Start Your New Year Out Right: Get a Credit Check!
Checking your credit report with TransUnion, Experian, or Equifax is not only free, it’s an important first step to getting your finances in order.
Hey you! What’s your credit score?
It’s a new year full of new financial possibilities. So if you don’t know the answer to that question, it’s probably time for you to figure out where you stand financially. How? There a couple ways to do this. Take a look at your credit report, which lists all your inquires, available credit and past due accounts, or take a peek at your credit score, which is essentially that report in number form.
Building good credit is one of the best ways to prepare yourself for a successful future, but sadly, many people actively avoid checking their credit scores because they’re worried about what they’ll find. According to a recent survey, 37 percent of Americans haven’t checked their credit in at least a year, and 16 percent of Americans admit to never having checked their credit—ever!
Credit checks should be common.
While ignorance may feel like bliss for Americans who live without knowing their credit score, the truth is that these people are putting their financial futures at risk. Whether or not you know your score, you use it all the time. When you apply for an apartment, a job, a credit card, or a mortgage, your credit score is used to determine whether or not your application will be accepted or how high your interest rates will be.
Additionally, the FTC recently found that one in five credit reports include an error that can significantly decrease your score. If you’re not regularly checking your official credit reports, you have no way of knowing whether your score is even accurate!
“You need to make sure the accounts and any other information listed on your credit report as your own is correct,” said Lucy Lazarony (@lucy_lazarony), a personal finance author and former Bankrate staff writer. “Having an unpaid account on your credit report that’s not yours can hurt your credit!”
“It’s also a good idea to check your credit often to protect yourself against identity theft, which happens when a thief steals your personal information and opens up credit accounts in your name. You’re not responsible for a thief’s bills but you will need to take steps to clear your credit report of a thief’s handiwork.”
It’s free and it’s easy.
That’s the good news. And the bad news is … well … there really isn’t any bad news. It’s easy and it’s free. Good news all the way down, baby!
The government-sanctioned site AnnualCreditReport.com offers free annual copies of your credit report from all three major credit bureaus: TransUnion, Equifax, and Experian. You can get them all at once if you want, or spread them out every four months to get a thrice yearly update. However, your report will not give you your credit score.
To find out your score, you can sign up for a free credit monitoring service with a bank-backed site like Chase’s Credit Journey, or even one of the credit bureau services, like Experian’s CreditWorks, if you want to track your score day-to-day. you might even get a free credit score through your online checking account!
“Monthly monitoring is a good way to stay on track if you are working on building up a credit score,” said Lazarony. “If you’re not in the market for new credit, checking your credit report two or three times a year is a good strategy.”
If you have bad credit or poor credit, life can be tough. If you can get a loan at all, your interest rates are gonna be much higher. And you may be unable to access the kinds of financial lifelines—like credit cards and emergency loans—that someone with better credit has at their fingertips. The good news? While it’s certainly not easy to build your credit, it’s more than possible.
Raise that score!
First, scour your credit report for errors or accounts that don’t belong to you. If you find something, report that to the credit bureaus. Getting fraudulent or mistaken information off your credit report can help raise your score significantly.
Second, take care to put all utility bills and recurring monthly payments on auto-pay, so you won’t accidentally miss a payment and ding your credit score in the process.
Third, if you don’t already have a credit card, look into to getting one with no annual fee, and paying it off in full every month. This will help build credit quickly, so long as you don’t abuse it and rack up debt. Try using it only for a few recurring monthly payment. If you can’t get one with cash back rewards try starting out with a secured credit card.
Lazarony says when shopping for a secured credit card, you should look for one that doesn’t nickel and dime you.
“You want an affordable interest rate and a low annual fee,” she said. “Before you apply, ask yourself: is the card from a major issuer? The aim is to graduate to an unsecured card as soon as you can and a big issuer will have a variety of low-cost card options. Avoid applying for secured cards with monthly or application fees. You don’t need to pay that much to establish credit!”
You can also take out a credit-building loan or try to become an authorized user on the credit card account of someone with good credit.
For even more help with credit building, check out these related pages and articles from OppLoans:
Lucy Lazarony (@lucy_lazarony) is an experienced personal finance journalist. She was lucky enough to begin her online writing career as a staff writer for Bankrate.com in 1998.
A freelance writer since 2004, Lucy writes on a variety of personal finance topics for websites such as Credit.com, CardRatings.com, MoneyRates.com and The National Endowment for Financial Education.
She writes accessible and easy-to-understand articles on credit, debt, budgeting, credit cards, prepaid debit cards, retirement, insurance and savings.
Her personal finance writing has appeared on MSN, Fox Business and Forbes.com.
Know Your Car Repossession Rights
Worried you’re getting behind on your car payments? Learn more about your repossession rights today before it’s too late.
Getting behind on your car loan is bad for both your credit score and for the car itself. Since the vehicle is serving as collateral, falling behind on your payments means that the car can get repossessed. While defaulting on a personal loan or even certain kinds of bad credit loans will hurt your credit score, defaulting on a car loan will hurt your everyday life.
And while we have quite a few articles explaining how you can improve your credit score, we haven’t spent as much time telling you how you should handle the threat of repossession. Until now.
Repossession occurs when you can’t pay back a loan that you used collateral to acquire. Technically, the term can refer to any kind of loan, but it is almost always used to refer to auto loans. That’s why you need to know your rights and the steps you can take when facing repossession.
Look back at that contract.
Before you take action, it’s important to make sure you know exactly what you’re up against. That’s why you need to go back to where this all began: the contract. At least, that’s what Justin Lovely (@myrtleinjurylaw), an attorney in Myrtle Beach, told us. His experience comes from representing creditors in repossession cases, but he gave us his perspective on what someone facing repossession from the other side should do.
“First, a consumer needs to look to his contract and read what they signed,” Lovely explained. It may seem obvious, but it’ll allow you to see what options you have. Although it may be too late now, it’s also important to make sure that any updates you might make to the contract are put down in writing.
As the Federal Trade Commission’s website states: “if your creditor agrees to change your payment date, the terms of your original contract may not apply any longer. If your creditor agrees to such a change, make sure you have it in writing. Oral agreements are difficult to prove.”
So make sure you have everything down in writing, and check that writing when the specter of repossession comes up.
Let’s make a deal.
Even if there isn’t anything in the contract you signed that seems like it can help you, that doesn’t mean all hope is lost. You can still work something out with the lender, and odds are they would prefer that route.
“In my jurisdiction, the debtor gets a right to cure [pay the debt before the default occurs],” said Lovely. “When clients send me a repossession file, we send a right to cure notice to the consumer/debtor. Consumers need to understand that companies don’t want to repossess the item in question, they always prefer to work out a payment arrangement. Often the arrangement may be better than the current situation he or she is in now.”
The FTC also suggests trying to work out a deal before your car (or house or other collateral) is seized: “It’s easier to try to prevent a vehicle repossession from taking place than to dispute it after the fact. Contact your creditor as soon as you realize you will be late with a payment. Many creditors work with consumers they believe will be able to pay soon, even if slightly late. You may be able to negotiate a delay in your payment or a revised schedule of payments. If you can reach an agreement to change your original contract, get it in writing to avoid questions later.”
If you’re not in a state with a right to cure, however, the FTC warns that your lender may not be willing to compromise: “However, your creditor or lessor may refuse to accept late payments or make other changes in your contract — and may demand that you return the car. If you agree to a ‘voluntary repossession,’ you may reduce your creditor’s expenses, which you would be responsible for paying. But even if you return the car voluntarily, you still are responsible for paying any deficiency on your contract, and your creditor still may enter the late payments or repossession on your credit report.”
You’ll have to deal with it.
As great as it would be to just ignore the looming threat of repossession, that’s a very bad idea. You can close your eyes and hope it all goes away, but realistically, the only thing that’ll be going away is whatever is being repossessed.
“Debtors stay silent and don’t call and just let the court date come without showing up,” Lovely warned. “Then it is out of our hands and the Sheriff picks up the collateral. If you are facing difficult financial times and miss payments resulting in a default in your contract, the best thing to do is simply be honest and try to negotiate before the file gets to a lawyer like myself.”
But don’t forget your rights.
Though it will likely benefit you to go out of your way to try and make a deal with your lender, it’s important that you remember your rights so you aren’t taken advantage of. Those rights will vary by state, so you’ll need to look up your specific situation, but here are a few possibilities the FTC outlines:
“Should there be a breach of the peace in seizing your car, your creditor may be required to pay a penalty or to compensate you if any harm is done to you or your property. A breach of peace also may give you a legal defense if your creditor sues you to collect a ‘deficiency judgment’ — that is, the difference between what you owe on the contract (plus repossession and sale expenses) and what your creditor gets from the resale of your vehicle.
“Once your vehicle has been repossessed, your creditor may decide to either keep it as compensation for your debt or resell it in a public or private sale. In some states, your creditor must let you know what will happen to the car. For example, if the car will be sold at public auction, state law may require that the creditor tell you the time and place of the sale so that you can attend and participate in the bidding. If the vehicle will be sold privately, you may have a right to know the date of the sale.
“Some states have consumer protection laws that allow you to ‘reinstate’ your loan. This means you can reclaim your car by paying the amount you are behind on your loan, together with your creditor’s repossession expenses. Of course, if you reclaim your car, your future payments must be made on time, and you must meet the terms of your reinstated contract to avoid another repossession.
Any resale of a repossessed vehicle must be conducted in a ‘commercially reasonable manner.’ Your creditor doesn’t have to get the highest possible price for the vehicle — or even a good price. But a resale price that is below fair market value may indicate that the sale was not commercially reasonable. ‘Commercially reasonable’ may depend on the standard sales practices in your area. A creditor’s failure to resell your car in a commercially reasonable manner may give you a claim against that creditor for damages or a defense against a deficiency judgment.
“Regardless of the method used to dispose of a repossessed car, a creditor may not keep or sell any personal property found inside. In some states, your creditor must tell you what personal items were found in your car and how you can retrieve them. Your creditor also may be required to use reasonable care to prevent anyone else from removing your property from the car. If your creditor can’t account for articles left in your vehicle, you may want to speak to an attorney about your right to compensation.”
In the end…
Facing repossession is never going to be fun. It’s the kind of situation that can lead to folks taking out predatory no credit check loans and cash advances to keep from falling behind on their bills, only to find themselves trapped in a different kind of debt trap.
While we can’t promise some kind of magic cure-all for having your car repossessed, we can tell you this: If you face repossession head-on, remember your rights, and deal with the issue as soon as possible, you can make it as painless as possible. And if your lender doesn’t follow the rules, you might even stand a chance at getting your car back.
Have you ever successfully challenged the repossession of your vehicle? We want to hear about it! You can email us or you can find us on Facebook and Twitter.
Mr. Justin Lovely (@myrtleinjurylaw) is admitted to practice in all South Carolina Courts and the U.S. District Court for the District of South Carolina. Mr. Lovely is a Certified Guardian ad Litem in South Carolina for Family Law Cases. Mr. Lovely is also a member of the South Carolina Association for Justice, the State’s Trial Lawyers Association. More bio information can be found on his firm’s website.
Understanding Debt Relief: An Interview With Michael Bovee of The Consumer Recovery Network
There are a thousand reasons that a person can end up drowning in debt. But whether it’s hefty medical bills, irresponsible credit card use, or predatory bad credit loans, it’s true that your options for getting out of debt are far more limited than your options for getting into it.
We’d like to pretend that simply tightening your belt and working a side gig to pay off those personal loans and credit cards would be enough to get you out of debt, but that simply isn’t true for everyone. Some folks might be better off choosing a debt relief program with an experienced professional.
To get some additional insights into debt relief and how it works, we sat down with Michael Bovee (@debtbytes), debt coach founder of the Consumer Recovery Network, a site that provides educational tools and assistance to people looking for debt relief options. He gave us his thoughts on the process of settling and consolidating consumer debts as well as the state of the debt relief industry in general. Enjoy!
OppLoans: Can you tell us a little bit about yourself and your background? How did you get into the business of debt relief?
Bovee: I fell into this industry by accident and became entrenched in it. I’m a debt geek, I’m fascinated by debt, and I would be doing this no matter what, even if it was just in my spare time like I did back in the day with forums and things like that. Ultimately, I got angry. A friend of mine was contacted by a debt collector back in the early ‘90s, and they cussed him out, did things they weren’t supposed to be able to do. I went to the law library on campus and found out the things they were doing to him were actually illegal. They can’t say those things!
Long story short, I helped him resolve that debt. We tried to find attorneys to help us at the time, but back then, in ‘94… there was really no consumer law body that did this kind of work. So we resolved it on our own and actually negotiated a settlement. We used some of their bad behavior to get a really good deal.
That happened in 1994. I started full-time in the industry in 1998, and I started CRN in 2004. We have a focus on education mainly. That’s our mission statement: educate and inform. Mostly as it related to triage. We’re not focused on methods like the debt snowball or whatever, we focus more on anybody that’s dealing with a triage situation. That is mostly something we achieve through publishing guides through our website and in video form through YouTube.
We do work with consumers. We are a network, so we network with attorneys, we network with credit counseling agencies, bankruptcy attorneys. Basically, we’re always trying to help people find and/or get direct assistance when they can’t go through the process on their own.
I’m an outspoken critic of my industry, because it deserves it. I’m an expert witness in court matters about the industry, and I work hard to change laws dealing with debt consolidation and debt fairness. I’m pretty heavily engaged in the industry at large.
Can you talk about the difference between debts and expenses?
A debt is something that, in today’s society, you’re paying on. You received something on forward demand, you wanted to buy something that you didn’t have the money for, and you took a loan out for all intents and purposes. That’s what a credit card is – a revolving or fixed loan. Or a mortgage, or a car payment. It’s forward demand. You didn’t have enough or chose not to pay for something in cash. Expenses are things that you do to get by each day.
How much debt are the people who use your services typically in?
Right now, on average, the people who we contact and do a full consultation with have about 22 grand in revolving credit card debt or online loans. That doesn’t speak to student loans, it doesn’t include mortgages or auto loans. That’s kind of the average, it’s down from what it was, say, 10 years ago, although I do see it creeping back up. We do run data and we see a little year over year creep in the last few years. Not by much, it’s been going down and down over the past decade and now it’s starting to go up a little bit.
Why do you think it’s going up? Does it have anything to do with the shrinking regulations that the lending industry is being subjected to?
No, that would only be consistent with the last year. The new administration has much less aggressive regulatory standards, but I think it’s more or less a symptom of people not having enough, and going through financial setbacks. I also think it has to do with the increasing cost of medical care. But what I’m talking about are people who are going through triage. That’s traditionally maybe 30 percent of the population.
What is your process like working with clients? When someone reaches out to you, what are the steps you take to help them?
It’s all math. Everything I’ve done all these years has been very math-centric. I do want to talk to them about their specific goals, both near and midterm. I’d define that as anything between now and three years from now, what financing and other kinds of goals do you have to both improve your life or the life of a loved one? This includes student loans!
It’s math-centric because usually people call us when something’s not going well for them financially. They’re usually limited to three mainstream options that are designed to help them manage the situation because they’re past the point of consolidating or getting lower interest rates through a loan, they’ve already tried that.
So we focus on consolidating through the nonprofits. There are about 100 nonprofits in the nation that do this. They don’t require a credit score, it’s not a loan, they have pre-arranged interest rate concessions from credit card banks, not online lenders.
They go in and have these five year plans (they’re not allowed to last longer than 60 months, the Fed won’t allow it), and they amortized their payments over some reduced interest rate and their monthly payment will be somewhere between 1.7 and 2.5 percent of their combined balances for up to 60 months. They have to have a dependable source of income that says this is the track you can be on and succeed on. That’s the first line of arithmetic.
We just calculate 2.1 percent of their balance and see if that’s an affordable payment for them. If they can, I’ll have them talk to one of those hundred agencies. They all do the same thing so it doesn’t matter who you go to, they’re all gonna give you the same quote for a monthly payment. If that’s a go, I usually stop there. I don’t want to talk about other options until they’ve either been informed about the nonprofit option, and if they can do that, we usually won’t hear from them again. If they can’t, then we’re on the phone again.
If someone tells me they can’t go that route and tell them that, well, now we’re looking at bankruptcy or settling your debts for less than what you owe. I want to go through the bankruptcy process to see whether they meet the median income to qualify for Chapter 7 in their state. This is a set number that varies from state to state and depends on the number of people in your household. But I’ll walk clients through that process.
Some states take home equity into account, and some don’t. So you have to look at that before you move into that option. Maybe they would qualify if they sold their home, is that worth it to them? If you can’t qualify for the means test, or just absolutely refuse to do Chapter 7 for some other reason, then we can move onto other options. The things is, if you can qualify for Chapter 7, it’s absolutely the smart choice. But some people just won’t do it. In that case, I talk to them about their specific creditors and what it would take to settle their debt.
This is what you’re up against. One creditor might settle for one amount, another for more or less. I go down the list of forward-looking estimates. I ask them how long it would take them to get that amount of money. Contrary to the way the rest of my industry like to pigeonhole people into things, selling them on three, four, even five-year plans, which are often disasters, I usually make sure that these payment plans don’t take longer than two years because you can be sued, and many creditors do sue!
At the end of the day, I try to push people towards Chapter 7 as hard as I can. I tell them that bankruptcy doesn’t affect them for as long as they think it will. Sure it will be on their credit report for a while but you can still get a mortgage in three years, for two years SHA. You can get a car loan for five or six percent the year after your bankruptcy and you’ll have credit card offers flooding into your mailbox just a month after your bankruptcy!
When they weigh the costs of bankruptcy as being less than $2,000, and the cost of settling their debts might be 40 percent of their total debt, or around $18,000, it just makes sense to do it and be done with it! Mathematically, which would you prefer?
Bankruptcy doesn’t kill your goals or dreams, it just puts them on pause for a relatively short time, all things considered.
You were talking about creditors who will settle for less than what someone owes. Does every creditor do this?
Every one of them. There’s honestly not a single creditor out there that doesn’t settle to some degree. I would tell you that small local credit unions have a tendency to not settle very well. They do draw the line and sometimes just refuse to settle at all. At some point later on they might take 10, 20 percent off. That’s not great, and sometimes I’ll tell people to avoid trying to settle with smaller credit unions at all. But larger USAA, NavyFed, etc, they all settle. All the major banks, they settle.
What’s the lowest amount you’ve seen a creditor settle for?
This doesn’t apply anymore but during the height of the recession, in 2008-2009 when credit card defaults were at an all-time high (300% higher than average), we were seeing some of the larger credit card issuers regularly take $0.10 on the dollar. That doesn’t happen anymore for the most part. Those same creditors are now back to the standard of 35-40 percent. There are times when you can do a little better than that, but in general, that’s what you’re going to see.
If you wanted to negotiate a debt settlement on your own, what would be the process there?
That’s the question with the longest answer. I’ve got a 10-part article series on our website. If you’re a DIY person, there is a process, but it would take me hours to explain it to you right now. We have a video series and an article series that will take somebody from zero to hero if they read it. We try to help where we can. We respond to everyone’s comments on the website, on YouTube, virtually every day.
We want to help people navigate that process if they want to do it on their own. Of course, we offer that as a service as well, and we charge less than anybody else in the nation. We only get paid after we put a deal together that people like. They pay the creditor first, we get paid last, and we get 15 percent.
There’s a lot of scams out there that claims to help people consolidate debt. How can you tell a real organization from a scammer?
There are 100 of these agencies, they’re all nonprofits and they’re all heavily regulated. You can call your state finance commission, see if they’re on the DOJ approved vendor list for bankruptcy certification. In 2005, there were some changes to the bankruptcy code, and it created a requirement for anyone filing Chapter 7 to get a certificate of completion for pre and post-bankruptcy counseling. Virtually all of those agencies offer that service, they have ever since the law changes, so if they’re not on that DOJ-approved list, it doesn’t necessarily mean it’s a scam, but that’s a good way to vet potential companies.
This is all codified into the CARD Act. Banks used to be able to jack up your interest rate because they stubbed their toe, they didn’t need a reason. But because of the CARD Act they have to wait for two months of consecutive nonpayment before they can up your interest rate. On every one of their monthly statements they send out, they also have to have a toll-free number that connects to one of these agencies. If you’re ever questioning whether or not you’re reaching one that’s legit, just open up your most recent credit card billing statement and call the toll-free number on there. That will connect you to one of these agencies.
What is the process of bankruptcy like?
I let people know that Chapter 7 is the heavyweight champion of all things debt relief. Nothing can compete with it. The national average cost of Chapter 7 bankruptcy is $1,800. It’s over in 90 days, you have absolute protection from creditors and you can move on very quickly, but you have to qualify. I go over that means test and look at assets that would otherwise be used to pay off creditors if you didn’t do Chapter 7.
I tell them Chapter 13 should be last resort option to avoid. About 70 percent who have ever filed for Chapter 13 in this country have not completed it. The overarching reason as to why is the inflexible nature of the plan. It’s a forced repayment play overseen by a trustee, and you pay a set amount of money to the trustee every month. You have to give them that money, you have no wiggle room. The trustee tells you what you’re allowed to spend on groceries every month I mean it’s that real. If you have a life event, and it could be a flat tire, a hot water tank blowing, an unexpected medical expense, you’re out. You get kicked out of the plan and you’re back to where you started.
I try to help people understand the difference between Chapter 7 and 13, and see if they can qualify for 7, but I don’t go into any kind of lengthy explanation beyond that. Everything is so state-specific when it comes to bankruptcy, I refer them out to connect with NACBA, the largest association of consumer bankruptcy attorneys in the country. They have a great feature on their website where you can search for an attorney by zip code and about 80 percent of their lawyers don’t charge for an initial consult. If you’re considering this you need to talk to someone in your state, we can only scratch the surface in terms of the information we can give you for your specific situation.
For more information on debt relief, debt consolidation, and bankruptcy, check out these related posts from OppLoans:
Michael Bovee (@debtbytes) is the founder of the Consumer Recovery Network. he has been involved in the credit and debt industry for over 20 years and has participated as an expert panelist in federal consumer protection rulemaking, collaborated on state law changes governing debt consolidation, has worked as an expert witness in court matters related to the debt relief industry, and is a regular contributor to several personal finance websites.
The Holiday Borrowing Risk List
Ch. 3.1. Credit Cards
Most Americans have at least one credit card in their wallet, so using one to fund holiday spending might seem like the easiest option. But you need to be careful with credit card spending: interest can build up quickly. There’s a reason why, as of May 2016, Americans had built up $953.3 billion in outstanding revolving debt – the vast majority of that debt comes from credit cards. While interest rates can vary depending on your credit score, the average rate is currently at 15.97 percent, not exactly a small amount.9
If you decide to use a credit card for holiday shopping, remember that not all cards are created equal.
For example, some general use credit cards (the kind you can use anywhere) have an interest-free grace period on purchases, meaning they won’t charge you interest so long as you pay off your statement balance in full every month. This is good for the responsible shopper who always takes care never to carry a balance on their credit cards, but not everyone is capable of paying off their bill in full every month, especially during the big-spending months leading up to the holidays.
Cards with interest-free grace periods are different than cards that offer deferred or no interest introductory periods, which are often widely promoted during the holiday season.
Deferred-interest cards won’t charge any interest on your balance during the promotional period – usually six months to a year. The catch is that, in order to pay no interest on any purchases you make during that time, you’ll need to pay off your entire balance before the promotional period is up. If it ends and you’re still carrying a large balance, all of the interest you racked up during that time will be applied in full. According to the Consumer Financial Protection Bureau (CFPB), interest on these kinds of cards is typically calculated based on the balance you owe each month. If your promotional period is a year and you don’t pay it off in that time, or if you are more than 60 days late in making a minimum payment, “you will be charged interest for each month on the balance you owed in each of the 12 months,” which kind of defeats the purpose of getting a card like this in the first place. Unless you’re sure you’ll be able to pay off your balance in full by the end of the promotional period, you should stay away from cards like this for holiday shopping.
No-interest credit cards, by contrast, offer an introductory period that is truly interest-free. No interest is charged, nor does it accumulate during the promotional period, so long as you’re making your minimum payments on time every month. However, if you make a late payment, your introductory period will be abruptly canceled, and when the promotional period is up, some of these cards may start charging interest as high as 25 percent.10 These kinds of promotions are definitely better than deferred-interest promotions, but if you use one for holiday shopping, you need to be careful that you’re making your payments on time, and you should try as hard as you can to pay off your card in full before the interest-free period is over.
During the holidays, you’ll notice an influx of marketing for store credit cards, some of which are closed-loop credit cards that can only be used at one specific retailer, and some of which are general-use cards that can be used anywhere that accepts credit. The holiday season is typically rife with deals surrounding these kinds of credit cards. Some stores will take a set percentage off any purchase made with their card, some will offer no interest until the new year, and some will throw in freebies like cash back or even free merchandise for signing up. But you should be very careful with store credit cards: even applying for one can negatively affect your credit score, and many only have one interest rate option, not a variable rate that’s lower for people with better credit.11
The other major downside to retailer credit cards? When you use a store credit card, your lender is actually a bank, not the store, which means falling behind on your payments can have a very real and very negative impact on your long-term finances.
Bruce McClary, Vice President of Public Relations and Communications for the National Foundation for Credit Counseling, said he has a relative whose excellent credit score was damaged by one of these cards.
“I think people should be careful when considering in-store financing or credit cards that come with introductory discounted interest rates,” McClary said. “These are very attractive to a lot of shoppers during holiday season… the caution flag is associated with how people approach repaying the balance once it’s time to move past the holidays and start clearing that debt.”
McClary says that if you do take advantage of an in-store offer, it pays to remember that the person at the register isn’t a financial advisor and won’t know whether or not that offer is actually a good one. If the promotional rate expires in a year, make a plan to pay it off in six months. If the promo is six months, pay it off in three, and so on.
If you want to use a credit card as a way to build credit, look for one that has cash-back deals and can earn you money or points on purchases you make. Some cards even partner with different retailers in order to offer higher cash-back percentages during the holidays, or sweet travel deals that can cut the cost of getting home for the holidays down to zero.12
As with any bad relationship, there will be tons of warning signs if you and your bank are a couple that’s beyond repair.
When you first met your bank, it was a romance like no other. You would spend days together at a time, eating at restaurants, going on weekend trips, or even just staying in, ordering stuff off of Amazon.
But now things have cooled a bit. They don’t seem to be offering you the same rewards they used to. Their customer service representatives used to talk on the phone with you for hours, but now they seem to be rushing you to wrap it up. They also used to keep their ATM kiosk sparkling clean if they thought there was even a chance you’d be coming over, but now it seems to be constantly covered in mustard.
(Specifically mustard. No other condiment. Just mustard.)
Is it time for you to break up with your bank? It just might be. But don’t worry, honey, because Auntie OppLoans Financial Sense Blog is here to help you make that decision.
The fee’s knees.
You’ll probably never find a bank with no fees at all. That’s just hoping for too much.
But if it seems like your bank is offering more fees than usual, it can be worth looking around and seeing what other banks are offering. Overdraft fees may be standard—and they may be preferable fees for bad credit loans—but it’s not wrong to take a look at banks that offer some form of overdraft protection. You deserve to be with a bank that tries to minimize the fees you pay, rather than squeeze you for every cent you’re worth.
After all, squeezing should be something you do to your loved one’s hand as you both watch a sunset together, not a way for bank executives to get rich at your expense.
Oh and make sure you’re paying attention to their interest rates too, especially the rates on their personal loans. If you’re not getting rewarded for being a loyal customer, then it might be time to teach them a lesson by walking out the door. That’ll show them to take you for granted!
You’ve grown distant.
People change. Maybe your bank worked for you when you were younger, but your life may have changed. You could have moved to a place that doesn’t have as many locations for your bank if it has any at all.
Maybe you were still a student when you started this account and now they’re trying to stick you with an “old person” penalty. Or you could have lost a job or gotten a new one and the specific rules and incentives this bank offer simply don’t mesh well with your new financial reality.
People and banks grow apart sometimes. It might not be anyone’s fault, but it could mean it’s time for a split.
It might just be time for a change.
There might not be any specific thing or things wrong, but it’s worth taking a look at your relationship with your bank every so often.
“I think it is good to stop and review every 6 months or every year and look at the interest rates you are receiving and the perks,” advises nationally recognized credit expert Jeanne Kelly (@creditscoop). “Sometimes you can go years as a loyal customer and that is great, but still when you sit down and take the time to review what other banks might offer for rewards, they might fit your lifestyle better for today.”
Getting back on the scene.
So you decided you might want to break up with your bank. But it’s been so long since you’ve been out there! How do people even find new banks these days? Is there some sort of app where banks post pictures and information about themselves and you can swipe left or right accordingly? How about a variation on that app where only potential customers are allowed to send the first message so you don’t get inundated with messages from banks?
Not really! But the internet is still a great resource for finding which new bank is best for your needs. Many banks also offer special rewards for starting a new account, possibly even straight up cash. But make sure you’re looking at all the terms you have to sign on to. Don’t let flashy rewards right now trap you into whole new bad bank relationship.
And speaking of the internet, different banks will offer different services in their apps and online. Take a look at each of those and consider them as one part of your decision.
Also, make totally sure that your bank is insured by the Federal Deposit Insurance Corporation (FDIC)! That’s how you can make certain that the funds you deposit are safe. Never, ever open an account with an uninsured bank, or you could risk losing everything in your account. If you aren’t sure if the bank is FDIC insured, you can check on the FDIC site.
Staying single isn’t recommended.
When it comes to banking, being single isn’t so great.
There are actually tons of folks out there who can’t even get a bank account. According to a 2015 survey by the FDIC, as many as nine million U.S. households are entirely frozen out from banking. These folks are known as “the unbanked.” They have to rely on check cashing services that charge hefty fees just so people can access the money in their paychecks.’
(If you’re worried that a bad credit score could prevent you from opening a bank account, then you’ve come to the right place. We have a blog post for that.)
Without a bank account, you could find yourself falling prey to predatory payday loans or title loans. These are a kind of no credit check loan, and they come with incredibly high interest rates and can trap borrowers into a cycle of debt.
Unless you like the feeling sleeping on top of money stuffed into your mattress, you should always maintain a bank account. We really can’t recommend the alternative.
At the end of the day, you have to do what’s best for you. As much as you want to avoid any awkward conversations or hurt feelings—if you let a bad relationship with your bank fester, you’ll both just end up miserable.
Are you thinking of breaking up with your bank? We want to hear from you! You can email us or you can find us on Facebook and Twitter.
Jeanne Kelly (@CreditScoop) After being turned down for a mortgage 15 years ago, Jeanne Kelly realized she needed to get her credit in order. Not only was she able to fix her bad credit, but she took the skills and knowledge she gained and decided to share it with the world. Now she’s a nationally regarded credit coach and expert, with multiple books and television appearances. Follow her on Twitter and check out JeaneKelly.net to get the credit help you need!
Bad Credit Boot Camp
An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.
Set up autopay on all your accounts
When you set up autopay for your credit card, utility or loan payments, a monthly charge is automatically deducted from your bank account. Autopay is useful if you’re not great at remembering to pay 15 different bills every single month, and find yourself missing payments or racking up late fees on a regular basis.
“Generally speaking, most people end up with bad credit because they’ve failed to pay their bills on time. That could mean anything from being late on their credit card bills to skipping a mortgage payment,” said Holly Johnson, a financial expert and author.
Unlike credit card payments, utilities, rent, and loan payments tend to be a set amount every month, so you’ll always know what to expect. When it comes to comes to credit cards, you should always try and pay off your full balance every month to avoid interest fees. Sometimes that’s not possible, though, and if you make a major purchase that you can’t pay off all at once, setting up autopay to cover your full credit card balance can mean over drafting on your checking account.
Instead, set up autopay for your minimum monthly payment. Different cards use different formulas to calculate minimum payments – some require you to pay based on a percentage of what you owe, while others calculate fees and interest into your minimum payment.24 Either way, your minimum monthly payment is likely going to be a lot less than the full balance of your credit card, and meeting it every month will keep you in good financial standing with your credit card company. Of course, if you CAN pay off your full balance, do so, but keep your minimum payment on autopay, just in case you forget.
Keep your account balances under 30 percent
As we mentioned before, your credit utilization ratio refers to the percentage of your available credit that you’ve used.25 A high credit utilization ratio means that you are carrying a large balance on your card, and the longer it stays that way, the lower your credit score will get. In general, you want to keep your credit utilization rate under 30 percent. If you have a credit limit of $500, don’t carry a balance over $150. If your credit limit is $15,000, keep it under $4,500. To calculate your optimal credit utilization score, take your credit limit and multiply it by 0.3. The number you get is the 30 cap you’ll want to stay under.
An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.
A Credit-builder loan is a small personal loan taken out for the sole purpose of building credit.16 This kind of loan is available at many banks, credit unions and online lenders, and they tend to range from around $500 to $1,500. In some cases, these loans serve double-duty, acting as a much-needed cash injection during a financial emergency while helping to build the borrower’s credit as they pay it off, but most people who take out this kind of loan do it for the sole purpose of raising their credit score.17
The safest type of credit-building loan for both the lender and the borrower is called a pure credit-builder loan. Unlike other loans, which give you the lump sum of your loan up front, a pure credit builder loan is more like a forced savings account. The lender will give you a set amount of money, but keep it in a locked savings account that you can’t access until you’ve paid the full cost of the loan. These loans can be really beneficial to cash-strapped consumers who need to build credit. No money is required up front, and when you’ve paid off your entire balance, you have a nice chunk of change waiting for you in a savings account, which you can use to start an emergency fund or 401k.18
Standard secured loans can also be used to build credit. Secured loans require the borrow to use the money they have in savings as collateral for the loan. The money in your collateral account will be frozen until you begin to pay off your loan, and as you continue to make payments on time, more funds from the frozen account will become available to you. Secured loans are nice for anyone on a budget, as their interest rates are typically much lower.18
Taking out an unsecured loan can help build your credit and act as a safer alternative to predatory payday loans. Unsecured loans give you access to the lump sum of your loan up front, and an installment loan is probably your safest bet here. Unsecured installment loans allow you to make a set payment every month for a set amount of time until your loan is paid off. This set payment will include both the amount you borrowed, and the total amount you owe in interest, so you’ll know before you even start making payments exactly how much this will cost in the long run. These loans do typically come with higher interest rates, but as your credit score increases, the amount you’ll be required to pay in interest on just about everything goes down. This is a rare case where spending money initially will help you save it in the long run.18
Remember: if you want to take out a credit-builder loan, don’t get antsy and pay it off early. Credit building credit is a process, and you need to use all the time allotted to make regular monthly payments that will eventually show up on your credit report, and prove that you are a responsible borrower. Most loans will take six months to affect your credit score, so there’s no rush to get it paid off.
“Credit builder loans are often called secured loans. Basically, your bank or credit union gives you a loan. The most common amount for these loans is $1,000 over 12 months. The key difference between this and a regular loan, though, is that the proceeds go into a locked savings account. This means that you make the payment each month and at the end of the 12 months, you get the principal back ($1,000 in this case). The advantage is adding diversification to your profile. Creditors usually like to see a mix of credit beyond just credit cards. The disadvantage is that you are basically paying interest on your own money. Though rates for these loans are usually low, it’s still money you’re paying for the bank to take zero risk at all.”
An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.
Chapter 2. How to build credit when you don’t have any
If you’ve never taken out a loan, had a credit card or put utilities in your own name before, you probably don’t have much of a credit history. You might think this is a good thing – no credit usually equals no debt, after all – but in some cases, having zero credit can be just as hard has having terrible credit. Lenders are hesitant to loan money to someone with no credit history because there’s no way for them to know whether or not you’ll be able to pay it back in a timely fashion. However, if you’re in this situation, don’t panic. When it comes to credit, everyone starts from nothing, and there are plenty of easy ways to build credit without too much risk.
Secured Credit Cards
Signing up for a secured credit card is one of the easiest ways to build credit if you have none. Pretty much anyone, regardless of their credit score, can sign up for a secured credit card so long as they pay a cash deposit, which will serve as both collateral and, in some cases, set your credit limit. Depending on the card, your deposit amount can vary, but in general, your credit limit will be about double what your deposit is. In other words, if you deposit $50, your credit limit will be $100. Some issuers require the entire line of credit as a deposit – so if you want a $400 credit limit, you’ll need to make a $400 deposit – but some only require a fraction of the overall credit limit, it all depends on the issuer.14
Not every bank offers secured credit cards, and not all secured credit cards are created equal. There are a lot of good ones out there, but be aware that many charge a plethora of fees, from application fees a required monthly insurance policy that can really drive up the price of card membership. On top of that, most secured cards have an annual fee and can carry some pretty hefty interest rates.
In order to use a secured credit card to build credit, you will need to pay it off in full every month. Several months of on time, full payments will significantly improve your credit score, and due to the high-interest rates most of these cards carry, you probably won’t want to keep any kind of balance on one.
“You want to start by either applying for a secured card or a store card. It does not matter what the credit limit is, so do not stress over that. Make sure when you get a new credit card account you use it and pay it on time. Keep the balance below 10% or less of the credit limit. You should treat the credit cards as an investment into your credit future.”
“Secured cards offer the advantage of almost guaranteed approval, but the downside is that your money will be tied up for a long period of time. Look for cards that “graduate” after a year or so. Graduating means they give you your deposit back but you keep the card & credit limit. Some secured cards that graduate are Bank of America, Discover and Capital One.”
“Reviewing your credit report is essential with both the increase in identity theft and the possibility of simple errors. There are three major reporting agencies: Equifax, Experian, and Trans Union. Each is required to give you a free copy of your credit report each year if you request one. At the very minimum, you should be doing this. However, it is probably in your best interest to invest in a credit monitoring program such as Life Lock to have a daily and active monitoring system of your credit and further your personal information.
Let’s focus on the minimum review that you should be doing. After requesting your credit report from each agency, you need to sit down and work through each aspect of the report. The report will include personal information, employment information, and then credit information. Make sure addresses are correct. If there is an address that is not yours, this should be reported to the agency that has it listed. This could be a signal that someone has your credit. Also, report inaccurate employment information and then move to the credit section. You want to be able to match all credit entries with the accurate information you have in your personal records. Make sure that all accounts that are closed are in fact closed. Match open accounts to accounts you currently maintain. Any account that you do not recognize, you need to inquire about and possibly open a formal inquiry.
It is important that you maintain a good recollection of your credit history and also good records to refresh that recollection if you find something odd on your report. An annual review is imperative but experts will urge that you do this more frequently than that.”
“I’ve been using Experian’s CreditWorks, I get to track my credit score (FICO score 8 model) each month and check my credit report from Experian. It’s not free but I trust the accuracy of the score since it uses the FiCO scoring model. Another free site put me in a panic, they had my credit score much lower than I expected and that’s why I paid Experian for a check of my FICO score and felt relieved when it was higher.”
Checking your report for errors
According to the FTC, about 5 percent of all credit reports contain errors, These errors, if left unspotted, could seriously affect your ability to borrow.9 The Fair Credit Reporting Act holds credit bureaus and the companies that they collect information from accountable for correcting errors on your credit report.10 However, it’s up to you to find these errors in your report and submit a formal complaint to the credit bureaus on your own. To look for errors on your credit report, request a copy and take a hard look at the following information to make sure it’s all correct:12
Personal information: name, address, social security number, etc.
Account history: a list of all the accounts you’ve opened under your own name, loan or credit amount, history of payments, etc.
Inquiries: A list of third parties that have requested your credit report in the last 24 months
Public records: bankruptcies, legal judgments against you, foreclosures, etc.
If you find an error in your credit report, you need to write a letter to both the credit bureau and information provider correcting the information and including documentation to prove that there was an error. You can find a sample dispute letter on the next page, or click here to file a dispute online with all three major credit bureaus.
Sample Dispute Letter
8/17/2016 John Doe 123 Fake Street City, State Zip codeComplaint Department X Credit Bureau 123 Fake Lane City, State, Zip CodeHello, I have spotted the following error(s) on my credit report, and am writing to correct it (/them). I have attached a copy of my credit report, and have circled all the incorrect information on the attached files. Below is a list of the error(s):
Error #1 is inaccurate/incomplete because (describe what the problem is and why). I am requesting this error be corrected and the information be deleted or updated.
Error #2 is inaccurate/incomplete because (describe what the problem is and why). I am requesting this error be corrected and the information be deleted or updated.
(Mention that you have attached documents supporting your position, and explain what they are and how they prove the errors on your report). I hope these errors can be deleted or corrected as soon as possible.Thank you,
“Many experts will tell you to get your reports from annualcreditreport.com, but with the new era of digital technology and data breaches, I believe consumers should take advantage of the many free and better alternatives. Sign up for a credit monitoring service such as CreditKarma (I’m not affiliated with them – they are just popular). Services like this are free and while the credit scores they give are notoriously unreliable, you can very easily keep track of reports and get notifications for changes to your credit reports as they happen. Consumers should be looking at their reports monthly if possible in order to keep on top of them, as simple overlooked errors can cost you thousands when applying for credit.
The best way to know if something is inaccurate is to reconcile your reports like a checkbook. If you read through your report and see an account that you don’t recognize or some of the details of a legitimate account are incorrect, the first thing to do is contact the creditor.. By law they have to list an address and phone number on the report. Simply call or write a letter stating why you believe the item is inaccurate and send it to the creditor. Often times they will rectify it on their end and that will be the end of it. If they refuse to help, send a letter to the credit bureau (addresses are easily found on Google) requesting they investigate and remove it. In 95% of cases, this will cure the error and you can move on! If not, it would be best to speak with a professional for further guidance.”
An OppLoans Guide to Understanding Your Credit, Credit Report, and Credit Score.
Credit Reporting Agencies, also known as credit bureaus, collect and store the information that goes into your credit report and by extension, your credit score. The United States has three major credit bureaus: Experian, Equifax, and TransUnion.7 Between the three of them, these for-profit companies, independent of the government, have information on the spending and financial habits of more than 200 million people.8
Each of these credit bureaus allow consumers to see a free copy of their credit report every year through AnnualCreditReport.com. If you want to check your score, make sure you’re going there, and not to one of the many other scam sites that are designed to look and feel like that page. The imposters will look similar and may have a very similar site name, but require you to pay a fee, or worse, steal your information. AnnualCreditReport.com is a government-authorized website and will not charge you a fee for an annual copy of your credit report.
If you want to see more than one copy of your credit report per year, don’t request your report from all three bureaus at once. If you space out your requests every four months, you’ll be able to check your official score and report three times per year. However, if you’re trying to build credit or if you are dealing with issues like identify theft, you’ll probably want to check your score more often.
“Monthly monitoring is a good way to stay on track if you are working on building up a credit score,” said Lucy Lazarony, a financial writer. “If you’re not in the market for new credit, checking your credit report two or three times a year is a good strategy.”
There are many (free!) ways to keep on top of your credit score, even if you’ve already maxed out your three official queries.
Credit Reporting Apps
There are quite a few websites, apps, and services designed to let you check your credit scores from all three bureaus anytime, anywhere. Because credit reports contain very sensitive and private information, it’s important to choose a trustworthy credit monitoring service with a reputation for being safe and reliable. While many of these services cost a monthly fee, there are several that are completely free.
Offers ongoing credit monitoring, a toll-free credit information hotline, fraud protection and automatic credit alerts.
All of the above services are reputable and safe, but FreeScoresAndMore, Identity Guard, and Privacy Guard all have five-star ratings on the independent financial review site NextAdvisor. If you’re not sure which service to go with, take advantage of all the free trials to see which one you like best, then cancel the rest.
Applications submitted on this website may be originated by one of several lenders, including: FinWise Bank, a Utah-chartered bank located in Sandy, UT, member FDIC; Opportunity Financial LLC, a licensed lender in certain states. All loans funded by FinWise Bank will be serviced by OppLoans. Please refer to our Rates and Terms page for more information.
CA residents: Opportunity Financial, LLC is licensed by the Commissioner of Business Oversight (California Financing Law License No. 603 K647).
DE residents: Opportunity Financial, LLC is licensed by the Delaware State Bank Commissioner, License No. 013016, expiring December 31, 2019.
NM Residents: This lender is licensed and regulated by the New Mexico Regulation and Licensing Department, Financial Institutions Division, P.O. Box 25101, 2550 Cerrillos Road, Santa Fe, New Mexico 87504. To report any unresolved problems or complaints, contact the division by telephone at (505) 476-4885 or visit the website http://www.rld.state.nm.us/financialinstitutions/.
NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.
OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.
Based on customer service ratings on Google and Facebook. Testimonials reflect the individual's opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.
* Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.
†TX residents: Opportunity Financial, LLC is a Credit Access Business that arranges loans issued by a third-party lender. Neither OppLoans nor the third-party lender reports payment history to the major credit bureaus: TransUnion, Experian, and Equifax.
Rates and terms vary by state.
If you have questions or concerns, please contact the Opportunity Financial Customer Support Team by phone at 855-408-5000, Monday – Friday, 7 a.m. – 11:30 p.m. and Saturday and Sunday between 9 a.m. – 5:00 p.m. Central Time, or by sending an email to firstname.lastname@example.org.