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

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

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

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

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


How does your credit score work?

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

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

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

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

Why do insurers factor in your credit history?

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

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

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

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

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

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

How can you improve your credit score?

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

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

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

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

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

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

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Can You Lease A Car With Bad Credit?


Cars! They get you from one place to another place. Sometimes that other place is work. If you have a job and you don’t live within walking distance or close to good public transportation, you’ll probably need a car to get there!

But we don’t have to tell you that cars are important. And we don’t have to tell you that they’re expensive either. That’s why many people choose to lease a car instead of buying it outright. And then you’ll only have to commit to a few years.

But what if your credit isn’t so hot? Can you still lease a car? And should you?


How does leasing a car work?

First of all, it’s important to understand that when you lease a car, you in no way own that car. It’s essentially the equivalent to renting an apartment. Much like renting an apartment, there are pros and cons to leasing. The main disadvantage is that you aren’t building any equity in the thing you’re leasing, so once that lease is up, you won’t have anything to show for all the money you’ve spent. However, unlike a house or apartment which might increase in value, especially with renovations, cars are notorious for very quickly losing their value. So it might not be that much of a downside, comparatively.

And there are advantages to leasing. Aside from the shorter commitment we alluded to earlier, you may not be fully on the hook for repairs. Although you’ll still need insurance, you may be able to bring a lease back to the dealer for certain repairs, just like you can have a super fix a problem at your apartment. Eventually.

So if you are approved for a lease, you’ll sign on for the length of time you’d like to lease the car, and then make your monthly payments. You’ll also likely have a limited number of miles you can drive each year you have the lease or else you’ll have to pay an additional fee.

But how will your credit influence your chances of being approved for the lease?

Credit cars. 

Unless your credit is in a really bad place, you’ll probably be able to get some kind of lease. But it’s going to be less than ideal to say the least.“Most people think of their credit score as a black and white number, but having a bad credit reputation is more of a gray area,” advised Jonas Sickler, marketing director for ReputationManagement.com (@repmgmt_com). “Your credit score can be lowered by a number of factors that won’t affect your ability to lease a car. What will? Bankruptcy, more than 90 days of credit card delinquency and recent charge-offs will all raise flags when you sit down to discuss financing. Still, some companies are willing to overlook a tawdry credit reputation if you’ve turned things around and have a steady income source. However, you’ll pay more for your past indiscretions with a much higher rate.”

But is it a good idea?

Assuming your credit isn’t so bad that you’re denied a lease outright, are the increased rates Sickler mentioned worth it? Or are their better methods to get a car out there?

Walter Zeiss (@WalterZeiss), public relations lead for Mychoicecarinsurance.ca offered a couple notes in favor of leasing with less than great credit, assuming you’re able to make all of your payments: “Your bad credit will begin to eventually improve. Generally speaking lease repayments tend to be somewhat cheaper than auto loan repayments, so leasing could be a good short term alternative.”

But he also outlined the downsides: “Leasing isn’t the best option to improve your credit rating, auto loans will actually do a better job at improving your bad credit rating faster. Most likely you’ll need to pay a large upfront fee before beginning the lease. Your credit rating is an indicator of how you behave and manage your finances, so taking on a large financial burden probably isn’t the best idea. You still won’t own the car, so you would be much better off saving up and purchasing your own car outright and avoiding high interest fees. Bottom Line: While leasing a car with a bad credit rating is completely 100% achievable, there is much more sense in trying to get an auto loan or go one step further and save up to purchase your own car instead.”

Okay, but I really want to… 

If you do decide you want to lease a car anyway, there are steps you can take to make it better for yourself while you’re still working on your credit.

Sam Olmsted, writer and consultant for Superior Honda, told us what some of those steps are: “Although it’s not ideal, leasing a car with bad credit is possible. The simplest course of action is to wait and strive to build up your credit so that you’re in the best financial position before committing yourself to a contract. However, if you need to lease a car quickly, here are some tips:

“Save cash – Chances are your dealer will require a larger cash down payment to mitigate their risk if you have bad credit.

“Be prepared to pay more – Good credit scores instill trust in the transaction and lead to lower interest rates. Those with bad credit will likely have to pay a higher interest rate.

“Research lease takeovers – For those who are having trouble leasing a car due to bad credit, it is possible to take over another person’s lease. Typically, these takeovers don’t require such a strict credit check, though they may be done by a third party and not a dealer.”

Whether you decide to lease a car or go a different direction, it’s important to know what you’ll be getting into. Now happy driving and enjoy these related posts from OppLoans:

How have you dealt with transportation and financial issues? Have you ever taken out a bad credit loan to fund a vehicle? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

Jonas Sickler is responsible for building and executing the digital marketing strategy at ReputationManagement.com (@repmgmt_com). The broad scope of his role encompasses strategic content creation, web analytics, and developing and deploying targeted digital campaigns from concept to completion.
Walter Zeiss (@WalterZeiss) is the public relations lead over at Mychoicecarinsurance.ca, where he heads up a small team of eager writers and content creators. In his spare time he’s a car enthusiast that likes to spend his time consuming the latest info about high-tech cars and seeing as much motorsport as he can.
Sam Olmsted is a writer and researcher for Superior Honda, a new and used car dealership outside of New Orleans, LA. Sam researches the automotive industry’s top trends and latest news. He spends time writing about the latest car releases, newest technological features and upgrades, the best tips and tricks on vehicle maintenance and servicing, and more. Sam also works to create marketing materials and promote the dealership online on a variety of platforms.

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

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

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

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

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

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


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

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

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

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

5 ways seniors can maintain good credit.

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

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

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

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

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

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If You Have Bad Credit, There Aren’t “Grants” That Can Help You

if-you-have-bad-credit-grants-cant-help-youWhile the government does have grant programs aimed at helping people in need, they aren’t the kind of thing that you can just apply for directly.

Loans are a necessary part of modern-day life. Without them, most people wouldn’t be able to afford any large purchases like houses, cars, or even furniture and other major appliances. Being able to put down a little money now and pay something off over time in exchange for some interest allows folks to live better than they otherwise could.

But when you have bad credit, getting a personal loan can be tough. Real tough. And borrowing from a traditional lender, like a bank, is pretty much impossible. While there are many safe, responsible bad credit loans available, there are also tons of dangerous predatory loans that will trap you in a never-ending cycle of debt.

if you’ve seen ads promising a government grant for someone with bad credit, you might think this is the answer to your problems. But it’s not. While there are grants designed to help people with low incomes, they aren’t something where you can simply go online, fill out a form, and expect a deposit in your bank account. More likely than not, the ad you’re seeing is a scam.


How is a grant different from a loan?

The main difference between loans and grants is simple: Loans have to be repaid, while grants do not. When you take out a loan, you are borrowing money. The institution that lent it to you is expecting you to pay them back, plus interest. When you take out a grant, the institution is giving you money for a specific purpose. No repayment required.

Both loans and grants can be made to individuals or organizations. Loans typically come from banks or lenders, while grants can come from a variety of sources, like schools, non-profits, individuals, and trusts. The federal government also doles out tons of both, as do state governments.

Because grants don’t have to be repaid, you’ll see people refer to them as “free money.” And you know what? That’s true! When you take out a loan, you’re not getting free money. You’re paying interest so that the lender can reduce their risk and turn a profit. With a grant, you’re not paying any extra costs. However, the term “free money” gets used a bit too … freely.

Most federal grants go to businesses and states, not people.

This is the biggest reason why you can’t just go get a grant to help stabilize your finances. The Federal government does provide financial aid resources to help people in need, but they do so by dispersing money to nonprofit organizations and state or local governments. Even federal benefits like Supplemental Nutrition Assistance Program or SNAP (also known as “food stamps”) are administered through individual states.

One of the major exceptions to this rule is if you’re in an area that’s been hit by a natural disaster. In cases like that, you should be able to apply directly to the federal government for assistance. You can learn more by visiting DisasterAssistance.gov.

When it comes to lending, the government usually insures or helps private lenders arrange loans rather than lending money to individuals itself. The government’s involvement helps people qualify for loans who would not otherwise be able to. For instance, you might be able to qualify for an FHA mortgage loan, which is insured by the government and come with lower capital requirements.

If eligible, you should apply for government benefits.

If you’re going to get a grant from the government, it is likely going to be in the form of public assistance, and it’s probably going to be administered by your state or local government. Government programs you might qualify for include SNAP, Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), and Low Income Home Energy Assistance Program (LIHEAP). Additional programs are available for US Veterans.

Eligibility will vary depending on age, location, and income. Meanwhile, just because you are eligible for a government program does not mean that you will be accepted, so don’t limit your search to these larger federal programs. You should also check out local government programs in your city, state, or county, as well as grants that are offered by local non-profits and aid organizations.

Programs like these are not what most people are thinking of when they think “I need a grant” but they are the closest thing that you’ll find. And if someone comes along offering you something better, it’s most likely a scam.

Beware of “government grant” or “free money” offers.

Con artists love dangling promises of free money to entice potential victims. If you get an email in your inbox promising an easy “government grant” or someone calls you with a fantastic sounding pitch for “free money,” they are a scammer. You are being scammed.

The jerks who run these scams are likely looking to do one of two things. They either want you to pay some kind of upfront fee, after which they disappear, or they want to get your personal/financial info—stuff like your bank account and social security numbers—at which point they’ll steal your identity. Either way, their only goal is to screw you over!

If you receive an email promising free money or a government grant, delete it. Don’t even open it, and certainly don’t click on any links it contains. Doing so will open you up to a phishing scheme, where scammers steal your online ids and logins.

And if you receive a phone call from someone making similar promises, just hang up on them. Whatever you do, refrain from giving them any personal information over the phone. Even if they pinky swear that they’re from a legitimate government branch, ask them for all their relevant business and contact info. That’ll make them get off the line right quick.

If you have bad credit and need money, there are other options.

When you have a credit score below 630 and you have an unexpected expense, like a car repair or a medical bill, you’re going to be in a tough spot. Building up an emergency fund is the best way to handle situations like these, but that’s more a long-term play. If you need money, and need it now, your options will be limited—especially since a “government grant” won’t be on the table.

Borrowing money from your family can be a good way to go—even if it might mean swallowing your pride—but lots of people don’t have that option. You can also try pawning some of your valuable, but the trouble with pawn shop is that you’ll probably only receive a fraction of what your item is worth. In many cases, the sentimental value will be much higher than what you can get for it.

Putting the bill on your credit card isn’t great, but it’s much better than settling for a high-cost no credit check loan. Short-term “cash advance” products like payday loans and title loans can all too easily lead to a predatory cycle of debt. You don’t want that, trust us. The right installment loan, one with affordable payments, is likely a much better option.

No matter what kind of loan you end up taking out, make sure you do your research. Borrowing money means being on the hook for repayment, and there could be dire consequences for your credit score if you default on your loan agreement. Sure, a grant would be far preferable to loan but, for all their faults, bad credit loans have a big leg-up on bad credit grants: They actually exist.

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

Has someone ever tried to scam you with a fake “grant” offer? We want to hear from you! You can find us on Facebook and Twitter.

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4 Simple Ways to Save Money on Your Grocery Bill—While Still Eating Healthy!

Start by planning ahead, stop by the bulk section to avoid costly food waste, then head on over to the frozen aisle to save money on produce—without sacrificing quality!

Eating: We’ve all got to do it! But unless you have your own farm, you’re probably going to have to pay for the food you need to eat. And unless you live in a food desert, which comes with its own issues to work through, you’ll probably be getting that food from a supermarket.

You could try to just get the cheapest food possible, but eating too much unhealthy food can lead to an increased risk of medical issues. And we surely don’t have to tell you that medical issues can get very, very expensive. So when shopping for groceries, you ideally would like them to be both affordable and nutritious. But how can you manage that?

We spoke to the experts to find the answers to that very question. Now let’s eat!


1. Meal plan to conserve ingredients and take advantage of sales. 

They say that you should never go to the supermarket hungry. And they are right. Without a proper plan, you might just end up grabbing whatever looks good without enough concern towards cost and nutrition. That’s why it’s important to plan ahead.

“Meal plan and use the same ingredients for several different meals,” suggested Sarah Moe, a money and business coach at Flauk. “The biggest waste of money when it comes to groceries is wasted food. An easy way to avoid this is to plan your meals and use the same ingredients for several different meals. For example, if you’re buying kale for a salad or specific recipe, look what else you can use it for (i.e. roasted kale chips, add it to chili or soup, or add it to an omelet). This also helps you get more creative in the kitchen.”

Knowing what you’ll need in advance can also provide other means to save.

“Here’s an amazing tip for cutting down grocery bills,” advised Talia Koren, meal prep expert and the founder of Workweek Lunch. “This involves some planning ahead. After you make your grocery list, go to the website of your regular grocery store. A lot of them now have features where you can add all of your grocery list items to their site and it spits out the estimated cost. This way, you can easily find brands on sale and give yourself a heads up about deals you wouldn’t have normally paid attention to when physically at the store. It works really well for me and my community.”

Once you know what you’re going to buy, how you’re going to buy is also important.

2. Use the bulk section to avoid expensive food waste.

Meal planning and deals will help you cut costs without sacrificing nutrition. But if you really want to save, you should look into buying in bulk.

“My suggestion is—use the bulk bins,” Mary Weidner, co-founder of Strongr Fastr (@strongrfastrapp), offered. “We’ve all run into those recipes where it asks for some ingredient that you rarely use and while buying a bag of it might be cheaper per ounce—if you’re never going to use it again or if it’s going to take you so long to use it that you’ll wonder if it’s still okay to eat—just buy the exact amount you need from the bulk section and pay a fraction of the price. This is a great tactic for those really expensive healthy foods where it’s such a large upfront cost for something you don’t need much of or just want to try out in a single recipe.

“I did this recently for some energy balls that a friend wanted me to make for a hike. The ingredient list had some things I don’t use too frequently like coconut shavings, dark chocolate chips, ground flax, small amounts of various nuts, etc. All of these things I could just buy the exact amount I needed and paid under a dollar for each of them, and now I don’t have 8 bags of ingredients I rarely use taking up space in my cabinets and slowly spoiling. Bonus: the bulk bins are better for the environment too if you bring your own containers. Cuts down on packaging and waste!”

Moe echoed the bulk-based advice: “When buying grains, nuts, or dried fruit head to the bulk section so you only get the amount you need rather than buying a whole 16 oz bag when the recipe only calls for 1/4 a cup. Buying in bulk is also often much cheaper than buying pre-packed food.”

But you don’t want to buy bulk all willy-nilly.

“While bulk shopping can help you save on 30 to 40 percent on your grocery bill, not everything is a smart buy when it comes to health foods,” warned savings expert and TV personality Andrea Woroch (@AndreaWoroch). “For instance, bulk containers or large bags of produce may lead to food waste if you can’t finish the fruits or veggies before they spoil. Focus your warehouse purchases on non-perishable health foods like quinoa, brown rice, almond butter and olive oil. Quinoa, touted as today’s leading super food and cleanest carb to eat, has a relatively long shelf life (two to three years dry) so you don’t have to worry about it going bad.”

Beyond buying bulk, there are other things that are affordable that might still be healthier than you’d think.

3. Go frozen, go generic, and don’t always go organic.

It’s easy to assume that the cheaper option is always going to be less nutritious. But that isn’t always the case!

“Frozen fruits and vegetables may seem like a less-healthy choice compared to fresh, but they’re actually just as nutritious and much cheaper,” explained Woroch. “That’s because produce is flash frozen at peak ripeness, retaining optimal flavor and nutrients. When buying frozen produce, don’t assume brand-names are superior to lesser-cost generic or store brands; after all, frozen peas are frozen peas! If you have room in your freezer, stock up during sale time when you can purchase frozen produce for as little as $1 per bag.

“Another misconception about healthy eating is that you must buy organic. However, not every fruit and vegetable needs to be purchased organic. Coined the ‘clean fifteen,’ produce with outer skins that you peel away like pineapple, avocado, onion, and sweet corn aren’t affected by pesticides. Produce you eat directly, skin and all, is better purchased organic if your goal is to avoid chemicals.”

And then sometimes, it helps to get back to nature.

4. Buying local often means buying cheaper, too. 

More natural isn’t always cheaper. If it was, you’d forget the supermarket and just move into a forest somewhere. But when it comes to the supermarket, the less super science they have to perform to get you your produce, the cheaper it’s likely to be.

As culinary nutrition consultant Julie Harrington (@ChefJulie_RD) told us: “The shorter the distance food has to travel, the less expensive it is for the consumer once it hits the store. Ever notice how expensive tomatoes and strawberries are during the winter? Grocery stores pay more to import produce from warmer climates during the winter, ultimately making the price you pay much higher.”

Woroch also recommended a way to skip the supermarket entirely for some produce: “Plant a garden. Why waste time and money at the grocery store when you can grow your own vegetable garden? Start small by planting just a couple of your favorite herbs like rosemary, sage, or dill and study up on gardening tips for optimal conditions. Apartment dwellers don’t  have to dismiss this tip, either; vegetables like lettuce, tomatoes, summer squash, eggplant, and peppers can be grown in containers on window sills.”

Follow all of this advice, and you can keep your wallet and your body healthy! To learn more about ways you can save, check out these related posts and articles from OppLoans:

What are your best tips for cutting down your grocery bill? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

Julie Harrington (@ChefJulie_RD) is the Registered Dietitian and Culinary Nutrition Chef behind her website JulieHarringtonRD.com based in New Jersey. Cooking has always given Julie joy because of its powerful ability to connect people together. Julie’s passion is to educate others about nutrition through food and giving them the tools they need to build confidence in the kitchen. Along with being a cookbook author, most recently, her recipes have been featured in SHAPE, Huffington Post, US News & World Report, and Healthy Aperture. Follow along with Julie on social media: FacebookInstagramTwitter.
Talia Koren is a meal prep expert and the founder of Workweek Lunch, an online resource for quick, healthy meals on a budget for all diets. She has helped thousands of people all over the world crack the code to meal prep via her website and Instagram and has been featured in NBC Better, Women’s Health, Greatist and Entrepreneurial Chef.
Sarah Moe is a money and business coach at Flauk, a one-stop-shop for individuals who want to launch a business. Sarah is a recovering lawyer who has been traveling and working around the world for the past three years. She enjoys dancing to 90s hip-hop in her kitchen and is always searching for the best croissant.
Mary Weidner is a Co-Founder and COO of Strongr Fastr (@strongrfastrapp), a meal planning and strength training site. Previously, she was a Financial Planner for a large research department at the University of Wisconsin.
As a sought-after media source on all things finance and money-saving, Andrea Woroch (@AndreaWoroch) has appeared on hundreds of national and regional TV shows like Today, Good Morning America, CNN, MSNBC and more. In print and online, her advice and stories have appeared in New York Times, Money, Reader’s Digest, USA Today, Yahoo!, People, Forbes, Huffington Post and more. You can read more about her at www.AndreaWoroch.com.

Living With Bad Credit is One Thing, But Can You Make It in Life With NO Credit?

If you want to live your life without ever using credit—which means no loans and no credit cards—get ready to do a lot more transactions in straight cash.

We often write about bad credit. How you get it, how to manage it, and how to get rid of it. But what if you don’t have any credit at all? Humans aren’t born with credit scores and it is totally possible to get well into adulthood without one.

But can you have a successful life without a credit score in this day and age? And if so, how? With the help of our experts, those are the questions we’re going to answer for you today!


Let’s get the basics out of the way.

As we always like to do when we talk about credit, let’s cover what exactly a credit score is and how you might end up without one. A credit score is a three-digit number that determines how likely you are to be granted a loan and with what terms.

That number is generated from information in credit reports maintained by the three major credit bureaus: TransUnion, Experian, and Equifax. Factors in your score include payment history, amounts owed, length of credit history, credit mix, and recent credit inquiries.

To learn more about those individual parts of your score, check out our “Know Your Credit Score” blog series.

But what if you never use credit? If you’ve never taken out a personal loan or used a credit card? Well, then you might not have a credit score at all. And where exactly does that leave you? Can you just go through life without borrowing any money whatsoever?

Living well without credit is certainly possible.

We’ll be straightforward here: Many things in life are much easier when you have a good credit score. But lacking a credit score doesn’t mean you’ll be forced to go live in the woods. You can theoretically live your life without having any credit to your name. In fact, we heard from someone who did just that!

“Up until two years ago, I had zero credit,” recalled Mikhail Shvartsman, in-house counsel for USB Memory Direct (@usbmemorydirect). “I never opened a credit card, I bought pre-owned cars outright, and bought my house on foreclosure. You can’t possibly live without credit unless you buy your own assets.”

But as Shvartsman implied, you’re going to have to live your life in a very specific way if you’re hoping to get by without credit. He eventually found himself in a situation requiring a change of gears:

“After finishing law school, I had $200,000 in student loan debt. So why did this change my need for credit? I had to lease out my apartment and find a place closer to work. Credit helps you manage when you pay for things. You still have to pay all of your debts, but this way you can do it over time.

If you plan properly, and have a large enough salary, you can do this without the assistance of loans and credit cards. Regardless of my effort to do this, when it came time to rent an apartment closer to work, I knew I had to work on my credit.

“With just a $200,000 debt posted for my student loans, it took me two years to create a credit history enough to score me over 600. For you to survive without credit, you have to manage your own finances by saving at least 10 percent of your income each year. However, if you are not making enough to make ends meet, that is not likely.”

“The most important part is making sure 10 percent of your salary is enough to cover unforeseen costs. If you don’t own your own house, this is unlikely. When leasing or renting anything, lack of creditworthiness will often deter anyone from renting to you.

“In this case, without credit, you would have to be able to pay your rent for a year up front. If you do, then you still shouldn’t rent. You should use that money as a down-payment to own your property. In reality, the best practice is to build your credit, and not use it unless needed.”

Want to skip credit scores? Then get comfortable using cash.

Kalen Omo, of Omo Financial Coaching, gave us a slightly rosier idea of living without credit:

“I believe people today can absolutely live without a credit score. If mom and grandma could do it, why can’t I? As long as cold hard cash is the primary mode of payment for goods and services, you can live without a credit score.”

Omo went on to offer some common issues you might run into when living without credit and how you could handle them:

Buying a home: The best way to buy a home without a credit score is either through a process called manual underwriting, the way mom and grandma used to get mortgages, or the one hundred percent down plan (aka buy a house in cash).

Buying a car: If you’re wanting to buy a car, the best way to do exactly that without a credit score is saving up your money over time and buying it with cash. Also, because you are a cash buyer, you are also in a better negotiating position with the dealership, as you have walkaway power, and are not held to a car loan or its interest rate.

Renting a car: The best option is to do your research and find a rental car company that takes a debit card instead of a credit card. You may need to have a deposit put on your checking account, but as long as you bring the car back in the shape you left it in, you’ll get that back.”

So to sum it up, your life is going to look a lot like a cash-only venue.

But if you do want to fix it

As we said above, life will be easier with good credit. Even Shvartsman, who was doing really well with no credit history, eventually hit a point where he needed a decent credit score. But how can you go from no credit to good credit?

One of the most reliable ways is to get a secured credit card. That’s a credit card that requires a cash collateral but is much easier to qualify for. Then you just have to use about one-third of your credit limit each month and pay your bill in full and on time.

Here’s something that WON’T help your credit: Taking out a predatory payday loan or title loan. These are no credit check loans that almost always go unreported to the credit bureaus. (You should watch out for cash advance loans, too.) However, there are bad credit loans out there that do get reported to the credit bureaus, so keep your eye out for one of those—especially if they’re installment loans.

Life without credit isn’t impossible. But you’ll probably have an easier time if you start building up your credit now. To learn more about how you can improve your credit score, check out these related posts and articles from OppLoans:

Have you or someone you know chosen to live without credit? We want to hear from you! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Contributors

Kalen Omo is the founder and owner of Omo Financial Coaching. Kalen has been in the world of personal finance since 2010 and has earned the title of Ramsey Solutions Master Financial Coach in 2017, after completing training with Ramsey Solutions, the company owned by National Best Selling Author and Financial Expert, Dave Ramsey. Kalen works with people’s personal finance issues and pain points ranging from budgeting to dealing with debt collectors to bankruptcy to estate planning to retirement. In his spare time, he enjoys spending time with his family, playing music, and is an avid musician.
Since Mikhail Shvartsman was a kid, he has loved fiddling with computers. Before law school, he worked in technology as a web developer, system administrator, and even worked in the realm of online marketing. He currently works as the general counsel of USB Memory Direct (@usbmemorydirect). Navigating the law for an electronics wholesaler and manufacturer allows him to grow his knowledge in both technology and law.

Forty-Six Percent of Millennials Feel Held Back by Credit Score

New survey by fintech firm OppLoans shows the impact of bad credit on young people.

CHICAGO—July 11, 2018—Are millennials too young to have bad credit? Definitely not. And it’s taking a toll.

According to data from a new survey by the fintech firm OppLoans, a shocking 46 percent of millennials already feel held back by their credit score. Bad credit was found to have a far-reaching impact on areas of life including purchasing a car, securing housing and applying for credit cards.

The survey of 2,000 Americans was conducted between June 7 and June 19 by the polling company OnePoll at the request of OppLoans. Of 1,000 millennial respondents, a significant percentage reported difficulties that sprung from poor credit scores.

  • Twenty-seven percent of millennials said a bad credit score had hurt their chances of buying a car.
  • Twenty-six percent said poor credit had hurt their chances of getting a loan.
  • Twenty-three percent said poor credit had hurt their chances of getting a credit card.
  • Twenty-five percent said poor credit had hurt their chances of getting an apartment or a house.
  • Fourteen percent said they lived with roommates because they couldn’t rent on their own due to bad credit.

“A low credit score can cause serious problems long before the common milestone of applying for a home mortgage,” said OppLoans CEO Jared Kaplan. “For a significant portion of millennials, the things that most people do in their 20s – rent an apartment, buy a car, get a credit card – are tough because of bad credit.”

Along with the survey, OppLoans released a list of seven money “hacks” to help young people keep their credit healthy. The tips are designed to provide millennials with simple, concrete ways to avoid credit damage and build a strong credit history.

“There are many easy ways that young people can avoid hurting their credit,” said Kaplan. “For instance, our survey found that 36 percent of millennials who missed a credit card payment simply forgot about it. Almost all credit card companies allow customers to set up automatic payment plans, and these can be programmed to cover only the minimum amount due if someone’s on a tight budget. This is an everyday hack that can help millennials avoid credit damage and late fees.”

A detailed list of the tips, as well as survey results and shareable infographics, are available on the OppLoans site.

Millennial Money Hacks

  1. Use a free budgeting app. Budgeting apps are a thing, and they’re perfect for tech-savvy millennials. They keep you organized and honest. Take advantage of them.
  2. Check your credit report. You can get a free credit report once a year upon request. Visit AnnualCreditReport.com for yours. Knowledge is power.
  3. Go cash-only. Credit cards are easy to overuse, but with cash, you can’t spend what you don’t have. Make a budget and withdraw fun money once a week. Once it’s gone, you’re done until next time.
  4. Set up automatic payments. Use these to avoid late fees and credit damage. But be careful: if you don’t have funds to cover the bill, you’ll overdraw your account. If you’re on a tight budget, consider setting your plan to pay only the minimum amount due, and deal with the rest manually.
  5. Call if you’re behind. Creditors lose money when they sell your debt to a collection agency. If you’re behind, they might be willing to negotiate with you. It doesn’t always work, but it’s worth a try.
  6. Close old utility accounts. Millennials move around a lot. In the shuffle, it’s easy to forget to close an account. Don’t let a silly slip-up damage your credit.
  7. Open a savings account. Millennials know it’s often too easy to withdraw money from a checking account. Set up a separate savings account and get in the habit of making regular deposits. Bonus: You’ll earn interest, and that’s a wonderful thing.

About OppLoans

OppLoans is one of the highest-rated online lenders and service providers in the industry. With faster funding, significantly lower rates, total transparency, and unmatched customer service, OppLoans provides non-prime borrowers a safe and reliable alternative to payday lending.

For more information regarding OppLoans, please visit the OppLoans website at OppLoans.com or call John O’Reilly at (312) 212-8079 extension 818.

Yes, You Can Get Fired For Having Bad Credit

you-can-get-fired-for-bad-creditMost people know that employers can check your credit score while hiring you, but they can also do it while you work there—and let you go if the results are bad.

If you were to make a list of things that would get you fired, where would you rank “having a bad credit score?” Surely it would be below all-time classics like “stealing money,” “calling your boss a bad word,” and “insisting that your coworkers call you Lord Fancy Pants The Fourth.” Honestly, most people don’t even realize that you can get fired for having a poor credit score.

But you can! And while it’s unlikely that a lousy credit score will get you canned—it’s much more likely to stop you from being hired in the first place—it certainly can happen, especially if you’re in one of the many states that don’t restrict the use of employer credit checks.


A quick refresher on creditworthiness and credit checks.

Your creditworthiness is summed up by your credit score, a three-digit number that created using information from your credit reports. The most common type of credit score is a FICO score, which was first created by Fair, Isaac and Company in the 1980’s (they’ve since changed their name to just FICO). Your FICO score is ranked on a scale from 300 to 850—the higher your score, the more creditworthy you’re considered to be.

Credit reports are documents that track your history of credit use. Most of the information on your reports date back seven years, but some information (like bankruptcies) can stay on your report for longer. Credit reports contain information on how much you owe, whether you pay your bills on time, the types of credit you have, recent hard credit checks, etc.

There aren’t any hard and fast rules on what defines “great” credit versus “good” or “bad” credit, but there are some general guidelines you can follow. If you have a score above 720, you won’t have to worry much about having a personal loan/apartment/job application denied or getting slammed with high interest rates. Meanwhile, if your score is below 630, that pretty much means you have bad credit and could find yourself paying for it in all sorts of ways.

When it comes to credit checks, only “hard” checks affect your score. These return a full copy of your report, unlike “soft” checks which only return a summary of your credit history. Hard credit checks are often run by potential lenders and landlords, but they can also be run by prospective or current employers. In order to run a hard check on your credit, the business in question must first obtain your express permission.

Want to read more about the difference between hard and soft credit checks? We’ve got a blog for that: How are Soft Credit Checks Different From Hard Checks?

Employers can check your credit before and after you are hired.

When it comes to credit checks and the possibility of unemployment, you are much more likely to run into problems while applying for a position than you are after you’ve been hired. Checking credit history as part of a background check is a fairly common part of the hiring process.

Depending on how that long hiring process lasts, though, you might end up serving in the job for a while before the employer gets the results and decides to terminate you. Additionally, employers can run a credit check after you’ve been hired or if you are up for a promotion and let you go if the results send up a red flag.

(Everything in this section depends on which state you live in. For a list of states that restricts how employers can use credit checks, scroll down.)

One thing that’s important to note here: These pre-employment credit checks will not actually return a copy of your credit score. Instead, they will only return a copy of your credit report. This will allow employers to view, for instance, your debt-to-income ratio and your history of bill payments.

Even with just a copy of your credit report, employers will be able to get a pretty good idea of how you have managed your debts over time, even if they aren’t given a single score to sum it all up. So if you have a bad credit score, your employment status could be at risk.

While there are no defined limits on what roles can require a credit check, it tends to be much more common in certain industries and job types than it is in others. Jobs in financial industries or finance positions—especially ones where you will be handling large amounts of money—commonly carry requirements for a credit check.

Certain states and cities limit what employers can do with credit checks.

If it hasn’t been made clear by now, the laws under the Fair Credit Reporting Act (FCRA) that dictate employer credit checks give them a fair amount of leeway. While a current or potential employer needs your permission to run a credit check, refusing to grant them that permission pretty much means that you either won’t get the job or won’t have your current job for long.

This is why 13 states, two cities, and the District of Columbia have passed laws limiting employers’ ability to check people’s credit. According to the good folks at Microbilt, an alternative credit reporting agency, the following areas have laws designed to rein in how employers use a person’s credit information:

  • California
  • Colorado
  • Connecticut
  • Delaware
  • Hawaii
  • Illinois
  • Chicago, Illinois
  • Maryland
  • Nevada
  • New York City, New York
  • Oregon
  • Philadelphia
  • Pennsylvania
  • Vermont
  • Washington State
  • Washington, D.C.

While the specifics vary from state to state (or city to city), many of them limit credit checks to managerial positions, finance jobs, or public safety officers. Some also limit what decisions can be made with this information, while a few of them outright ban the practice entirely. If you live in one of these areas, you can read more about your local laws in Microbilt’s report: State Laws Limiting Use of Credit Information For Employment.

When you have bad credit, an unexpected bill can mean turning to predatory no credit check loans like payday loans, cash advances, and title loans in order to get by. That part’s pretty obvious. And yet, bad credit can also affect your life in so many more additional ways.  For more information on how a bad credit score can negatively impact your everyday life, check out these related posts and articles from OppLoans:

Have you ever been fired or not hired because you failed a credit check? We want to hear from you! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN

46% of Millennials Feel Held Back by Their Credit Score

Our survey found that bad credit is taking a toll on young people in surprising ways.

Bad Credit Is Holding Back Millennials

Bad credit spells trouble at any age, and young people are not immune from its effects. In fact, our latest survey found that a shocking number of millennials are feeling the pinch, with 46 percent reporting that their credit score is holding them back.

What makes this number surprising isn’t that a big chunk of millennials have bad credit. (TransUnion found that 43 percent of millennials have subprime scores, compared to 20 percent for boomers and 9 percent for the silent generation.) Rather, what comes as a shock is that so many millennials are feeling the effects of bad credit so young, and it’s playing out in far-reaching ways.

What’s the Impact of Bad Credit on Young People?

For many older Americans, applying for a mortgage is the credit milestone that’s most significantly impacted by a low score. But bad credit can cause trouble long before that. Transportation, credit cards, housing—even though a lot of people don’t realize it, all of these can be impacted by bad credit. Our survey found that a significant number of millennials are struggling in these areas, precisely because of low credit scores.

  • 27% of millennials said a bad credit score had hurt their chances of buying a car.
  • 26% said poor credit had hurt their chances of getting a loan.
  • 23% said poor credit had hurt their chances of getting a credit card.
  • 25% said poor credit had hurt their chances of getting an apartment or a house.
  • 14% said they lived with roommates because they couldn’t rent on their own due to bad credit.

Car Loans

Buying a car is a rite of passage for many young people. But buying a car outright—even a cheap one—is outside the price range of most. The solution? Finance it.

While most people will qualify for an auto loan, the rate at which it’s offered will depend in large part on a borrower’s credit score. And, unfortunately, those with bad credit can expect a much higher cost. How much higher? Subprime borrowers will likely pay an interest rate four times that of borrowers with excellent credit.

Our survey found that 27 percent of millennials blame their credit score for preventing them from getting a new car.

Loans and Credit Cards

Another part of young adulthood is a first taste of financial independence. This includes a job to—hopefully—make ends meet, but rent and bills too. Loans and credit cards are also usually a part of this new reality.

Twenty-seven percent of millennials in our survey said they don’t apply for credit cards because they think they’ll be denied. A further 23 percent said bad credit had hurt their chances of getting a credit card in the past. Additionally, 15 percent said they regularly miss payments and their credit card debt is unmanageable.

With loans, millennials face similar difficulties. Twenty-six percent of respondents said a bad credit score had hurt their chances of getting a new loan or line of credit.

Housing

As young people more and more delay home ownership, it might seem that bad credit would impact their lives less and less. But this isn’t the case.

Our survey discovered that a significant percentage of millennials feel hindered by their credit score as they make housing decisions. A full quarter (25 percent) of millennials reported that bad credit had hurt their chances of getting an apartment or a house. And 20 percent of millennials said they can’t buy a home because they think their mortgage application will be denied.

For some millennials, the impact of bad credit on housing options has left them struggling to move beyond a dorm-like lifestyle. Fourteen percent said they’re forced to live with roommates because their credit prevents them from getting their own apartment.

Who’s to Blame?

Many would argue that part of being young is making mistakes. And certainly, we found that some of the credit damage that millennials suffer is due to easy-to-avoid mishaps.

Of the millennials who missed credit card payments in our survey, 36 percent said they simply forgot about it. Another 10 percent said they had a bill they didn’t know they had to pay. This means that nearly half of those who missed credit card payments could have avoided them if they kept better track of their bills or set up autopay on their accounts.

However, our survey also found that a significant percentage of millennials felt they were unprepared to tackle the financial challenges that tanked their credit. Twenty-four percent said they had received insufficient education about habits and techniques that build a strong credit history. It might not be surprising, then, that 15 percent of millennials said they regularly miss credit card payments, and 43 percent described their credit card debt as unmanageable.

How Can Millennials Avoid Bad Credit?

Bad credit is tough to fix. Black marks usually stay on a credit report for seven years, and even though lenders typically give more weight to recent credit history, a missed payment from long ago can still show up to haunt you.

The better option is to avoid the mishaps that sink your credit in the first place.

While going back in time isn’t possible, young people with short credit histories are in a position to put themselves on the right path early on. And it’s never too late to build good money habits, because even if mistakes have been made, good money habits and a strong credit history can help to counteract them.

To help millennials keep their credit healthy, we put together a list of money hacks designed specifically for the lives of young people. (Many of them are good advice for older generations, too.) These seven tips offer simple, concrete ways that millennials can avoid credit damage and begin to build a strong credit history.

  1. Use a free budgeting app. Budgeting apps are a thing, and they’re perfect for tech-savvy millennials. They keep you organized and honest. Take advantage of them.
  2. Check your credit report. You can get a free credit report once a year upon request. Visit www.AnnualCreditReport.com for yours. Knowledge is power.
  3. Go cash-only. Credit cards are easy to overuse, but with cash, you can’t spend what you don’t have. Make a budget and withdraw “fun” money once a week. Once it’s gone, you’re done until next time.
  4. Set up automatic payments. Use these to avoid late fees and credit damage. But be careful: if you don’t have funds to cover the bill, you’ll overdraw your account. If you’re on a tight budget, consider setting your plan to pay the minimum amount due, and deal with the rest manually.
  5. Call if you’re behind. Creditors lose money when they sell your debt to a collection agency. If you’re behind, they might be willing to negotiate with you. It doesn’t always work, but it’s worth a try.
  6. Close old utility accounts. Millennials move around a lot. In the shuffle, it’s easy to forget to close an account. Don’t let a silly slip-up damage your credit.
  7. Open a savings account. Millennials know it’s often too easy to withdraw money from a checking account. Set up a separate savings account and get in the habit of making regular deposits. Bonus: you’ll earn interest, and that’s a wonderful thing.

Survey Methodology

This survey was commissioned by OppLoans and conducted by OnePoll. It ran from June 7 to June 19, 2018. Two thousand Americans ages 18 and older were surveyed. One thousand respondents were between the ages of 18 and 34 and defined as “millennials.” OnePoll is a member of the European Society for Opinion and Marketing Research and employs members of the Market Research Society.

Fair-Use Policy

All data and images in this report are free to share and post. However, please provide a link back to this page to ensure context and accuracy.

How Do You Ask Someone to Be Your Cosigner?

how-to-ask-someone-to-be-your-cosignerIf you don’t have a great credit score or a large income, you might have to ask for help in order to get a loan or an apartment. What’s the best way to go about it?

Asking for help is never easy. You’d probably rather come across as someone who can take care of themselves all on their own. But asking for help shouldn’t be seen as a sign of weakness. In fact, knowing when to ask for help is one of the most important skills you can have.

But asking someone for help is even harder when it’s not just your pride on the line. It’s difficult to know exactly how to ask someone else to put something, whether it’s their money or even just their reputation, on the line for you.

If you need a personal loan but you can’t get approved for one, that means asking someone to be your cosigner. How might you approach that?


Why do I even need a cosigner?

You can sign on your own. You have a perfectly good signature. Why do you need a cosigner?

Odds are it’s because you want a loan or a lease and you can’t get it on your own. Maybe your credit is bad or maybe your income isn’t high enough. Or it could be both!

And needing a cosigner isn’t anything to be ashamed of. In some cities, you could need an annual income of more than forty times your monthly rent to sign a lease on an apartment by yourself. There’s no reason to feel embarrassed about having a less than extravagant income.

In addition to how much money you earn, a lousy credit score—or even a so-so score—could mean needing a cosigner with better credit to help you get a loan or a lease for an apartment.

Even if the person you’re asking is a good friend or family member, it can be awkward. You’re asking them to have a pretty significant amount of trust in you because if you don’t make your payments on time, it’ll negatively affect the cosigner’s credit—and they could be on the hook for payments you don’t or are unable to make!

Choose your cosigner wisely.

But where should you turn for a cosigner? Obviously, you’ll want someone who has the necessary income or credit score to actually help you get what you’re looking for. And it will need to be someone you trust who also trusts you.

But there are other things to consider when choosing who to ask, as we learned when we spoke to Casey Stubbs, founder of Finance and Markets (@FinanceMarkets1):

“When I first left the military to start going to college for my undergraduate degree, I too had to find a cosigner myself as I did not qualify to even rent an apartment on my own. What worked for me was simply to make sure that I had collateral that could cover my cosigner should something have happened to me, and finding someone who no longer needs to rely on credit as they already have paid off their house and their cars. If your parents have already paid their house off and have no intention of moving, chances are they could care less about their credit score dropping a few points during the application process, and they can be a great resource as well for you to start building credit on your own.”

So if you know anyone who you’re close with who doesn’t have to worry about their credit, it should be easier to get them on board. But regardless of who you ask, it’s important to ask in the right way.

Show them that you are trustworthy.

As we said at the start, asking for help isn’t always easy. So it helps to make sure you’re asking in a way that is likely to be well-received.

“If you cannot find someone who is indifferent to their credit score because they are still relying on credit heavily in their everyday lives,” advised Stubbs, “your best solution is to show them that you have the means to cover the debt, and that it is simply that you do not have enough to cover the bank’s standard, but that you do indeed have something to cover their loses should something happen to you down the line.”

It can also help if you present your case to the cosigner with the same preparation and consideration you’d give a bank.

“If you’re going to ask someone to be a cosigner on a loan or a lease, there are a couple of things you should do up front,” explained Michael Gerstman, CEO of Gerstman Financial Group. “First, you should insist on putting it in writing that you are committed to repaying the note under the terms of the note. That means no late payments.

“There should be a “personal penalty” for a default. For example, if I default on this loan, I’ll be cleaning your house once a week for the next three years. When both parties have ‘skin in the game’ the chances for a default are more limited.”

“I’d also make sure that if someone is agreeing to cosign a loan or lease they recognize I’d rather cut off my arm than default on a payment.”

But as long as you work out a payment plan and stick to it, you should be able to get the loan or lease you need without cutting off any limbs. Show that you have a plan and ask for help, and you’ll probably find that people will do what they can for you.

Finding a cosigner for a standard loan is far preferable to getting a predatory no credit check loan or cash advance. And even if you can’t find a cosigner, remember that payday loans and title loans are not your only option in a financial emergency. There are safer, more affordable bad credit loans out there. To learn more about navigating life when you have bad credit, check out these related posts and articles from OppLoans:

What are your stories of asking someone to be a cosigner? We want to hear from you! You can find us on Facebook and Twitter.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN


Contributors

Michael Gerstman, ChFC, CLU, has been in the financial field for over 25 years. Michael is committed to helping clients make informed financial decisions and strives to use his knowledge, experience, and commitment to help people enjoy a comfortable lifestyle today while building towards a financially secure future tomorrow.
Casey Stubbs is a United States Army Veteran and lifelong entrepreneur dedicated to helping investors from all walks of life achieve financial freedom and abundance in their lives. After launching his first website, Winner’s Edge Trading, Casey has gone on to launch several other successful brands such as Trading Strategy Guides, Learn To Trade For Profit, and Finance and Markets (@FinanceMarkets1); all dedicated towards helping investors at every level learn how to profitably manage their investments, as well as their personal finances, for themselves.