline, you should probably steer clear of them.

Dearing recommends that you use as much as 50 percent of your monthly savings to pay down your credit cards. Plus, she has a tip to help you save more in interest:

“Contact your credit card company and ask if they will lower your annual percentage rate (APR) on the card. Many credit card issuers would rather lower your rate than have you transfer to another company. It’s worth asking.”

Make the most of financial windfalls.

Lastly, you should utilize any financial windfalls you have coming your way: stuff like your tax refund or a month where you get three biweekly paychecks. Whatever it is, use that money wisely—even if it’s to take care of your other financial priorities!

“Add them to your cash reserves to top off your emergency fund,” suggested Dearing. “Unexpected expenses happen all the time, but if you have the right cushion of savings, these unexpected expenses don’t have to derail you.”

Paying off debt should be a top financial priority, but you shouldn’t let it blind you to the importance of maintaining a well-stocked emergency fund. Lacking funds in a financial emergency is how you end up getting stuck with short-term bad credit loans, cash advances, and predatory no credit check loans like payday loans and title loans. If you’re trying to get out of debt, they’re the last thing you need.

To learn more about financial best practices, check out these related posts and articles from OppLoans:

What are your best tricks for trimming your budget? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Contributors

Carla Dearing is CEO of Sum180 (@mysum180), an online financial wellness service designed to be simple and affordable. She is also CEO and Managing Director of IMC, a marketing services agency. Previously, Carla held senior executive positions with at the University of Louisville, Community Foundations of America and Investors Capital Services. Earlier, she worked at Morgan Stanley and American National Bank & Trust Company. She holds an MBA from The University of Chicago Booth School of Business and a BA from the University of Michigan, Phi Beta Kappa.
Bryce Lloyd is the Phoenix Market President for FirstBank (@efirstbank). FirstBank has over $18 billion in assets and over 100 locations in Colorado, Arizona, and California. Since 2000, FirstBank has contributed over $55 million and countless hours to charitable organizations. Mr. Lloyd has been with FirstBank for the entire 29 years of his banking career. He has served on numerous non-profit boards, including the Boys and Girls Clubs of Greater Scottsdale and the Scottsdale Area Chamber of Commerce.
Cherie Lowe (@Thequeenoffree) is a personal finance blogger at Queen of Free and author of the book Slaying the Debt Dragon, her story of paying off over $127K in debt. She loves nothing more than helping people find freedom in their finances, save money, and live life to its fullest. Her and her husband Brian are finishing the final round of edits on our their book: Your Money, Your Marriage: The Secrets to Smart Finance, Spicy Romance, and their Intimate Connection due out September 2018 from Zondervan (Harper Collins Christian).

Should You Freeze Your Credit?

Freezing your credit will mean scammers can’t steal your identity and open new accounts in your name. But is it the best way to protect your money?

It’s quite cold outside. So cold, in fact, that your credit might just freeze!

Just kidding. It’ll take more than leaving your credit in the snow to freeze it. But what does freezing your credit even accomplish? And should you do it? And how would you do it?

Those are the questions we’re here to answer. So chill out, cause we’re talking credit freezes.


What does it mean to freeze your credit?

Wouldn’t it be … ice … to keep your credit score to yourself? Well, you can! At least temporarily.

“What is a credit freeze?” asked Robert Siciliano (@RobertSiciliano), Security Awareness Expert and CEO of Safr.Me, rhetorically. “It’s an action you take to lock down your credit report. A lender can’t see your score, which means your Social Security number and credit rating is useless to them. In other words, they can’t tell if you are risky or not.

“When an identity thief can access your ID (aka your Social Security number), they can also create credit in your name. However, if your credit file is frozen, the bad guys can’t access it any longer. With a credit freeze, your credit file is inaccessible.”

Should you freeze your credit?

As you might have been able to gather from context, one of the main reasons to freeze your credit is if you’re worried you’ve been the victim of identity theft.

“The very best thing you can do to protect yourself from many forms of identity theft is to put a credit freeze on your credit report at each of the three major credit reporting agencies,” recommended Steve Weisman, lawyer, author, and identity theft expert who writes at Scamicide (@Scamicide).

“Having a credit freeze on your credit reports at the three major credit reporting agencies, Equifax, Experian and TransUnion, will prevent criminals from accessing your credit reports in order to open accounts, access credit or make major purchases in your name even if the criminal has your Social Security number and other personal information.

“Particularly due to the fact that with large numbers of data breaches including the massive data breach at Equifax, your Social Security number may already be in the hands of an identity thief so freezing your credit is important.”

But surely freezing your credit must have some major disadvantages, right? Not necessarily!

“With data leaks becoming increasingly common, it makes sense to freeze your credit,” explained Austin Grandt, founder of Financial Toolbelt (@fintoolbelt). “If your social security number gets leaked, it is possible for someone to open accounts in your name if your credit isn’t frozen. Freezing your credit is a precaution that does not cost you anything and can save a lot of headaches in the future.

“If you are curious if your information has been a part of any hacks, use the tool Have I Been Pwned. This will give you some context about the extent of data leaks and help you make an informed decision if you want to freeze your credit or not.”

How do you freeze your credit?

OK, so this freezing your credit business sounds like it can be a good way to deal with identity theft. But how do you do it?

“Freezing your credit is not an inconvenience, explained Siciliano. “It only takes a couple of minutes to freeze and unfreeze your credit file. Of course, you need to unfreeze before getting approved for credit. That simply means prior to initiating an application for credit, you need to spend 5 minutes administrating the thaw.

“This boils down to a simple change in the current process which makes you more secure. Think of a freeze as putting on your seatbelt. It’s just something you have to do. To freeze your credit with Equifax, click here. To freeze your credit with Experian, click here. To freeze your credit with Transunion, click here.”

And you’re sure it won’t cost anything?

“The cost to freeze your credit was between $0 and $10 per credit bureau agency, the cost depending on the law in your state,” Justin Lavelle, Chief Communications Officer at BeenVerified (@BeenVerified), told us. “However, since September 21, 2018, there’s been no cost to place or lift a credit freeze.

“The removal of the fees doesn’t make the process easier; however, the removal of fees makes the process more attractive to consumers who were hesitant to pay a fee for placing a freeze and for each lifting of the freeze. The process has become faster since the credit freeze was first introduced several years ago. Presently, a freeze can be lifted in minutes via the internet or by phone.”

Are there alternatives to freezing your credit?

Freezing your credit isn’t the only way to counter identity theft, though each method has its own upsides and downsides.

“While various identity theft protection services are available from companies such as Lifelock and others, none of these companies protect you from identity theft,” warned Weisman. “They merely alert you to identity theft sooner than you would otherwise become aware of the problem and while that it is important, freezing your credit can actually prevent many instances of identity theft.”

You could also look at a credit lock. How does that differ from a credit freeze, you might ask?

“One difference is the simplicity,” Lavelle explained. “It’s easier to lift a credit lock than it is to lift a credit freeze. Once you freeze your credit report with the three credit report bureaus, you can only unfreeze it through the use of a PIN. Once you lock your credit report, you can unlock it at any point, instantly, via your computer or mobile.

“Another difference is the cost associated with each service. The credit freeze doesn’t cost the consumer. The credit lock service has a monthly fee, typically of $20. Finally, a credit freeze offers a legal advantage over a credit lock. State laws govern and mandate credit freezes whereas a contract between the consumer and the credit bureau mandates credit locks.”

And a credit freeze also offers protection that a fraud alert does not.

“A fraud alert only lasts for 90 days, and the bad guys can still access your credit file and apply for new credit,” warned Siciliano. “This informs a creditor that you might have had your ID stolen, but they can still, and do, issue credit. At their best, fraud alerts simply notify lenders that something might be going on with your identity. It’s really just a false sense of security.”

Hopefully, you now have a sense of what freezing your credit means and why you should do it. Now even if you’ve been exposed to a risk of identity theft, you don’t have to lose your cool. To read more about keeping your finances safe from potential scammers, check out these related posts and articles from OppLoans:

What other questions do you have about fraud protection? Let us know! You can find us on Facebook and Twitter.

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Contributors

Austin Grandt is the founder of Financial Toolbelt (@fintoolbelt), a site that helps millennials understand and improve their finances. He is also a software developer passionate about building tools that build financial literacy.
Justin Lavelle is a Scams Prevention Expert and the Chief Communications Officer of BeenVerified.com (@BeenVerified). BeenVerified is a leading source of online background checks and contact information. It helps people discover, understand and use public data in their everyday lives and can provide peace of mind by offering a fast, easy and affordable way to do background checks on potential dates. BeenVerified allows individuals to find more information about people, phone numbers, email addresses, and property records.
Robert Siciliano (@RobertSiciliano) is a #1 Best-Selling Author and CEO of Safr.Me. Safr.Me is funny but serious about teaching you and your audience fraud prevention and personal security. Robert is a United States Coast Guard Auxiliary Flotilla Staff Officer of the U.S. Department of Homeland Security whose motto is Semper Paratus (Always Ready). His programs are cutting edge, easily digestible and provide best practices to keep you, your clients and employees safe and secure. Your audience will walk away as experts in identity theft prevention, online reputation management, online privacy and data security.
Steve Weisman is a lawyer, college professor at Bentley University and author.  He is one of the country’s leading experts in identity theft.  His most recent book is “Identity Theft Alert.”  He also writes the blog Scamicide.com (@Scamicide) where he provides daily updated information about the latest scams and identity theft schemes.

Decide On Your Adventure:

Bad Credit Bayou

With interactive stories making a big comeback (Thanks Netflix!), we figured it was the perfect time to sink into the murky depths of … Bad Credit Bayou.

Your uncle always used to tell you stories about his days as a conman, swindling casino owners out of the gold in their vaults. But don’t feel too badly for them. They were the crookedest casino owners you could possibly imagine. Seriously, think of the most crooked casino owner you can, and then imagine they were ten times as crooked. That’s still not even one one-hundredth as crooked as these casino owners were.

Before he passed on, he told you he wanted to leave that gold to you. But it won’t be easy. Because he hid the gold in a cave in the middle of a swamp.

And not just any swamp. The Bad Credit Bayou.

It’s a dangerous place for a credit score. You may have been paying all of your bills on time, but just a few minutes in the Bad Credit Bayou can do more harm to your credit than a rollovered payday loan mixed with a cash advance you forgot to pay back.

And that’s before you even start to consider all the different hazards lurking below the bog’s surface. And also in the bog’s trees. There’s danger pretty much throughout the whole bog.

In this Decide On Your Adventure tale, it will be up to you to choose what happens. Will you find the gold, or will the swamp swallow your credit whole? Pay attention to your surroundings, don’t let down your guard, read up on some financial basics, and you just might survive…

Be sure to check out these other Decide On Your Adventure stories:

The Haunted Bank
Legend of the Mole-People Lenders of the Underground
The Yetis of Mortgage Peak
Help! I’m Trapped in an Accountant’s Computer
Tax Season on Mars

Come to think of it, none of those actually exist. Instead, we think you might enjoy these other posts and articles from OppLoans:

What was your favorite ending? Let us know! You can find us on Facebook and Twitter.

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The Broke Person’s Guide to Credit Cards

Stop using your credit card to rack up high-interest consumer debt and start using it to boost your credit score instead!

Credit cards are a tricky thing. On the one hand, you can use one to earn great rewards or miles, keep your credit score in shape, and even cover the rare emergency expense. On the other hand, they can also be a one-way ticket to expensive debt, a lousy score, and a financial life lived one paycheck at a time. It all depends on whether you use the card responsibly.

“A credit card can be a payment method or a debt machine!” said Financial Lifeguard and author Christine Luken (@FinLifeGrd). “I advise my clients to first ask themselves honestly if they can be trusted to use a credit card as a payment method that they pay off in full monthly. There are a few things we can proactively do to ensure that a credit card doesn’t turn into a debt machine.”

Career bank officer Laura L. Mael of Settlers Bank (@settlersbankwi) observed that “We are a society where you have to have debt to get debt (i.e. home, car, and business loans) at the same time, we don’t teach responsible use of it.”

Well, that’s exactly what we’re trying to rectify. If you’re on a tight budget and are want to start using your credit card to build your credit score instead of your debt, here are the things you should do.


Treat it like a debit card.

The easiest way to rack up burdensome debt on your credit card is to spend money that you don’t actually have. That’s why Evan Sutherland, Co-Founder of BudgetingCouple.com (@BudgetingCoupl), recommends just using your credit card like it’s a debit card.

“When you swipe your debit card, money automatically gets withdrawn from your checking account to make the payment. Let the same be true for your credit card,” he said. Every time you swipe your credit card, pay off that balance immediately.”

“This means you can only use your credit card if you’ve got the cash to back it up. Follow this one simple rule, and you save $1,000+ dollars/year in cash back opportunities, and watch your credit score climb to 800 or above.”

And even if you can’t get your score that high, avoiding high-interest debt will be reward enough.

Keep your credit limit low.

If you’re a credit card newbie or someone who’s had some previous difficulty with overspending, then don’t give yourself the room to pile on extra debt.

“Keep the credit limit low and something that could reasonably be paid off if need be,” said Mael. She went on to recommend that you base this limit on your monthly disposable income or savings balances.

And what about if you end up maxing out your card? Well, a lower limit means less debt to pay down. “If you do happen to max out a $500 or $1,000 credit limit, you could work some overtime or a side hustle to easily pay it off,” offered Luken.

Set limits for yourself.

While we don’t recommend maxing out your card every month (seriously, it will likely have a negative impact on your score), you should be able to set a monthly spending limit on the card and then hold yourself to it. If you can’t do that, you probably shouldn’t have a card at all.

“To responsibly use a credit card, you need to have some self-control and set yourself a limit for monthly spending on it,” Jacob Dayan, CEO and co-founder of Community Tax (@communitytaxllc) and Finance Pal. “Set a limit that you know you will be able to make the minimum monthly payment.

“Ideally, you should try to pay it off every month to not accrue any interest on your bill. Doing so is a sure-fire way to help you build up your credit score. Plus, having little to no debt on a credit card comes in handy in emergencies where you need to pay for something in a hurry,” he added.

Only use it for small monthly expenses.

“Using a credit card solely for small monthly expenses is the simplest way to boost your credit score,” said Roslyn Lash (@RosLash), an accredited financial counselor and the founder of Youth Smart Financial Education Services.

Additionally, only using your card for small, regularly-occurring expenses will help you keep a cap on your overall spending. It will also prevent you from using your card on shiny, new purchases that you otherwise wouldn’t be making.

“Only use the card for items you would already be purchasing (gas, food, utilities etc),” said Mael. “Don’t use it to purchase the extras that you want.”

Track your spending closely.

Many folks have experienced that awful sinking feeling when they’ve checked their credit card balance and discovered that it’s way, way higher than they thought it was. How could this be, they wonder.

Well, it’s probably because they weren’t keeping track for themselves of how much money they were spending.

As Mael put it:

“Each time you make a purchase on that credit card, write the amount out of your checkbook so when you go to pay the bill at the end of the month you have the cash to do it with (you could also deposit the money into a separate account if that’s easier to keep track of).”

And if you don’t have an actual checkbook, that’s no excuse. A notes app should work fine, or an actual note as well. You can also check out some of the personal finance apps listed in our App Directory that will help you track your spending.

Pay your bill every month.

This one’s pretty simple. You’re going to have a credit card bill due every month, which means that you have to pay your bill monthly. Not only is this one simple, it’s basically non-negotiable.

Ideally, you should be paying off the entire thing every month. But even if you aren’t, you still need to be paying at least the minimum amount due.

In order to keep yourself honest, Mael recommended that you “never add charges in a new month if you haven’t paid off the previous month’s charges.”

Never forget that one late payment recorded on your credit report could have a serious effect on your credit score.

Make it harder on yourself to even use your card.

Self-control can be difficult to master. In order to get yourself into the habit, you can go above and beyond by making your card difficult to access. Literally.

“Make it harder on yourself to even use your credit card in the first place,” said Luken. “Leave your physical card at home so you’re not tempted to spend money you don’t have while you’re shopping or out on the town. And don’t save your credit card information on websites which are a temptation to you.

“This is also a good idea anyway because it will protect you from fraud,” she added.

Set up auto-pay.

“Put your credit card on autopay, and set it to cover your full statement balance” advised Sutherland, noting that, “now you won’t even have to remember to pay off your card. Your only responsibility at this point is to always have enough money in your checking account ready cover your upcoming credit card bill. Then let autopay do the rest.”

Of course, this will have to be paired with a rigorous approach to credit card spending so that you don’t end up zeroing out your checking account and incurring bank overdraft fees. As Sutherland noted, this is a slightly more “advanced” tip. It’s one you should start trying until you’re sure you can use the card responsibly.

In order to lessen the risk of an expensive overdraft, Mael recommended that you “partner this with deducting the purchase from checking as it’s made. That way, when the payment comes out, the money has already been deducted from the checking account at the time of purchase!”

Get a secured credit card.

If you can’t get approved for a regular credit card because your score is too low, that doesn’t mean you’re out of options. In order to build your score and practice the basics of responsible credit card use, you could apply for a secured credit card!

“Consider a secured credit card that’s backed up a savings account you can’t access while the card is open,” said Luken. “If your financial situation becomes rocky, you can contact the issuing bank and have them close the card and pay it off with the money that’s secured in the savings account.”

Plans are easy. It’s sticking to them that’s hard.

As Mael noted to us, many of these steps are pretty simple. But that doesn’t mean they’re easy. “They do take a commitment and a dedication to making them work,” she said.

“The key is to have a plan and stick to that plan. Credit is sexy and easy and lets you get the ‘stuff’ that you want. It can be a real trap that once you’re in it is hard to get out.”

Racking up credit card debt and tanking your credit score could leave you hard-up during a financial emergency. That’s how people end up relying on predatory no credit check loans and short-term bad credit loans like payday loans, cash advances, and title loans. So use your cards responsibly! To read more about setting yourself up for financial success, check out these related posts and articles from OppLoans:

What other questions do you have about credit cards? Let us know! You can find us on Facebook and Twitter.

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Contributors

Jacob Dayan is the CEO and Co-Founder of Community Tax, LLC (@communitytaxllc) and Finance Pal, LLC. He began his career in Wall Street New York at Bear Stearns working in the Financial Analytics and Structured Transactions group. He continued to work in Wall Street until early 2009. When he then left New York and returned to Chicago to be with his family and pursue his lifelong dream of self-employment. There he co-founded Community Tax, LLC followed by Finance Pal in late 2018.
Roslyn Lash (@RosLash) is an Accredited Financial Counselor and the Author of The 7 Fruits of Budgeting. She specializes in financial education, adult coaching, and works virtually with adults helping them to navigate through their personal finances i.e. budgeting, debt, and credit repair. Roslyn is a real estate broker and is also the founder of Youth Smart Financial Education Services which specializes in financial literacy. Her advice has been featured in national publications such as USA Today, Forbes, TIME, Huffington Post, Los Angeles Times, and a host of other media outlets.
Christine Luken, The Financial Lifeguard (@FinLifeGrd), is a money coach, speaker, and author of two books: Money is Emotional: Prevent Your Heart From Hijacking Your Wallet and Manage Money Like a Boss: A Financial Guide for Creative Entrepreneurs.
Laura Mael has been working in the financial industry for over 30 years. Currently, she is responsible for sharing the story and expertise of Settlers Bank (@settlersbankwi) where she serves as Public Relations Officer. Also, she is an entrepreneur and owns, Career Solutions by Laura.  Active in her community she recently served as ambassador for the Women’s Entrepreneurship Day in Madison, WI. She holds her BA in Sociology from the University of Wisconsin Madison and is a certified Global Career Development Facilitator.
Evan Sutherland is a Veterinary school dropout turned entrepreneur. In late 2017, he and his wife co-founded BudgetingCouple.com (@BudgetingCoupl) to teach one simple truth: spending money correctly is the secret to building savings, becoming debt free, and enjoying money. He and his wife live in Washington State with their cat and pup.

8 Good Habits to Get Your Finances—and Your Life—on Track

The better your money habits, the better equipped you are to achieve financial success (or at least financial stability) in the long-term.

More often than not, a healthy financial outlook is all about maintaining solid financial habits. It’s the little things you do on a daily, weekly, and monthly basis that add up over time and make a difference.

If your finances are currently in shambles, the best thing you can do is start practicing some of these habits right now. And while money isn’t everything, getting yourself on solid financial footing will have benefits throughout your life. Here are eight habits you can start practicing right now …


1. Making a budget.

If you’re trying to take control of your financial future, the odds are good that you need to start spending less and saving more. But in order to do that, you first have to know how you’re actually spending money. Once you know that, you can make a plan to get your spending and saving back on track.

In other words, you need to make a budget.

“The very first thing to do when wanting to change financial habits is to start with your budget,” said Budgets Made Easy (@budgetsmadeeasy) founder and Master Financial Coach Ashley Patrick. “Make a zero-based budget and write it down. Examine where your money has been going for the past couple of months.

“This is very eye-opening and most people say they feel like they got a raise. It also will help change your thinking about your money and what potential it has.”

2. Spending less money.

Once you’ve tracked your expenses and built a budget, you’ll be able to see how you’re actually spending money.  And the next step is pretty simple: You spend less of it!

“If you’re spending more than you’re earning or saving, you might need to make some lifestyle changes,” said Josh Zimmelman, owner of Westwood Tax and Consulting (@westwoodtax). “Look at where the bulk of your money is going and figure what adjustments or eliminations can be made.”

“Can you swap movie tickets and cable for Netflix or Hulu? Or make more home cooked meals instead of going out to dinner every night? Are you wasting money on overdraft charges? Keep your checkbook balanced and set up email or text alerts.”

If your finances are out of control, the odds are good that you’re spending more than you’re making and racking up expensive credit card debt. The ultimate goal of budgeting should be to live well below your means, which means you can build up your savings. But, in the meantime, spending only as much as you’re making is a good start.

“Spending beyond your limits can put you deep in debt,” said Zimmelman. “If your income isn’t covering your costs, it’s time to cut back.”

3. Maintaining an emergency fund.

Building your first budget is a short-term project, as is finding places to trim your spending. In order to make it a long-term financial fix, you first need to sit down and think about why you’re taking control of your finances.

“The next thing to do in order to stay motivated long-term,” said Patrick “is to decide why you want or need to change. What is your big motivating factor? It has to be a big reason in order to get through the tough times.”

While you’re considering those motivating factors, think about this: Most Americans don’t even have enough money in savings to cover a $500 emergency expense! That’s how they end up turning to short-term bad credit loans like payday loans and cash advances just to make ends meet.

If you’re looking for a place to stick all that extra money you’re saving on your new, slimmed-down budget, start an emergency fund and imagine the peace of mind it will grant you!

“If you’ve been putting off building your emergency fund because it seems like too daunting of a task, then just start small,” said Zimmelman. “Start by depositing as little as a dollar a week and then gradually increase that amount as time goes by.

“Every time you use a coupon or get a discount, take the money you saved and put it directly into your account.  At the minimum, you should have liquid cash for at least six months of expenses.”

Six months worth of expenses sounds like a lot of money. And it is! But don’t let that get you discouraged. For now, start with a slightly smaller goal like $1,000 and work your way up from there!

4. Getting out of debt—and staying there.

Building up your savings is important, for sure, but it’s not a financial silver bullet. There are other important steps you need to take, including paying down your consumer debt. This can include personal loans, but for most people it means their credit cards.

“The first step is to go through all your financial documents and credit reports to fully evaluate how bad the situation is,” said Zimmelman. “Find the largest debt with the highest interest rates and concentrate on paying off that one first.”

“Contact creditors and lenders to see if you can negotiate a reduced settlement or lower your interest rates and consider transferring your credit card balance to another card with a lower rate,” he added.

Finally, Zimmelan had some tips for those whose financial situations are truly out of control: “If your debt is truly unmanageable, there’s also the option of filing for personal bankruptcy and having your debts cleared.”

“However,” he added, “paying them off is usually better for your credit score.”

5. Avoid feeling overwhelmed.

Getting out of debt is important, but don’t let that importance overwhelm you. As business coach and best-selling author Amanda Abella (@amandaabella) pointed out, doing so can lead to procrastination, which only causes further problems down the line.

“When paying off debt, you might feel it’s impossible to achieve your goal but the amount of debt you have is relative,” said Abella. “You need to rewire your brain into believing you can pay off your debt. One of the best ways to do this is to flood yourself with successful debt repayment stories.

“You may also want to find support – there are groups on Facebook and many online financial challenges that are totally free. If you feel you need more than that, consider a support group in the form of a twelve-step program.”

6. Maintaining your credit score.

Creating a budget, building an emergency fund, and paying down your debt all have an immediate impact on your finances. When it comes to your credit score, however, it might be harder to discern what effect it’s having on your day-to-day life.

Well, unless you’re trying to take out a loan or a credit card, buy a home, rent an apartment, open a bank account, apply for car insurance, or even apply for a job. In situations like those, the effects of a bad credit score could very well become apparent super fast.

In order to get control of your finances, you need to improve your credit score. It will improve your access to better financial products and lower interest rates. Here are three tips for improving your credit, courtesy of Abella:

  • “Make sure you’re paying off all credit cards at the end of every month. Don’t spend more than you can pay off.”
  • ”Use your current credit cards more responsibly or go to a prepaid. Prepaid cards carry little risk because your “credit limit” is only what you’ve funded on the card. But it works like a credit card and you pay it off each month like one. Because of the way it works, it will help your credit score.”
  • “You should also pull your credit report—you can do this for free once a year—and close old, zero-balance accounts that you’re not using. Having too many lines of credit open can hurt your credit score.”

The most important aspects of your credit score are your payment history and your amounts owed. If you can keep your total debt loads low and pay all your bills on time, you’ll be well on your way to a healthier score.

7. Cutting out impulsive purchases.

Making good financial decisions is often about doing the right thing or picking the right product. But sometimes the best financial decision is to do … nothing at all.

“A great habit to develop in 2019 is waiting on purchases,” said personal finance blogger Marc Andre of VitalDollar.com (@vital_dollar). “Get in the habit of waiting at least a day or two on any purchase that isn’t a necessity.”

“If you wait, a lot of times you’ll decide that the purchase isn’t worth the money it will cost you. And if you still think it’s a good purchase after waiting, at least you can buy it with the confidence that you won’t have buyer’s remorse.

“Waiting on purchases teaches you to value the money that you have,” he added, “and to only part with it when the purchase is justified. I use this habit myself, and it’s saved me from many purchases that I would have regretted later.”

8. Investing more for retirement.

In this post, we’ve covered habits that will help you in both the short- and the long-term. With this last piece of advice, we’re covering the really long-term.

“Rebalance your investments portfolio for 2019,” said Zimmelman.” Take a look at the mix of stocks and bonds in your portfolio and make sure they’re still working for you and your goals. You might also want to shuffle some investments around into tax-advantaged accounts.”

And, of course, if you don’t have any money currently dedicated towards your retirement, then 2019 is literally the best possible time for you to start. Why? Because the sooner you start saving for retirement, the better.

To learn more about setting yourself up for financial success, check out these related posts and articles from OppLoans:

Do you have a financial question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Contributors

Featured in Forbes, The Huffington Post, Inc, and Business Insider, Amanda Abella (@amandaabella) has created an online community where millennials can learn how to make money online and actually enjoy their financial journeys. Amanda is a certified professional coach who has undergone several trainings including the IFC accredited International Coach Academy. In 2014, Amanda launched her Amazon bestselling book, Make Money Your Honey: A Spirited Entrepreneur’s Guide to Having a Love Affair with Work & Money which has been featured in Yahoo! Finance and Seventeen Magazine.
Marc Andre is a personal finance blogger at VitalDollar.com (@vital_dollar), where he writes about saving money, managing money, and ways to make more money. His goal with Vital Dollar is to help individuals and families get the most out of the money they have and to reach their full financial potential. He lives in Pennsylvania with his wife and their two kids (a son and a daughter).
Ashley Patrick is a Master Financial Coach and founder of Budgets Made Easy (@budgetsmadeeasy). She started helping people budget and pay off debt after paying off $45,000 in just 17 months while working as a police officer. She now stays at home with her three kids and tries to stay sane in the chaos.
A forward-thinking entrepreneur and passionate family man, Josh Zimmelman graduated from Yeshiva University in 2003 with a degree in accounting. After learning the ropes and excelling at several large firms, Josh took the leap to launch his own firm in 2010. In just a few years, Westwood Tax and Consulting (@westwoodtax) has become a booming full-service accounting firm that demystifies the perplexing world of taxes for individuals and small businesses.  It is his goal to make taxes not only bearable, but even a little bit fun for his clients.  Always excited to share his tax knowledge, Josh has been quoted in the Wall Street Journal, Newsday, USA Today, The Huffington Post, and US News & World Report.

If You Have Bad Credit, Should You Consider an Installment Loan?

Unlike short-term payday loans, the right bad credit installment loan could deliver manageable payments and even boost your credit score!

Your car breaks down. Your kid ends up in the emergency room. All of a sudden you have an unexpected bill sitting on your kitchen table that you have no idea how you’re going to pay. It seems like you’re just going to have to bite the bullet and take out a high-cost payday loan.

Wait. Stop. Take that bullet out from between your teeth. Even if you have bad credit, you still have other options available to you besides a payday loan. And no we’re not talking about a predatory title loan or cash advance—the latter of which is really just a payday loan, anyway.

No, we’re talking about a product that you don’t need to pay off in single, unmanageable payment. Instead of taking out a payday loan, you should consider applying for a bad credit installment loan. While they’re not perfect, they have several advantages over their short-term cousins.


The dangers of payday loans.

There are a ton of ways in which bad credit installment loans are different from payday loans. But what it really comes down is the length of their repayment terms. All the other differences spread outward from there like branches on a tree.

Payday loans are short-term loans, with an average repayment term of only two weeks. They’re often “secured” by a post-dated check or by an agreement that the lender can debit your account once the loan is due. Repayment works like this: On the due date, the entire loan amount (usually a few hundred dollars) plus the interest charge is withdrawn from your checking account.

This might make payday loans sound like a good option. All you have to do is wait until your next paycheck and you’ll be out of debt for good. In fact, that’s how payday loans got their name!

But the reality is something quite different. With an average APR of 391 percent, payday loans are incredibly expensive compared to traditional loans. And that single payment is one that many payday loan customers—over 80 percent, actually—struggle to afford.

When a person can’t afford to pay off their payday loan, they often have to end up rolling the loan over—extending the due date in return for an additional charge—or “reborrowing” a new loan soon after the old loan is paid off.

This is how payday loan borrowers end up stuck in a cycle of debt. They are continually racking up new interest charges and making payments that never actually bring them closer to zeroing out what they owe.

The benefits of bad credit installment loans.

Bad credit installment loans work much the same way that a traditional personal loan does, just with a much higher interest rate. The loan usually has a repayment term of six to 36 months and is paid off in a series of smaller, more manageable payments—often on a monthly or bi-weekly schedule.

Whereas you can oftentimes only a borrow a few hundred dollars with a payday loan (the maximum loan caps are different depending on the laws in your state), you can generally borrow more with an installment loan. You shouldn’t borrow more than you need to, but installment loans are better if the bill you’re trying to pay off is larger than, say, $500.

While you need to make sure you find an installment lender that’s offering lower rates than a payday lender, the fact that their loans are amortizing helps to stave off the predatory debt cycle. With an amortizing loan, every payment you make goes towards both the loan principal and the interest, meaning that every payment you make brings you one step closer to getting out of debt.

The one downside to installment loans is that you can end up paying more interest than you would with a payday loan that you paid off on time. Due to their longer repayment terms, the interest adds up—despite the fact that many installment lenders are offering online loans at lower APRs than your average payday loan.

However, this downside doesn’t mean much when the average payday loan customer is taking out 10 payday loans per year and spending almost 200 days in debt annually. Even if you end up paying slightly more interest, having appropriately-sized payments that you can genuinely afford could be well worth the trade-off.

Here’s one last benefit: Some installment lenders, like OppLoans, report your payment information to the three major credit bureaus—Experian, Equifax, and TransUnion. This means that making your payments on time can help improve your credit score, possibly securing you access to better, cheaper loans in the future.

With payday loans, on the other hand, lenders do not report your payment information, meaning that your payments won’t be included in your score. In fact, the only way that a payday loan can affect your score at all is if you fail to pay one off and it gets sent to a debt collection agency—in which case your score will probably drop even further.

The best loan is … no loan at all.

Not to get all cryptic on you, but it’s true. If you’re looking for the best way to handle an unexpected expense, the best thing you can do is be prepared. Put a portion of every paycheck into savings and build a well-stocked emergency fund that you can dip into when times get tough. That way, you won’t need to take out any bad credit loans at all!

Another great way to avoid no credit check loans is to work on improving your credit score. Easier said than done, right? To learn more about the steps you can take to improve your credit score, check out these related posts and articles from OppLoans:

Do you have a financial question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

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Should You Refinance Your Installment Loan? 4 Factors to Consider

Whether or not refinancing is right for you will likely come down to your specific financial situation—but these questions can still help you sort things out!

We write a lot about borrowing here on the OppLoans Financial Sense Blog. We write about how folks with bad credit should avoid payday loans, about how people can go about borrowing money from friends and family members, and how one can responsibly maximize their credit cards rewards without racking up excess debt.

But there’s one aspect of borrowing that we don’t write about so much: refinancing. This post is an attempt to rectify that because refinancing is a really important part of borrowing! So if you have an installment loan—whether it’s a traditional unsecured personal loan, an auto loan, a bad credit loan, etc.—here are four factors you should keep in mind when considering whether or not to refinance.


1. Do you need it?

This might seem pretty basic, but it never hurts to go over the basic building blocks of responsible financial behavior.

When a person is refinancing their loan, they are usually doing one of two things: They are either borrowing more money or they are borrowing the same amount of money with new payment terms and a new interest rate. This factor generally applies to the former.

If you’re refinancing your installment loan in order to take out more money, you first need to sit down and have a very honest conversation with yourself about why you’re doing it. Is it to pay for something that’s more of a “want” purchase, or is this a very important “need” like an unexpected car repair?

If it’s for a “want” purchase, then you probably shouldn’t refinance. Instead, take a look at your budget and see where you can cut back in order to make the purchase without credit. And if you don’t have a budget, then you should definitely start one! For tips, check out our Beginner’s Guide to Budgeting.

Now, if you’re refinancing your loan in order to pay for a “need,” then you’re on much more solid ground. Still, it wouldn’t hurt to take a look at your finances and see if you can cover that bill without borrowing. Refinancing means more payments (which can have their benefits) and more interest (which doesn’t). Make sure it’s your best financial option before committing.

2. The size of your payments.

Now, if you are refinancing for the same loan amount, just at a longer term and/or with a better interest, you should take a look at what your new payments are going to look like.

Here’s the good news: They’re probably going to be smaller! The same amount of money stretched over a longer period of time will mean less money put towards each individual payment. That’s great!

Take this exercise a step further: What are you going to be doing with the extra room that you’re creating in your monthly budget? Is this money that you’re going to just be spending? Because that’s probably not the best use for it!

Look at what you can do with those extra funds. Consider using them to build an emergency fund or to bolster the emergency fund that you already have. You could also have them automatically deposited in a retirement account, where they will grow and earn interest.

And remember: Smaller payments are great, but more payments overall still mean paying extra money towards interest. Is that extra room in your budget worth those additional costs? Calculate the total amount you’ll be paying in interest to help you weigh the overall effect that refinancing would have on your financial wellbeing.

3. Interest rates.

The one thing you should never be doing is refinancing a loan at a higher interest rate than what you were paying previously. That just doesn’t make any sense. If you find yourself needing to refinance at a higher rate, it’s probably because you made a big financial misstep elsewhere that you are now scrambling to correct.

Now, if you are refinancing at a lower rate, congratulations! You’re clearly doing something right. Still, just because you’re being offered a lower rate doesn’t mean you should take it. Similar to what we discussed in the previous section, that longer payment term likely means paying more in interest charges overall—even if you’re getting a lower rate!

Our advice here is the same as it was up above: Do the math and weigh the benefits. If you end up paying less money in interest overall, that’s one thing. But paying interest for a longer period of time means that you need to weigh the benefits of those lower rates and smaller individual payments. Still, the more productive you can be with that extra money you’re saving, the better.

4. Your credit score.

This factor mostly applies if you have a bad credit installment loan. Unlike many bad credit lenders—the kind who are hocking short-term no credit check loans like payday loans, title loans, and cash advances—some installment lenders like OppLoans report their customers’ payments to the three major credit bureaus: TransUnion, Experian, and Equifax.

If your lender reports to the credit bureaus, then every payment that you make on your installment loan gets recorded on your credit report. That’s important, because your payment history is actually the single largest factor in determining your FICO score, making up 35 percent of the total. This means that any on-time payments you make on your bad credit installment loan are actually helping your score!

Now, this isn’t really a good enough reason on its own to refinance your loan. However, it’s not for nothing if each additional payment you make translates to another positive mark on your credit report. If your score improves enough, you could even graduate to more affordable loans and credit cards in the future! At the very least, it’s something to seriously consider.

In the end, whether or not you should refinance your installment loan is going to come down to your individual financial situation. The best you can do is take all these factors into account, triple-check all your math, and make the most informed decision possible.

Want to steer clear of bad credit loans? Well, you’re going to need good credit! To learn more about how you can fix your credit score, check out these related posts and articles from OppLoans:

Do you have a personal finance question you’d like us to answer? Let us know! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN