When You Get a Cash Advance, Do They Check Your Credit Score?
Neither credit card cash advances nor cash advance loans require a credit check. But that doesn’t mean they can’t affect your credit score.
For people with not-so-great or flat out bad credit, applying for a loan or a credit card can be nerve-wracking. After all, applying for new credit is something that gets added to your credit report, and it usually causes your score to lower just a little bit.
When your score is already hurting, the last thing you need is for your score to drop any further. Plus, what if you apply for a loan and you get denied for it? Now you’ve got a lower score and nothing to show for it!
One option you could explore is a cash advance. After all, if you need fast cash to cover some emergency expenses, a cash advance seems like as good an option as any. But will they check your credit? Will a cash advance affect your score at all?
With a credit card cash advance, you use your card to withdraw cash.
There are two different types of cash advances. One is a credit card cash advance. This is a type of credit card transaction where you use your card to take out paper money and the amount you withdraw is then added to your total balance.
The annual percentage rate (APR) for a credit card cash advance is usually much higher than the APR for a regular transaction. Plus, the cash advance does not come with a 30-day interest-free grace period like regular transactions do. This means that the interest for cash advances starts accruing immediately.
Plus, most credit card cash advances carry an additional fee just to process the transaction. The fee is often expressed as either a dollar amount or a smaller percentage of the amount withdrawn. For instance: $10 or three percent of the amount withdrawn, whichever is higher. All in all, credit card cash advances are a much more expensive alternative to regular credit card use.
Some predatory loans advertise themselves as “cash advance loans.”
These loans are a subset of bad credit loans. They’re financial products with short terms and high rates that can be very difficult for people to repay on time. Lenders who offer these products often stand to make more money from the customer rolling their loan over and entering a dangerous cycle of debt.
However, even though these two types of cash advances are very different, neither one of them involves a credit check.
With either type of cash advance, they won’t check your credit.
When you take out a credit card cash advance, there is no credit check run. In fact, the transaction won’t even show up on your credit report. It will just be seen as an increase in your total credit card balance.
As we mentioned earlier, most cash advance loans fall under the heading of “no credit check loans,” which pretty obviously means that they do not involve a credit check. Lenders that offer loans like these usually don’t report payment information to the credit bureaus either, which means that your cash advance loan won’t be showing up on your credit report.
With both types of cash advances, this is good news for your credit score. When a lender runs a full check on your credit history—otherwise known as a “hard” credit check—it will slightly ding your score. After all, looking for additional personal loans or credit cards can be a sign that you are “desperate” for more credit, which makes you a less appealing prospect to lenders.
The effects of the hard check won’t last long, but it’s always best if you can keep your score from lowering, even if it’s just a temporary “ding.”
There are two ways that a cash advance could affect your credit score.
Now, the only way that a credit card cash advance will affect your credit is if you take out a series of very large cash advances and add so much money to your balance that it starts to affect the “amounts owed” component of your credit score.
When it comes to credit cards, your credit score takes into account your “credit utilization ratio,” which measures how much of your total limit you’re spending. If you had a total credit limit of $10,000 and a balance of $3,000, your credit utilization ratio would be 30 percent.
And in fact, 30 percent is the ratio that you should aim to stay below. Above that, and you’ll start seeing your score be negatively affected. Luckily, it will probably take quite a few cash advances to push your balance above 30 percent, so this likely isn’t something you’ll have to worry about.
A cash advance loan, on the other hand, could affect your score if you fail to pay it back. In a situation like that, the lender will probably sell the debt to a collections agency, who will then report it to the credit bureau. Once that collections account is on your report, you will see your score be seriously impacted.
A “soft” credit check loan might be a better solution.
If you’re in the market for a cash advance loan, you should get out of that market right now. There are too many no credit check loans out there with incredibly high interest rates—often between 300 and 400 percent, but sometimes even higher—that will trap you in a cycle of debt.
Actually, the very fact that a lender does not do anything to check your ability to repay your loan is a big red flag. A lender that doesn’t care about your ability to repay is a lender that doesn’t mind if you have trouble repaying your loan. That way, they can charge you additional interest for a due date extension and make way more money.
Instead, look for a bad credit lender that runs a soft credit check with your loan application. These checks return a summary of your financial history but, most importantly, do not affect your credit score. You can apply for a soft credit check loan—like the installment loans offered by OppLoans—without having to worry about a denial lowering your score.
Plus, there are some other benefits to installment loans that a cash advance loan simply doesn’t have. To learn more, check out these related posts and articles from OppLoans:
Bad Credit Repair: When to Close a Credit Card and When to Keep It Open
Closing a credit card will negatively impact your score, but not for the reason you think.
Your credit score is very important. This three-digit number compiled by the three major credit bureaus determines what kind of loans and other credit cards you’ll be able to qualify for and at what rates.
Simply put, your credit score determines your financial future.
How does a credit score work, anyway?
If your score is in the high 700s or above, you’ll have a good shot at getting whatever kinds of loan you might need. But if that score is under 700, your prospects will look gradually worse and worse the lower it gets.
If your score is too low, you might not be able to find any loan at all, other than a bad credit loan. And while some bad credit loans can be useful financial tools, many of them are quite risky. For instance, you could end up with a no credit check loan with super high rates and super short payment terms–you might even have to put up your car as collateral.
Clearly, you’ll be much better off with a higher credit score, but if you’re starting with a low score or even no score at all, it can be really intimidating to build up good credit. One of the most important steps is paying down your debts and paying all of your bills on-time going forward.
But there’s often some confusion when it comes to credit cards. If less debt is good, wouldn’t the best possible option be paying off your remaining credit card balances and then closing them so you won’t be able to acquire any further credit card debt?
Closing a credit card won’t lower the age of your credit.
While you might be worried about hurting your credit score through credit card misuse, proper credit card use is one of the most effective ways to build up your score. And that’s not all. If you aren’t careful, you can actually harm your credit score by closing a credit card.
“Closing credit cards is typically a bad idea for your credit scores, but not for the reason a lot of people believe,” advised Michelle Black (@MichelleLBlack) credit expert and president at www.HOPE4USA.com. “One of the factors which FICO considers when calculating your credit scores is the average age of the accounts on your credit reports—the older the better.”
“Some people believe that when you close an account, such as a credit card, you lose credit for the age of that account when your average age of accounts is calculated. However, that is not true. Closed credit card accounts remain on your credit for generally seven to 10 years (seven years for negative accounts, 10 years for positive accounts). As long as the account remains on your credit reports, the age of the account will continue to be considered by credit scoring models.
Closing credit cards will hurt your credit utilization ratio.
“The real reason why closing a credit card account often damages credit scores is because closing an account, especially one which is paid off, can trigger an increase in your aggregate revolving utilization ratio. Credit scoring models take a look at how much total credit card debt you owe versus your total credit limits on open accounts. When you close an account your overall or aggregate credit card limit is lowered, often resulting in lower credit scores.”
“Closing your credit cards, especially closing multiple cards at once, will hurt your credit score, credit utilization, and length of credit history. Only close your card if you can’t control your spending and need to remove the temptation. However, if you plan on closing cards, you should fulfill your debt obligation so that it doesn’t report as closed, but with a balance. If you decide to close multiple cards, gradually doing so every six months will help limit the damage to your score, rather than closing multiple cards at once.”
So closing credit cards isn’t an inherently good way to improve your credit, and can even cause it greater harm.
If you’re going to close a credit card, which one should you close?
This doesn’t mean that you should never ever close a credit card. But how do you know which to close and which to leave open?
Thankfully, Ross gave us the rundown on which cards you should close:
“The card you don’t use with an annual fee. A card with an annual fee that you aren’t using will just cost you money.”
“A newer card you don’t use; it won’t help you establish credit history.”
“Make sure closing one card doesn’t impact your score by paying off balances on all other cards. If you have zero balances, your credit utilization rate will be zero, and won’t be impacted by the loss of a balance.”
And which cards does Ross advise leaving open?
“Keep your oldest credit card open. A longer, positive credit history is beneficial to your score.”
“Don’t close a card with a high credit limit, especially if you have high balances on other cards or loans. Closing a card with a higher limit will negatively impact your credit utilization ratio, making it seem like your ratio is spiking.”
“If you do close a card, request a credit increase on another existing card to maintain a strong ratio.”
Old cards are better than new cards, and secured cards can also help rebuild your credit.
Another expert we spoke to echoed Ross’s advice about leaving open cards you’ve had for a while and offered some tips about trying out new cards:
“Keep the credit cards you use and the cards you have held for a long time,” Janice Lintz (@JaniceLintz), consumer writer and CEO of Hearing Access & Innovations, told us. “A card that you have held for an extended time boosts your score. I was shortsighted and closed a card I held which was an error. But I will not shut a card I have held for 32 years since it boosts my score dramatically.
“I regularly try and close cards that don’t work for me. Some cards I don’t think I will like and do and vice versa. I ‘date’ my credit cards to see if we can be in a long-term relationship. My score is in the high sevens to eights.”
But what if you don’t have a credit score or any credit cards? Or you lost your credit cards for some reason?
“After bankruptcy, all the credit card companies cancel the credit cards, so I tell my clients to open a secure credit card to start building a credit history and to improve their credit ratings,” explained attorney Arnold Hernandez.
Hopefully, this has all helped you get a better understanding of how closing your credit cards can impact your credit. Now go forth, and may your credit be stronger than ever!
To learn more about credit scores, check out these related posts and articles from OppLoans:
Arnold Hernandez has been an attorney since 2000. He has represented consumers in many different areas of law. He has handled personal injury, wrongful death, unpaid overtime claims, and bankruptcy. He hs set goals to also represent individuals pro bono.
Janice Lintz (@JaniceLintz) is also a consumer education/travel writer. Her work has been published in Forbes.com, Yahoo Travel, Huffington Post and Johnny Jet. She contributed twice to Wendy Perrin’s column in Condé Nast Traveler and is featured in Departures magazine’s marketing video. Janice has traveled to 106 UN countries and 147 Traveler’s Century Club destinations. She is also the CEO of Hearing Access & Innovations.
Katie Ross, joined the American Consumer Credit Counseling, or ACCC (@TalkCentsBlog), management team in 2002 and is currently responsible for organizing and implementing high-performance development initiatives designed to increase consumer financial awareness. Ms. Ross’s main focus is to conceptualize the creative strategic programming for ACCC’s client base and national base to ensure a maximum level of educational programs that support and cultivate ACCC’s organization.
5 Surprising Ways You Can Hurt Your Credit Score
Everyone knows that missing a payment can hurt your credit, but did you know that applying for credit can also lower your score?
Behavior like missing your payments is widely known to be bad for your credit score, but there are many ways you can hurt your score—some of which are a little less well-known. We rounded up five things that are pretty common behaviors, and one that, quite honestly, is just really annoying.
1. Getting a credit card charge-off.
You know missing payments is bad, but you may not have realized how bad it can get. Miss too many credit card payments and the credit card company will decide you aren’t likely to ever make those payments. That’s when they hit you with a charge-off.
When you account is charged-off, it basically means that it’s been shut down. You will no longer be able to use that card to make purchases, take out cash advances, transfer balances, etc. However, you will still definitely be liable for paying back the charged-off balance. That credit card has turned from a useful financial tool into nothing more than a chunk of debt that you have to repay.
Your credit card company will report the charge-off to the credit bureaus, and the information will remain on your credit report for seven years—starting from the date that you first became delinquent on the account.
That charge-off will cause your credit score to drop—and it won’t be a tiny drop either. Payment history is the single most important part of your credit score; it makes up 35 percent of your total. Luckily, your score will improve over time—assuming that you continue to make all your payments on time—but that first drop will be a rocky one.
2. Applying for more credit.
When you’re trying to get a new loan or credit card, most legitimate lenders will want to perform a credit check before determining if they’ll lend to you. That’s because your credit score is seen as an indication of your likelihood to pay back any money you borrow. But not every credit check is the same; some are hard credit checks while others are soft credit checks—and they affect your score in totally different ways.
With a hard credit check, your entire credit report is pulled for the lender to examine. These checks are themselves recorded on your credit report—and since they represent an instance of looking for new credit, they can cause your score to lower. (For more, check out how “new credit inquiries” factor into your score.) You have to give permission before a lender can run a hard check.
Soft credit checks, on the other hand, do not require your permission before they can be run. However, they also don’t return nearly as much information. They’re not a full deep dive into your credit history; they’re more like a summary. They also aren’t recorded on your credit report and do not affect your score. These checks can be run by anyone. If you’ve ever received a “pre-approved” loan or credit card offer in the mail, it’s because someone ran a soft check on your report.
If you can’t qualify for a bank loan and need to get a bad credit loan instead, you should stick with lenders who perform soft credit checks. That way, your score won’t be impacted and there won’t be any risk in applying. Additionally, you should do your best to avoid no credit check loans at all costs. Not performing any sort of credit check is a flashing neon warning sign that the lender doesn’t care about your ability to repay. In fact, they might stand to make more money by giving you a loan that you can’t afford and trapping you in a long-term cycle of debt.
3. Carrying any high balance on your credit card.
Paying your credit card bill each month is great, but it’s not enough to maintain good credit. Ideally, you want to pay your credit cards off in full every month—that way, you get all the benefits of using one, like points or miles, without accruing any interest. But lots of us carry balances on our cards from month to month, paying them down a little at a time.
Here’s the thing: A lower balance is much, much better for your score than a high balance. At 30 percent of your overall credit score, your “amounts owed” is the second most important factor in your score. But we’re not going to just sit here and tell you to “owe less debt,” cuz that’s kind of obvious and isn’t super helpful. If you’re carrying high balances, you should aim to get them down to 20-25 percent of your total. Doing so should lead to a nice little uptick in your score.
And you should also be warned that most issuers report balances before your payment is received. So even paying off your balance in full every month could leave you vulnerable to high balances. To be safe, you should always avoid spending more than 30 percent of your balance, even if you plan to pay to it off by month’s end. Otherwise, you’ll risk negatively impacting your credit score for no good reason.
4. Failing to have a diverse credit mix.
Okay, so spending too much money on your credit card—even if you’re paying it off every month—can be bad for your credit. Clearly, the solution is to just not have a credit card, right?
Wrong! That’s also bad for your credit. Yet another factor in your score is your “credit mix,” which tallies all the different kinds of credit that you’ve taken out. It looks at credit cards versus student loans versus mortgages and auto loans versus personal loans, etc. So if you think that you can take care of your credit score by, for instance, paying back your student loans without ever having a credit card, you’re wrong.
If you have bad credit and can’t qualify for a standard credit card, you should consider getting a secured credit card. Secured cards require you to put down some money as collateral that also serves to set your credit limit. So a $500 deposit would give you a $500 limit on your card. The great thing about these cards is that the lenders who issue them will report your payment information to the credit bureaus, which makes them a great method for rebuilding your credit.
5. By having the same name as someone else with bad credit.
Yeah. It turns out that your credit score can be negatively affected without you doing a darn thing wrong! You can do everything right—pay your bills on time, keep your credit card balances low, only apply for new credit when it’s totally appropriate—and your score can still get dinged if the credit bureaus mix up your info with someone else’s.
Now, it’s totally understandable that the credit bureaus would make mistakes. After all, they are keeping detailed records for hundreds of millions of adults across the US. Errors are an inevitability. But that doesn’t make it anyless frustrating when your information gets confused with someone else’s, especially if they’re making poor decisions with their credit.
Oftentimes, these errors will arise from you and that other person having a same or similar name, resulting in what’s called a “mixed” file. Other times, this incorrect information on your report could be the result of something much more serious. It could be an indication that someone has stolen your identity.
In order to keep on top of your credit report, you should be regularly checking it for inaccuracies. Here’s the good news: You can request three free copies of your credit report per year, one from each credit bureau. To order your free copy today, just visit AnnualCreditReport.com.
If you find an error and need to have it corrected, just follow the instructions laid out in our blog post, How Do You Contest Errors On Your Credit Report? When it comes to preserving your good credit—or improving your bad credit—you have enough to worry about without someone else’s mistakes ending up on your score.
To learn more about ways you can fix a bad credit score, check out these related posts and articles from OppLoans:
Doing a great job is step one, but you have to make sure your bosses know you’re ready for a new challenge—and a bigger salary.
You want to get ahead, but you’re not sure how. You think you’re really good at your job—you’re great at it, in fact—and yet that big promotion always seems to elude you. What gives?
Well, working hard and being good at your job are good foundations for getting a promotion, but they’re not the entire ballgame. You have to make sure that your bosses understand your value and your career goals. A promotion isn’t a reward based on what you’ve already done, it’s a bet on what you are going to do moving forward.
We asked a number of employment and HR experts what their best advice was for people looking to score that big promotion. Here’s what they had to say.
1. Show your worth
Doing good work is always a good step towards being promoted. But crushing a project isn’t going to help much if no one actually notices how well you did. To that end, Steve Pritchard, HR consultant for The London School of Make-Up (@londmakeup) recommends that you make your worth known:
“Never expect that what you do at work will be instantly recognized by staff higher up in the system, if you’re doing nothing out of the ordinary,” says Pritchard.
“Make a point of your goals for the company and what it is you are doing to help your company achieve great results. Don’t let your hard work go unnoticed, but at the same time, don’t force your opinions or work achievements on your boss/managers.”
Make sure you do this strategically and professionally, setting pre-established values and pointing towards how your efforts have tangibly helped the company—and doing all of this within an appropriate setting, like a quarterly review. This is all to say, don’t just walk around your office loudly proclaiming about how you crushed it. Please.
2. Learn new skills.
According to Dr. Timothy G. Wiedman, Professor Emeritus of Management & Human Resources at Doane University (@DoaneUniversity), you can make yourself more valuable to your company—and make yourself more promotable, by continually learning and adding new skills to your repertoire:
“Make yourself more valuable to the organization by keeping your skills up-to-date. Take courses, attend seminars or webinars, and/or earn job-related certifications. Many organizations will contribute financially to your continuing education, but you may have to ask. And don’t keep your self-improvement activities a secret. Don’t brag, but do keep your boss informed about those activities.”
3. Manage your time and stay busy.
Sure, everybody would love to add some extra skills? But who has the time? Well, VitaMedica (@vitamedica) Chief Marketing Office Stuart Ridge has a great recommendation. Avoid downtime at work and use those extra hours to improve your skill set and take on new projects:
Always find work for yourself. While you shouldn’t be constantly stressed and overbooked, be sure to fill your slower times with additional projects, supplemental trainings, or assisting another team. This not only shows your superiors that you take initiative and work hard, but also helps you develop the skills needed to advance.
4. Help your boss.
Simply put, your boss is one of the most important people in your life when it comes to getting a promotion. Either they’re the one giving you the promotion, or their the one whose recommendation will seal the deal.
Are you looking to get a promotion? Make sure that you are helping your boss achieve their goals, and take pains to make sure they understand just how valuable you are. According to Pritchard:
“The boss is your priority when it comes to getting a promotion; they need to know that you’re willing to go above and beyond. Set up a meeting with your boss to find out exactly what it is they want to achieve out of a particular task, or their overall goals for the end of the month and suggest ways in which you can help to achieve them.
You want to show your boss you’re in your job for the long run; by suggesting new ideas and strategies for your company to thrive, you’re showing your commitment to the job, which will not go unmissed.”
5. Show professional courtesy.
If your bosses don’t see you as a professional, then they are less likely to think you’re worthy of a promotion. While no one wants to be bland automaton at their job, there are many ways that you can let everyone know that you are serious about your job.
Professor Wiedman has four tips in particular:
“Be punctual. Always get to work on time and get to meetings and appointments early.”
“Participate in discussions at meetings and ask relevant questions (but do not go overboard—respect others’ air-time).”
“Meet all deadlines. Always get an early start on projects so that the unexpected will not trip you up: Procrastination ruins careers! (And keep in mind that this is doubly-true in a team-based environment where colleagues rely upon your contributions!)”
“Spell-check and proof-read all written communication (including e-mails) sent to bosses, colleagues, and all outsiders connected to the business. Your written communication reflects upon your competence, so punctuation and grammar do matter!”
6. Prove you’re ready.
There’s a reason that people don’t go up to their boss on their first day and demand a promotion: They haven’t done anything to earn it yet! If you want to get promoted, you not only have to show that you’ve done the work, you have to prove that you are ready for the added responsibility.
“If you want to be promoted at work, you’ll need to be able to prove that you are ready to take the next step forward,” says Deborah Sweeney, CEO of MyCorporation.com (@MyCorporation). Promotions, while they do include a nice pay bump and title change, also mean an increase in workplace responsibilities.”
“You’ll need to be able to show your employer examples of moments when you took initiative and it paid off to benefit your department and the overall company. Promotions also help groom you for leadership roles, so you should be able to demonstrate moments where you helped lead or guide a team too.”
7. Ask questions and admit mistakes.
You’ve heard advice already about learning new skills, and the same goes for general work-related knowledge. If someone says something you don’t understand, ask them what they mean! Don’t worry about feeling stupid or uninformed; it’s much better to get the information you need and use it than to avoid a momentary bit of awkwardness.
“If you do not know something that’s job-related, ask!” says Wiedman. “A question that should have been asked—but wasn’t—can have catastrophic consequences that may never be forgotten.”
The same goes for making mistakes. If you screw-up, don’t hide it. That will only make things worse. People admire the character of people who immediately admit their mistakes. And character can go a long way towards getting your promoted.
“When you have made a mistake, admit it. Immediately. Do not wait to see if the boss has noticed. Most bosses are more observant than you may think they are,” says Wiedman.
8. Manage expectations early on.
“Set the foundation for an eventual promotion from day one of a new job by making a solid first impression,” says Ridge, “but don’t maximize your successes straight from the beginning.” You’re much more likely to get a promotion if your boss doesn’t see your request for one as a huge surprise.
Ridge also advises that setting concrete goals, and finding the right balance between impressive goals and reachable ones—is a great way to set you on the path to a promotion:
“When setting goals with your boss, identify what your true “reach” goal would be, and then set the expectation slightly lower. This makes it easier for you to guarantee that you will hit all your goals, and makes it far more likely you will exceed them, giving you an excellent reputation come promotion time.”
“Keep in mind that this doesn’t mean setting overly simple goals for yourself. Find goals that your boss will see as in line with the requirements of the position, but that you know you will be able to exceed.”
9. Look for feedback.
Have you ever played pin the tail on the donkey? Can you imagine how difficult that game would be if you had no one directing you? The same logic applies to your performance in the workplace. If you aren’t getting feedback, how are you going to know what you need to improve!
“Tell your boss and your colleagues that you welcome constructive feedback so that you can continually improve your workplace performance,” says Wiedman, adding, “And then, use the feedback that you receive!”
That last bit is crucial. Listening to feedback is one thing. Acting on it is another. It’s something that a lot of people have difficulty with. Showing that you can use feedback to improve your performance will definitely make you stand out from the pack.
10. Be prepared.
This last bit is important. If you want to get a promotion, be prepared to ask for one. And if you’re going to ask for one, you should also be prepared to, well, to be prepared! You don’t want to go in and ask for a promotion without a plan for the conversation that’s going to follow.
“Do your research. This means: Document what you have done for the company, how it has benefited- culture or bottom line. Check out HR policies on promotions and talk with trusted colleagues who can shed light on when/how workers have been promoted in your department and company-wide.”
“Make an appointment to speak with your boss. Practice at home how/what you will say. Be clear, concise and direct. State facts on how you benefit the organization and are valuable. Your seniority, loyalty, etc. Give examples. Know your career trajectory and explain why and how the promotion makes sense both for you and the company.”
“If you don’t get the promotion, ask for an explanation. Frame it as: I’d like to know how to improve my work- understand expectations so I can continue to benefit the company. ALWAYS gear your pitch toward the company—How have you helped the company grow/improve/profit? That is your value.”
There is no perfect way to receive or ask for a promotion. But follow the tips laid out in this article, and you’ll be well-positioned to start getting ahead.
If you decide you’d rather work somewhere rather than get a promotion, you can check out these related posts and articles from OppLoans:
Laura MacLeod created From The Inside Out Project®(@FTIOProject) with all levels of employment in mind to assist in maintaining a harmonious workplace. Laura is a popular professor in graduate studies at the Hunter College Silberman School of Social Work and is published in Social Work with Groups Journal. Laura leads training sessions and staff support groups at Housing Works in New York City and speaks at conferences across the country.
Steve Pritchard is an HR consultant who seeks the best from employees, striving to always take an original, innovative approach. Having previously worked in business and marketing, HR was a natural step to progress even further his career. Steve has now been working with The London School of Make-Up (@londmakeup) for over three years, handling HR and introducing new ideas to combat sensitive situations, with an aim to put both the employer and employee at ease in even the toughest situations.
Stuart Ridge is the Chief Marketing Officer at VitaMedica (@vitamedica), a physician-formulated nutraceutical company that supports people in achieving optimal health. He has over 20 years of experience in marketing and managing high-performing marketing teams.
Deborah Sweeney is the CEO of MyCorporation.com (@MyCorporation). MyCorporation is a leader in online legal filing services for entrepreneurs and businesses, providing start-up bundles that include corporation and LLC formation, registered agent, DBA, and trademark & copyright filing services. MyCorporation does all the work, making the business formation and maintenance quick and painless, so business owners can focus on what they do best. Follow her on Google+ and Twitter.
After completing 13 years as an operations manager working at two different ‘Fortune 1000’ companies, Dr. Timothy G. Wiedman spent the next 28 years in academia teaching courses in management, human resources, and quality control. He is a member of the Human Resources Group of West Michigan and does annual volunteer work for the SHRM Foundation. He holds two graduate degrees in business and has completed multiple professional certifications.
How Will Moving Countries Impact Your Credit Score?
Credit scoring methods change from country to country—and changing countries could mean starting over from square one.
You’re here because you want to know how moving to a new country will impact your credit. Maybe you’re planning to move because you need a change of pace or because you have a great new job opportunity—or maybe you’re having credit issues and specifically wondering whether moving countries could fix your problems.
Either way, you’ve come to the right place. We spoke to people who moved countries and found out what sort of change, if any, taking your credit score across a border causes.
Spoiler alert: There will be changes.
Wait, what’s a credit score?
Before we get into how moving to a new country will affect your credit score, let’s quickly make sure we all know exactly what a credit score is.
Your credit score is a three-digit number created through information gathered by the three major credit bureaus: Experian, TransUnion, and Equifax. This number is used by all manner of lenders to determine if they’ll lend to you and at what rate.
In general, a score above 720 is considered a great credit score, while 719 to 680 is considered good credit, and anything below 550 is considered poor credit.
Your credit score can have a big impact on nearly every aspect of your life, from educational to professional, so you’ll definitely want to pay all of your bills on time and pay off your debts whenever possible to keep your score as high as possible.
Move out of the US and your score will basically reset to zero.
You may not be surprised to learn that moving to a new country has a major impact on your credit score. You may be surprised to learn that some other countries have a very different approach to credit.
“As someone who has moved countries and moved back, I can confirm that moving countries can have various effects on your credit score—not all of them desirable,” advised Ben Taylor, a writer who has lived in the United Kingdom and Portugal and offers advice for freelancers at Home Working Club (@homeworkingclub).
“Not all countries have the kind of sophisticated credit scoring systems people are used to in places like the UK and the USA. In some countries (Portugal is an example), applications for credit have a more significant ‘manual’ element with more human decision-making involved.”
But even though the US and UK have similar credit systems (Experian is a UK company, after all) that doesn’t mean your credit score carries over when you move across the Atlantic. Nick Brennan, founder and CEO of MyUKSIMCard.com (@UKSimCard), learned that lesson first-hand:
“I moved to London a year ago so I have a unique perspective on what happens to your credit score. Here are the main points:
“Everything resets to zero. The slate is wiped clean! That can be a good thing (if you have a bad credit score in your home country) but it can be a bad thing too (if you have a good credit score). I was the latter, and I found I couldn’t even initially get a $50USD/month postpaid/contract cell phone plan because I didn’t have any credit history. So in a way having no credit history was just like having a bad credit history.
You can build your credit with just a few credit card transactions a month.
“I started getting myself a credit history by doing a few little things,” says Brennan.
“Applying for a couple of low limit credit cards and immediately putting some transactions on them and then paying the bill in full each month. This started giving positive marks on my credit file. Even if you keep using your USA credit card for most transactions, just put a few small transactions each month on the local credit card so that your repayment history is uploaded monthly to your credit file by the credit card provider.
“Putting my name on the electoral roll for my local council (in the UK, non-citizens can vote in their local council elections). My name on the electoral roll is placed on the credit file and assists with your credit score (it shows further ‘proof’ of your residential address).
“Setting up a local UK bank account and having my utilities paid automatically through the bank account. Again this started giving positive marks on my credit file.
“In the UK, one of the main credit reporting agencies is Experian. They have a service where you can pay a small amount to get a copy of your credit file. This is a good way to see the criteria they use when scoring and then try to fill in those blanks, but also to monitor any issues on the file (for example if they have confused you with someone else with a bad credit history).
“Over the ensuing 12 months, I saw my credit score go from very poor, to poor, to fair, to good, to now excellent! I achieved this through the methods above and ensuring the credit cards were paid in full each month and the utility bills were being automatically paid from my bank account.”
But what if you’re just moving across a land border?
The same thing happens if you move to the US, even from Canada.
You might understand that you’ll have to go through a reset when you travel overseas, but surely crossing into a neighboring country can’t have such big credit ramifications, right? Wrong, as Andrew Stephenson, director of product marketing for New Air Appliances (@NewAirUSA) learned.
“In Canada, I had a good credit rating—having owned two properties, credit cards, etc and was pretty much debt free (other than a mortgage),” Stephenson told us. “I had 40 years of credit history in Canada. The company I worked for moved me to the US and my credit score went to zero. Amazingly, two countries that are physically connected and do so much business together you think would share credit info. But alas, no.
“I had to start over, to the point of having my company co-sign on a credit card for me because I couldn’t get approved. This also applied to trying to get a cell phone as well—T-Mobile is one of the only US carriers that will do a Canadian credit check. Three years later in the US, I have an excellent credit score and recently bought a house in Orange County, CA.”
And you definitely don’t want to make any moving decisions too hastily. Because credit changes can’t always easily be undone.
You can’t go home again. Well, you can, but it’ll screw up your score again.
Just because you move back to your original country doesn’t mean your credit will automatically go back to what it was. As Taylor explained:
“However, things don’t usually work out so well in the other direction. Being away from a country with a refined credit scoring system can be problematic when you return. If faced with an application for something that needs several years of addresses, many systems won’t cope with an overseas address, meaning it can take years to build a credit score back up. A gap of several years takes automated systems ‘off script,’ which can leave people who’ve been out of the country for a while unable to access relatively simple things, such as car finance and cellphone contracts.”
Moving countries is a big decision, and it’s one that has a big effect on your credit score. If your credit is already bad, moving can give you something of a clean slate. But it should probably only be one factor among many in such a huge life decision. If you’re thinking of moving abroad solely to escape bad credit, we can assure you there are simpler solutions.
To learn about how you can fix your credit score, check out these related posts and articles from OppLoans:
Nick Brennan is the Founder & CEO of MyUKSIMCard.com (@UKSimCard) which offers prepaid SIM Cards with data, minutes and texts for Americans heading to the UK and Europe.
A 20-year industry expert in Consumer and Digital Marketing, Andrew Stephenson moved from Toronto, Canada to Orange County, California for work in 2015 to build a digital innovation center for his previous agency. Currently, as Director of Product Marketing for New Air Appliances (@NewAirUSA), Andrew and his team oversee the planning and execution for new product launches through a mix of content marketing, online advertising and influencer marketing that connects with consumers along the path to purchase.
Cash advances just show up as normal credit card purchases on your credit report.
When you’re in a financial bind and you need some quick cash, taking out a cash advance on your credit card can be an okay solution. Sure, they don’t come with the ludicrously high interest rates and short repayment terms of a payday loan, but they’re still much costlier than just maintaining an emergency fund.
If you’re living paycheck to paycheck, you should also consider how a cash advance will affect your credit score. After all, a higher score will lead to lower (i.e. better) interest rates down the line, which means a rosier financial outlook overall.
But how does a cash advance affect your credit score? Is there a chance that it could even help your score in the long run?
A cash advance is a loan you take out on your credit card.
When you make a normal purchase on your credit card, that amount you spend is added to your total balance. The same is true when you take out a cash advance, the only difference being that you receive cash instead of a purchased item. If you were to take out a $60 advance, you would receive $60 in cash and $60 would be added to your total balance.
When it comes to repaying your cash advance, nothing changes from how you would regularly pay down your balance. Ideally, you should pay off your balance in full every month, but your monthly minimum payments would only marginally increase with a cash advance added to your total versus a regular purchase.
A cash advance is convenient, but it’s much more expensive than just using your card.
However, there are some very important differences between cash advances and regular credit card transactions. For one, a cash advance comes with a higher interest rate than normal transactions. The difference will vary from card to card and from customer to customer, but the average credit card APR is a bit over 16 percent while the average cash advance APR is almost 24 percent. That’s a big difference.
Second, there is no way to avoid paying interest on a cash advance. With a standard credit card transaction, there is a 30-day grace period before interest starts to accrue. This is why it’s so important to pay your credit card off every month; it means borrowing money interest-free! But with a cash advance, interest starts accruing immediately. While it’s still a good idea to pay off your cash advance as soon as you can, there’s just no way to avoid paying interest.
Lastly, you’ll typically get charged a fee for taking out a credit card cash advance. And it’s not a tiny fee either. The average cash advance fee is usually something like $10 or 5 percent, whichever is higher. That means that a $500 cash advance would cost $25 right off the bat!
Does a cash advance have any effect on your credit score?
Luckily, a cash advance won’t have any real effect on your credit. They aren’t recorded separately from other credit card transactions on your credit report, so the credit scoring algorithms have no way of knowing what’s a cash advance and what’s a regular transaction. All they’ll see is a higher credit card balance.
If you’re sensing a “but” coming, you are correct. Because, while cash advances won’t get noted on your credit score, a higher credit card balance will get noted and could possibly hurt your score if it grows too large. Your total amounts owed makes up 30 percent of your credit score, so taking out $1,000 cash advance and adding that thousand dollars to your balance could definitely lower your score.
And a cash advance definitely won’t help your score. Taking out additional debt and paying more money towards interest just means higher balances and less room in your budget to pay them down. In theory, paying off a cash advance would help your score since it will get noted in your payment history (which makes up 35 percent of your score) but it’s not really going to have any effect. Failing to pay your bill on time, however, will have an immediate negative effect.
Some “cash advance” loans are actually payday loans in disguise.
There are several types of no credit check loans that like to call themselves “cash advance” loans, possibly to make them seem more like credit card cash advances. But don’t be fooled.
While some bad credit loans, particularly installment loans, can be a useful way to cover emergency expenses, predatory no credit check loans are anything but. These loans come with much higher interest rates and significantly shorter payment terms, and they pose a much greater risk to your financial future.
These loans are typically payday loans or title loans, which can carry annual interest rates anywhere between 250 and 500 percent. They’re meant to be paid back in a single lump sum payment, usually only a few weeks to a month after the loan was first borrowed. These factors—high rates and short terms—can make these loans exceptionally hard to pay back on-time.
These predatory “cash advance loans” could really hurt your score.
Here’s the thing: These lenders don’t mind that. In fact, they stand to make a lot more money this way! If you can’t pay their cash advance loan back on time, they can let you roll the loan over—extending the due date in return for paying additional fees and interest. The more you roll the loan over, the more money the lender makes, all without the customer getting any closer to paying off the original loan.
While most of these lenders don’t report their loans to the credit bureaus—meaning that the loans themselves won’t affect the borrower’s credit score—the cycle of debt that these loans can create will certainly affect a person’s creditworthiness. More money going towards interest on a payday loan means less money for other bills and necessary living expenses. Defaulting on your gas bill because you rolled over your payday loan will ding your score for sure!
Plus, defaulting on a sketchy bad credit loan could mean getting sent to collections. And that collections agency will definitely report you to the credit bureaus. It’s pretty much a lose-lose!
While credit card cash advances are far from a perfect financial solution—and will not help raise your credit score—they are far preferable to “cash advance loans” that are really just payday loans in disguise.
To learn about some ways that you can actually improve your credit score, check out these related posts and articles from OppLoans:
Before credit scores were invented in the 1950’s, lenders took a much more social approach to determining creditworthiness.
Your credit score is, for better or worse (and often worse) one of the more important numbers in your adult life. It dictates if you can get a loan and what rate you’ll pay. It could determine if you can ever own your own home. It might even determine if you get that dream job.
But how did this important number come to be? What secret Illuminati council first started tossing bank stubs and “past due notices” into a mysterious cauldron that spit out credit scores?
Okay, well, it definitely didn’t start like that. Instead, it went a little something like this …
For millennia, creditworthiness was judged on a much more casual basis.
Since the first caveman, Gug, asked his neighbor, Gorf, to borrow some wood to make a fire, lenders have had to consider whether the loans they offer will be paid back.
Sure Gug said that he “promise make fire with wood, give back more wood and cooked meat tomorrow,” but could Gug be counted on? What if Gug runs away to a different cave and Gorf never sees his wood again?
Perhaps Gorf could ask some of their fellows if Gug is reliable.
And that’s pretty much how things worked for the next tens of thousands of years. Even as early credit bureaus started to emerge, representatives would often speak to local businesses to find out if a particular applicant was reliably paying the money they owed in a reasonable manner.
Additionally, potential lenders would usually rely on character judgments. Maybe the person who walked into their office always paid their bills on time, but the loan officer just didn’t like something about the way the applicant conducted themselves. In which case: “No loan for you!”
That may not sound fair to you, and who do you turn to when something isn’t fair? Well, Bill Fair, himself, of course.
Credit scores were invented in the 1950’s.
In 1956, engineer Bill Fair teamed up with mathematician Earl Isaac to create Fair, Isaac and Company, with the goal of creating a standardized, impartial credit scoring system. Within two years, they had begun selling their first credit scoring system.
Today, that company goes by a different name: FICO.
The current FICO score system debuted in 1989 and has become the industry standard. It is a number between 300 and 850 determined by the following factors (by descending level of importance): payment history, amounts owed, length of credit history, types of credit used, and recent credit inquiries.
And who keeps track of those factors? The three major credit bureaus, of course!
An even briefer history of the credit bureaus.
The three major credit bureaus, Experian, TransUnion, and the always reliable Equifax, track your financial information to determine your credit score. Each of those companies has its own unique history.
Equifax is the oldest of the three credit bureaus, dating all the way back to 1899, when it was known as the Retail Credit Company. They were one of those early credit bureaus we mentioned above, and they would collect all manner of information about potential credit seekers, including personal details, like marital troubles or political opinions.
Criticism of these practices helped lead to the Fair Credit Reporting Act. And then Equifax never had any problems ever again.
TransUnion was founded in 1968 as a railroad leasing organization. Apparently, railroads weren’t interesting enough, because they immediately acquired the Credit Bureau of Cook County.
Experian is the newest of the credit bureaus. It was founded in 1996, making it a certified 90’s kid. We bet it loves pogs.
As a result of the Fair and Accurate Credit Transactions Act of 2003, you are entitled to a copy of your credit report from each of the three major credit bureaus once per year. To request one of these copies, just visit www.AnnualCreditReport.com.
Credit scores have done a lot. But many problems remain.
So knowing that the goal of the FICO credit score was the creation of a more fair system, was that goal reached?
Sort of! A FICO score is probably a more impartial way to handle credit approval than just having some bank representative make a superficial judgment about potential applicants. But algorithms can actually reinforce racial disparities that already exist.
And even if an applicant qualifies for a better rate, an unscrupulous lender could still take advantage of them, as happened before the subprime housing crisis, when minority applicants who qualified for prime loans were given subprime loans instead.
But there are issues beyond racial discrimination, inaccuracies, and data breaches. On a basic level, you need to take out some form of a loan—whether it be in the form of credit card use or otherwise—to build up your credit score. Theoretically, you could be very financially responsible without ever using credit cards or going into debt … and that would leave you without any credit score to speak of.
We don’t know what the future of credit scores looks like, but hopefully, it’s a system with fewer mistakes and more fairness.
To learn more about credit, check out these related posts and articles from OppLoans:
Is the Credit Blacklist a Real Thing or an Urban Myth?
Even though it can feel like you’re being blacklisted, the real answer is much more mundane.
Your fingers are shaking as you type the last of your information into the credit card application. You’ve been denied in the past, but this time you are sure that you will be accepted. After all, the company sent you a notice saying that you were “pre-approved!”
You hit “submit,” cross your fingers, and wait. 15 seconds later a response comes back.
What the heck is going on here?! You mention it to your uncle Terry and he tells you about this thing called the “credit blacklist.” Basically, because you’ve misused credit cards in the past, you are on a secret list that will ensure you never get a credit card ever again.
Sounds about right, you think to yourself. But is that what’s really going on here? Is there really such a thing as a credit blacklist?
No, there is no such thing as a credit blacklist.
Please forgive us for not keeping you in suspense. But no there is absolutely no such thing as a credit blacklist.
Maintaining a hard blacklist is forbidden under the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act (ECOA). The FCRA was passed in 1970 and the ECOA was passed in 2003. Both are aimed at preventing discrimination in lending and ensuring proper use of citizens’ private data.
But if there is no credit blacklist, then why would someone consistently be denied for credit? The answer lies in their credit history, as well as the algorithms that large companies use to make their lending decisions.
Your credit history determines your credit future.
Whenever you take out a loan or a credit card, make a payment (or not make payment), add money to your credit card balance, close a card, pay off a loan, or file for bankruptcy, that information gets reported by your creditor and added to your credit report.
Information stays on your report for seven years (or longer in some cases, including bankruptcy) and it weaves a fairly comprehensive picture of how you’ve used credit in the past. When people talk about your “credit history,” they are basically referring to what’s contained in your credit report.
Or rather, your credit reports, because you actually have three of them. Each of the three major credit bureaus—Experian, TransUnion, and Equifax—collects information and maintains their own separate version of your credit report. Depending on which businesses report to them, information can vary between reports.
The info contained on your report is what’s used to create your credit score. More often than not, the score used is your FICO score (created by the FICO corporation), but it could also be your VantageScore, which was created a joint venture by the three credit bureaus.
If you are being denied for credit, it’s likely because of the info on your credit report and how it’s reflected in your score.
A poor credit history can have the same effect as being “blacklisted.”
The exact algorithm for creating your FICO score is secret, but the FICO corporation has made it known that your score consists of 5 different information categories and that some categories are more important than others.
The two most important categories are your payment history and your amounts owed. Payment history makes up 35 percent of your score, while amounts owed make up 30 percent. Together they make up well over half your total FICO score.
If you’re being denied for credit, the odds are good that it’s because of problems in your payment history and/or your amounts owed. Maybe you had a period where you were out of work and skipped a number of credit card or installment loan payments. Or perhaps you were one of the 58 percent of recent college graduates who racked up too much credit card debt within their first two years out of school.
Even if it’s been half a decade since you cleaned up your financial act, that information is still on your report and dragging down your creditworthiness.
Credit report errors could be resulting in a “blacklist” effect.
Credit bureaus collect information on hundreds of millions of Americans, so it’s not at all surprising that mistakes end up on people’s reports. But that lack of surprise doesn’t forgive the immense damage that these errors can do to your score.
Errors can arise from any number of things, including the company that reports the info to the bureau making a mistake on their end. Oftentimes, an error will stem from your information being confused with someone else’s because you two have the same name.
Don’t worry. These errors can be fixed. To check your report for errors, just visit www.AnnualCreditReport.com and request a copy. By federal law, each credit bureau is required to provide you with one free copy of your report per year. All you have to do is request it.
Getting flagged by Chexsystems can feel like you’re on a blacklist.
Beyond the three major credit bureaus, there are a number of credit reporting agencies that track different aspects of consumer behavior.
One of the major agencies is Chexsystems, which tracks deposit accounts (stuff like checking and savings account). If you have a history of poor financial behavior with a checking account—racking up NSF fees, constant over drafting, refusing to pay a negative balance—then Chexsystems will flag you.
The next time you go to a bank to open a new account, you could be in for a rude awakening. While opening a bank account might seem like a formality, a poor Chexsystem score will basically ensure that your application for a bank account gets rejected.
Information stays on your Chexsystems for five years, which means that it could be that long before you are able to open another bank account. And if a lender, landlord, or utility company decides to pull your Chexsystems report, it could negatively affect your application with them as well.
There is no credit blacklist, but that doesn’t make having bad credit any easier.
If there were a hard and fast credit blacklist, it would almost be a little comforting. After all, getting your name removed from this blacklist would set you on the path to financial success. Personal loan and credit card applications would come flowing in, and you’d stop having to rely on bad credit loans, no credit check loans, and cash advances to get by.
But the truth is far more complicated. Poor financial behavior will stick with you long after you’ve cleaned up your act, and random errors on your credit report will ding you for stuff you didn’t even do!
The only thing you can do to improve your credit is to keep practicing smart money habits–plus a few weird little tricks that can help you out as well.
To learn more about ways to improve your credit score, check out these related posts and articles from OppLoans:
3 Ways to Finance Dental Care, Even With Bad Credit
Payment plans, special credit cards, and bad credit dental loans can all help you afford the oral care you need.
It’s easy to avoid going to the dentist, especially if you don’t have a ton of extra cash to shell out for a cleaning. But avoiding the dentist can lead to a much larger bill down the line when you end up needing a filling or, worse, a full root canal.
Even with dental insurance, you’re going to end up with a very sizeable bill after a major dental procedure. At that point, the question becomes: How are you going to pay for it?
If you don’t have a lot of extra money, or if you have bad credit, you probably can’t pay for the whole thing out of pocket. Instead, you’ll have to find another way to finance your visit. Here are your options.
1. Payment plans
Many dental practices have payment plans that allow you to pay off the cost of your procedures a little bit at a time. Assuming that you cannot pay the full amount up-front, payment plans are hands down your best option for financing dental work.
These payment plans have something you won’t find with any other form of dental financing: zero percent interest. Since this isn’t a loan or a credit card, you won’t end up paying more in the long run than you would have paid up front.
Unlike a loan or a credit card, payment plans won’t be reported to the credit bureaus—unless you default on your payments and it gets sent to a collections agency. But while not having your payments count towards your credit score isn’t ideal, the zero interest is worth the trade-off.
2. Dental credit cards
This is another payment option offered by many dentist offices. It’s not as good an option as a straightforward payment plan, but it has its benefits.
Instead of letting you pay off your dental procedure a little bit at a time, the office will help you submit an application to a financing company. If you are approved, you receive a credit card that you can use to pay your bill. You then pay off the credit card through monthly payments.
With a dental credit card, your monthly payment should be pretty small, usually something like two to three percent of your total bonus plus a $10-$15 monthly minimum. If you are on an incredibly tight budget, this can give you a lot of breathing room.
But those low monthly payments have a downside. Paying only the minimum payment every month means that it could take years to pay off your full balance. And taking that long to pay off your dental procedure means paying a ton of money in interest.
That’s because, compared to regular credit cards, dental cards have a high APR. In 2017, Time.com cited a rate of 26.99 percent, which is over 10 percent more than the average credit card rate.
On the plus side, those payments will be reported to the credit bureaus, which means that it could end up helping your credit score (or hurt your score if you can’t pay). But honestly, those extra payments on your credit report aren’t worth the extra interest.
If you decide to go with a dental credit card, don’t let those low monthly payments lull you into a false sense of security. Make sure you pay more than your minimum payment every month.
It’s the same as using one of your regular credit cards—which might be preferable to using one of these dental cards, depending on whether you can fit the full cost onto your card.
With credit cards of all kinds, the more you pay every month, the more you save overall.
In cases like this, you’ll probably have to take out a bad credit loan in order to pay for your dental work. These loans come with much higher rates than standard personal loans, but that doesn’t mean that they can’t be a good financial solution.
When you’re looking for a bad credit loan to pay for dental work, make sure you steer clear of no credit check loans. These are products are offered by lenders that don’t care at all about your ability to repay your loan. In fact, they might stand to make more money if you can’t pay your loan on-time.
Common no credit check loans include title loans and payday loans—which are sometimes referred to as “cash advance” loans. These are small-dollar, short-term loans that usually have to be paid back within a few weeks or a month. They have incredibly high APRs, often between 300 to 400 percent, but sometimes much higher.
They are exactly the kinds of loans you should be avoiding when looking to pay for dental work.
Instead, you should look for a bad credit installment loan that lets you pay your balance off over time. These payments will be larger than the monthly minimum on your credit card, but they’ll be much smaller than the payments for payday and title loans, which generally require that you pay the loan off all at once.
Make sure you find an installment loan that’s amortizing so that the amount you’re paying towards interest grows smaller over time. And if the lender runs a soft credit check during your application process, even better. That means that they care about your ability to repay the loan the first time, instead of just rolling it over.
After all, the best bad credit loans will help you fix your credit so that the next loan you get will come with a lower rate.
Other options for lowering the cost of dental care.
The first thing you should do is get dental insurance. It is much cheaper than medical insurance, and good a plan will dramatically lower the cost of dental care. No one loves paying their insurance bill every month, but we can guarantee that you’ll hate paying the full cost of your root canal even more.
Another option is visiting a dental school and letting the students be the ones to give you care. If that makes you a bit squeamish, well, we can’t really blame you. But they will be doing these operations under close supervision, and the cost of the whole thing will be a fraction of what you’d pay at a regular dentist.
You can even talk to your dentist about getting a discount for paying them in cash. Many businesses, including dental practices, are willing to charge less for a service in return for cash payments!
Lastly, a great way to avoid large dentist bills is … to go to the dentist regularly. Preventative care is way cheaper than restorative care, so we recommend you choose regular cleanings over the occasional root canal.
The only thing we won’t ask you do to is to floss regularly. Come on now, we’re not madmen.
To learn more about handling medical costs when you have bad credit, check out these related posts and articles from OppLoans:
Even if you’re closing it and replacing it with a new card, think again!
Your credit score might seem simple, but it’s not. And while basic “good money” habits will get you very far—stuff like paying your bills on-time and not maxing out your credit cards—there are other tricks to a good score that aren’t so obvious.
While it might seem like closing an old credit card is a good way to maintain good credit, it could actually have the opposite effect. Closing that card could actually hurt your score, not help it.
The 5 parts that make up your credit score.
Before we get into the specifics, let’s cover how your credit score is calculated. And when we say “credit score,” we are talking specifically about your score from FICO.
While the specific algorithms that are used to create your FICO score are unknown, we do know that credit scores are made from five different categories of info, some of which are more important than others.
The five categories are:
1. Payment History: This makes up 35 percent of your score, more than any other single category. It measures your history of paying your bills in full and on-time. If you have a bad credit score, odds are that your payment history is at least partially to blame. When a lender or a landlord is looking to do business with you, seeing that you keep up with your bills is key.
3. Length of Credit History: This category makes up 15 percent of your score, and it measures how long you’ve been using credit. The longer you’ve been responsibly using loans and credit cards, the better. It also takes into account the average age of your open accounts. Lenders not only like to see a long history of credit use, they also want to see longstanding relationships with other lenders and credit card companies.
4. Credit Mix: This category makes up 10 percent of your score. It takes into account the different kinds of credit you’re using. This means credit cards versus personal loans versus home and auto loans versus student loans, etc. If the only type of borrowing you do comes from credit cards, for instance, that will ding your score. Lenders like to see a diverse credit mix.
5. New Credit Inquiries: This category also makes up 10 percent of your score, and it reflects the number of times that you have recently applied for more credit. Any time you apply for credit from a traditional lender, they will run a “hard” check on your credit. These checks are noted in your report, and too many within a short time frame can negatively impact your score—though not by much. Too many recent inquiries signal that you might be desperate for new credit, a sign that you aren’t handling your finances responsibly.
Got all that? Great. When it comes to closing your old credit card, the two categories that it can negatively affect are your amounts owed and the length of your credit history.
Closing a credit card will hurt your credit utilization ratio.
There is a second part to the “amounts owed” part of your score that we did not touch on in the above section. It’s called your “credit utilization ratio” and it relates specifically to your credit cards. It’s also a crucial element to your overall score.
Credit utilization ratio measures how much of your total credit limit is being used. For example, let’s say that you have two credit cards: Card A has a $3,000 limit and Card B has a $7,000 limit. That means, between the two cards, you have a total credit limit of $10,000
Now let’s say that you had spent $2,000 on Card A and $4,0000 on the Card B. This would mean you have spent a total of $6,000 against your $10,000 limit. Your credit utilization ratio would be 60 percent.
In an ideal world, you are paying off your credit card balances in full every month. But many people carry balances on their cards from month to month, paying them down a little bit at a time.
If you’re carrying outstanding balances on your cards, try not to let your credit utilization rise above 30 percent. That’s the range where your score will really start to suffer.
And here’s where closing that old card comes into play: Your credit utilization ratio is just as much about your total credit limit as it is your balances. If you have an old card that you are no longer using, that unused credit limit is improving your ratio.
Back to Card A and Card B. What if you got a $2,000 tax return and used it to pay off Card A? Your credit utilization ratio would now stand at 40 percent—still high, but way better than 60 percent. But if you closed the card, your ratio would balloon to 57 percent. That’s almost as high as when you started!
Old accounts help your score more than new accounts.
There’s another way that closing that old card will hurt your credit score, and it’s by lowering the average age of your accounts.
Lenders not only like to see that you’ve been using credit (responsibly) for a long time; they also like to see that you have been using the same accounts for a long time. It shows them that another lender has been able to maintain a long-term financial relationship with you as their customer.
So even if you closed out that old card in favor of a new one with better rewards and a lower interest rate, it would still ding your score. Keeping that old card open will allow it to stay on your credit report (as an open account), which will, in turn, be reflected in your score.
Of course, the trouble with keeping an old card open is that you might be tempted to use it. And if you’ve recently spent a lot of time paying down excessive credit card debt, taking on new debt beyond what you can immediately pay off is a recipe for financial disaster.
So instead, you should cut up the physical card. At the very least you should lock it away in a safe. Do whatever it takes to make sure that your old card can stay open and benefit your credit score without you using it to take on additional, unnecessary debt.
To learn more about your credit score, check out these related posts and articles from OppLoans:
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.