What’s The Most Important Part of Your Credit Score?

There are five different categories that make up your credit score, and one of them makes up over one-third of your score all by itself.

Welcome to the Score Countdown, where we’re counting down the most important scores!

Score number 5? The score for Star Wars: A New Hope, which was labeled the number one greatest movie score on AFI’s list of greatest film scores. And how could it not be?

Score number 4? That would be 370, which was the combined score of the highest scoring NBA game in history on December 13, 1983, when the Pistons beat the Nuggets 186 to 184.

Coming in at score number three is 1,247,700, the current high score for the “Donkey Kong” arcade game, set by Robbie Lakeman on February 2018.

The second most important score is the “four score” of Gettysburg Address fame.

And coming in at number one, the most important score there is … your credit score! Yes, your credit score is very important if you’re looking to get a personal loan, an apartment, a car, or any number of other things. And it’s made up of different parts.

But let’s just ask the question you came to have answered: What’s the most important part of your credit score?


The most important part of your credit score is …

Of the five factors that make up your credit score, the most important one is payment history. We’re glad we could answer that question for you. Have a nice day! Keep warm!

Wait, how do you improve your payment history?

Don’t worry, we weren’t just going to leave you to fend for yourself. We spoke to the experts to find out how you can improve your payment history. The first piece of advice may seem obvious, but it’s also very important.

“Start making payments on time,” urged Leslie H. Tayne Esq. (@LeslieHTayneEsq), Founder and Head Attorney at Tayne Law Group (@taynelawgroup). “If your credit score is hurting because of your payment history, this likely means you haven’t been making your payments on time. In order to begin to remedy this, you need to start paying on time.”

“Paying as much as you possibly can by the due date will be the fastest way to improve your score, but even making the minimum payment on time will help. Do whatever you need to do to remember to make a payment.

“I write all of my due dates on my desk calendar in red pen so I don’t forget. Or perhaps set a calendar reminder in your phone or leave yourself notes where you’ll see them and remember. You can’t erase late payments from your history. The only way to repair it is to change your habits.”

“Be patient: One on-time payment won’t erase years of damage from late payments. Boosting your score will be a gradual process, particularly if it’s very low. Late payments appear on your credit report for seven years. You will need to establish a consistent pattern of paying on time to help counteract late payments. Late payments affect your credit more the more recent they are, so working to pay on time consistently will help lessen the damage.”

Request a (free) copy of your credit report.

“Aside from the obvious answer of pay your bills on time, there are a couple other things you can do to help your payment history on your credit score,” explained Joyce Blue (@EmpoweringYouLEC).

“The first thing is to get a copy of your credit report from all three credit bureaus and make sure the information reported is accurate. You’d be surprised to find out that it isn’t always right. Since this category of your score is 35 percent of how your credit score is calculated you want to make sure that the reports are correct.”

Here’s the good news: you can get one free copy of your credit report from all three credit bureaus once a year! To request a free copy of your credit report, visit www.AnnualCreditReport.com.

“Make sure to dispute anything on your report that is not correct,” Blue continued. “Payment history stays on your report of 7 years. If you have anything reported that is older than seven years you can request that it be removed as well. You can also request things to be removed that are not quite seven years old, and sometimes you will be successful in having those removed as well.”

Ask your landlord to report your rent.

“Are you great at paying your rent, but not all your other bills? You can go to your landlord and ask them to report your on-time payment history to the credit bureaus,” said Blue.

“Usually, the larger apartment complexes will be more apt to do this for you, but it never hurts to ask even with a landlord with a single rental. If you don’t ask, the answer will always be no.

“This will help show your on-time payment history and can be a boost to other things you might not have as good a track record paying.”

Use a credit card … carefully.

If you don’t really have a payment history to speak of, the best way to build one is through limited and responsible credit card use.

“Whether with a standard or secured card, just make one small purchase a month and pay it off in full,” advised Todd Christensen, education manager for Money Fit (@MoneyFitbyDRS).

“Best examples are Netflix and cell phone bills. They are small and typically the same every month. Do NOT carry the card with you into a consumer purchase situation (store).”

While payments you make on an installment loan can also help your credit score, this isn’t true for all types of personal loans. If you have lousy credit, be warned that most short-term bad credit loans like payday loans, cash advances, and title loans can’t help your score; they can only hurt it.

That’s because most lenders who offer no credit check loans don’t report payment information; they basically opt out of the credit check ecosystem altogether.

Of course, there are four other factors besides your payment history.

The other four factors.

Even though payment history is the most important part of your credit score, you don’t want to neglect the other four factors, which are, in descending order of importance: amounts owed or credit utilization, length of your credit history, credit mix, and new credit inquiries.

“Aside from your payment history, your credit utilization ratio is another major factor in your credit score,” Tayne told us. “This is the amount of money you owe versus your total credit line, and it includes all of your credit cards and loans.

“Keeping a low credit utilization ratio—under 30 percent is preferred, but you should aim for even less than 30 percent—can also help to offset a negative payment history. Working to get under or stay under that ratio, while also making payments on time, can help repair your credit.”

OK, now you have some solid advice to help you build up your credit score. Stay warm! And to learn more about credit scores, check out these other posts and articles from OppLoans:

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

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Contributors

Money relationship expert and self-empowerment coach, Joyce Blue is a certified Rapid Results coach. Joyce is passionate about empowering others to master their relationship with money, so all of their relationships thrive, they step into their power and fall in love with their lives. Contact Joyce at joyce@joyceblue.com or on Facebook and Instagram @EmpoweringYouLEC.
Author and Accredited Financial Counselor®, Todd R. Christensen, MIM, MA, is Education Manager at Money Fit by DRS, Inc. (@MoneyFitbyDRS), a nationwide nonprofit financial wellness and credit counseling agency. Todd develops educational programs and produces materials that teach personal financial skills and responsibilities to all ages. Having facilitated nearly two thousand workshops since 2004 on the fundamentals of effective money management, he based his first book, Everyday Money for Everyday People (2014), on the discussions, tips, stories and ideas shared by the tens of thousands of individuals and couples in attendance.
Leslie H. Tayne, Esq. (@LeslieHTayneEsq) has nearly 20 years’ experience in the practice area of consumer and business financial debt-related services. Leslie is the founder and head attorney at Tayne Law Group (@taynelawgroup), which specializes in debt relief.

12 Tips for Talking About Money With Your Spouse or Partner

Talking about money with your spouse or partner isn’t easy, but these helpful bits of expert advice should help make the conversation a healthy and productive one.

Maintaining a healthy marriage or long-term relationship takes a lot of work and communication. But if you and your spouse or partner aren’t talking to each about money, specifically, it could be undoing all the hard work you’re doing in the other areas of your marriage.

“Occasionally I’ll meet with clients and can tell that they’re on different pages financially,” said Holly Peterson, owner of Elite Retirement Strategies in Pocatello, Idaho. “When I meet with a couple and one indicates that they are an aggressive saver and the other is laid back and doesn’t track their spending, I know immediately that they are not on the same page in multiple ways. Each person will have a completely different attitude when it comes to money and how they treat it.”

If you and your spouse are unable to communicate about money, then neither of you is setting your partnership up for success. Don’t let that happen. Here are twelve pieces of advice from financial and relationship experts that can help you and your partner start a healthy, productive money conversation.


1. Be honest and be open.

Chad Rixse is the founder of Far North Capital (@farnorthcapital) in Anchorage Alaska. He cited “honest and open communication” as a crucial component in successful marriages and long-term relationships. “Relationships that harbor secrets or are dysfunctional on the communication end rarely, if ever, work out long-term,” he said.

“Even if you and your spouse (or significant other) share different financial principles or goals, if you are able to be open and honest about your current individual financial pictures, expectations, management styles, and habits, it’s far easier to find common ground and align your financial lives together.”

Personal finance educator Denise Myhand, founder of The Wealth Culture, an organization dedicated to the narrowing the wealth gap for women and minorities, agreed that partners being honest and open in their communications is key to successful money conversations.

“Let your partner know what is going with you financially or if you have any concerns,” she said. “Do you have debt that the partner needs to know about, maybe you have nothing saved for retirement or you don’t like combining your money because you feel like you are being controlled. Whatever the issue is you have to share it to resolve it. You and your partner can not address issues if you both are not aware of them.”

2. Don’t wait. Start talking now.

Syble Solomon is the creator of Money Habitudes (@moneyhabitudes), a personality profile and financial conversation starter game for couples. Her advice is to quit waiting and start talking about money with your partner ASAP.

“Start by acknowledging to your partner that talking about money can feel awkward, but it builds trust and lays a stronger foundation for your relationship,” she said.

Sounds scary, right? Don’t worry, Solomon offered some other helpful tips to help you ease into the conversation:

  • H.A.L.T.: When getting started, give yourself the advantage of a time and place where you can relax; planning a quiet evening to talk about money over coffee is much better than right after fighting about the credit card bill. Think of the acronym H.A.L.T.; don’t try to have this conversation when someone is hungry, angry, lonely or tired.
  • Avoid numbers—at least at first. There seems to be a lot of advice that tells couples that the first money conversation they should have is doing a budget or going over credit reports. Think about working up to that and first get comfortable talking about finances in more general terms.
  • Reminisce. An easy way to begin is to just share your memories. Remember the first time you bought something with your own money? What did you buy? How did you get the money? A simple conversation like this proves that you can talk about money in a constructive way and lays the foundation for future conversations and understanding. Then you can talk about debt and credit scores, etc.!”

3. Pull your credit reports and go through them together. 

Todd Huettner is the president of Huettner Capital (@HuettnerCapital), a residential mortgage bank located in Denver, CO. He recommended that you and your spouse start your financial conversation by going through your credit reports.

Credit reports document your history as a borrower and contain the information used to create your credit score. Most information on these reports goes back seven years, while some information (like bankruptcies) stays on your reports for longer.

You actually have three different credit reports, one each from the three major credit reporting agencies: Experian, TransUnion, and Equifax. You can request one free copy of each report annually, just visit www.AnnualCreditReport.com.

Huettner suggested that you pull your credit reports and walk through them together looking for the following:

  • What are your credit scores? Similar scores can highlight common attitudes toward risk and finances including savings, borrowing, managing debt. Vastly different scores are definitely something to discuss. If you both have low scores, now is the time to look at how you can improve your finances together.
  • Why are any scores low? There are perfectly understandable reasons why someone may have bad credit. However, repeated mistakes can indicate something other than bad luck.
  • Look at prior names and name variations. Now is the time to fess up if you were previously married. It is much uglier to find out later.

4. Learn your partner’s underlying values.

The way your partner deals with money might completely confound you. If that’s the case, it’s safe to assume that you don’t just find their behavior confounding, but extremely frustrating as well. So instead of looking at the things they do with money, take the time to figure out why they’re doing them.

“When it comes to communication about money between partners, I like to take a holistic approach,” said money coach and founder of Bountiful Money Cecilia Case. I ask my clients and their partners to both go through exercises that help them understand their underlying values. They then compare their answers.”

“This provides a basis for understanding what your partner is valuing when they do something with money that isn’t what they would do. When they understand their partner’s values and motivations, it becomes easier to see that the spouse wasn’t doing it to make you mad, they were doing it because it made sense to them. That can be the start for a supportive and understanding give and take between loving partners.”

Certified Financial Education Instructor Kassandra Dasent (@kassandradasent) likewise stressed the importance of “how each person’s experience with money in the past has shaped their understanding and interaction with it in the present.”

“Through open, honest and non-judgmental communication, couples will be able to make financial decisions that meet their needs, address some of their wants and overall improve their quality of life,” she said.

5. Decide on one common financial goal. 

They say that opposites attract. And they’re often right. This is just as true for money as it is anything else—maybe even more so. The odds are good that you and your partner have very different approaches to money and financial issues.

That’s why Holly Peterson suggests you and your partner pick one common financial goal and work towards it, “whether it’s creating a budget, getting credit card spending under control or pledging to put a portion of your income towards retirement.”

“It’s also important to be on the same page for overall goals,” she added. “You both probably want to retire by a certain age, now you need to work together to figure out how to make that a reality. Have regular check-ins with each other for support and accountability.”

Additionally, focusing on one financial goal will also help you and your spouse from biting off more than you can chew!

6. Make regular appointments to talk.

Dasent recommended that couples in a marriage or a committed relationship set aside time regularly to talk about finances. She also specified that these sessions should be held on a minimum monthly basis.

“Regardless if one partner is responsible for the day to day financial decisions, it is important that both partners know what their money is being spent on and how that may be affecting the progress of their financial and life goals,” she said.

“Expect to talk about money in casual spontaneous times but also in scheduled and routine times,” offered Carrie Krawiec (@CarrieJKLMFT), a Licensed Marriage and Family Therapist at Birmingham Maple Clinic in Troy, MI. “Monitor your body for signs of getting overwhelmed or frustrated and plan to take breaks, limit time, or reschedule if either person gets too heated.

“If you must take a break or quit early,” she added, “make a concerted effort to return as avoiding only makes it harder to come back and makes it more difficult as a couple to resolve money problems.”

7. Don’t make it personal.

A marriage is a very personal thing, but talking about how money works in your relationship is going to require a bit more detachment. Otherwise, the conversation could go off the rails fast.

“When discussing past mistakes or current debt, don’t make it personal, just remain objective,” said Rixse. “Ultimately, your goal is to move forward in harmony and work towards mutual goals that will benefit not only each of you individually but your marriage as well.

“If objectivity is difficult to obtain, bring a third-party in like a financial planner or trusted family member that can remove any negative emotions that might be wrapped up in the conversations together and help you see each other’s side in a healthy way.”

8. Be proactive.

Are things going okay between you and your spouse right now money-wise? Great. That means this is the perfect time to start talking about finances.

“Be proactive,” said Myhand. “Discuss your finances regularly and be planful. Don’t wait for something to come up to discuss what you are going to do.

“Waiting till something happens can create extra financial and emotional stress that can be a burden on your relationship.  Setting financial goals and budgeting regularly will help you be proactive and keeps everyone on the same page.”

9. Learn healthy problem-solving skills.

Identifying a problem is step one. Step two is actually fixing it. The more tools and positive problem-solving skills you have at your disposal, the better.

“Create a goal, Brainstorm objectives for reaching the goal, choose a handful of objectives that make sense,” said Krawiec. “Rough out a plan saying who will do what and then meet weekly to track progress and troubleshoot as necessary.”

She also offered the following guidelines for healthy problem-solving:

  • “A goal should be positive and future-focused so not ‘Spend less’ but rather ‘Put 20 percent of income in savings each month.’
  • “When brainstorming each idea should not be judged. Then cross off ideas that don’t work. Choose a few you are willing and able to do.
  • “Don’t expect 100 percent success.
  • “Meet weekly to congratulate successes and rework problem areas.”

10. Practice positive reinforcement.

When you’re part of a couple, you divide the chores and other household duties. Money is no different. One person is going to end up being responsible for the couple’s finances. That’s no small job, and it’s on the other partner to give them positive reinforcement.

“Give frequent gratitude and praise to the person responsible for managing the household finances,” said Krawiec, adding that, “Happy marriages have five positive interactions for each one negative.

“If you are the person responsible for money give specific directions of your expectations and frequent positive feedback for cooperation. If you are the person who is not the household accountant give thanks that this important job function is done for you.”

More than simply offering positive reinforcement, Krawiec laid out how you can avoid negative behaviors and modes of communication:

“Avoid criticism (character attacks; “you are so stingy” or “you think money grows on trees” and stick to factual complaints “I dislike when you spend cash on out to eat meals when you can pack a lunch or eat at home.” )

“Avoid defensiveness (cross-complaining, rebutting, denying). Avoid contempt (which is eye-rolling, sneering, sarcasm, name-calling) and lastly, avoid stonewalling which is shutting down.

“These are John Gottman’s 4 Horsemen of the Apocalypse or 4 behavior characteristic of marriages that end in divorce,” she added.

11. Choose success over shame.

Do you and/or your spouse have trouble maintaining positive financial behaviors over a longer period of time? You’re not alone. Here’s Huettner’s description of what he calls the “Financial Shame Cycle”:

“Paying your bills on time, spending wisely, saving money are all things people could tell you are good financial habits just like eating right, exercising regularly, and getting lots of sleep are good health habits. Then why are they so hard to do?

“The Financial Shame Cycle is something I created to explain why personal finance can be so difficult for many people even though we “know” the basics.

“Shame is different because we do not feel we simply made a mistake. With shame we feel we are bad inherently and ‘just aren’t good with money.’

“The stages in the cycle are:

  • “We don’t know what to do/how to start so we don’t do anything.
  • “We know what to do, but we don’t have a plan that we feel will succeed, so we don’t start.
  • “We don’t see progress/success so we reinforce our belief that we are not good and start back at one.”

“If you or your significant other experiences these feelings, you need to do a little more work,” said Huettner. Luckily, he also offered the steps that a couple can take to exit the “Financial Shame Cycle” and enter the “Financial Success Cycle” instead:

“It all begins with the acceptance that we are not the only ones who have these struggles and we just need to get learn to handle our finances.” The steps for Huettner’s Financial Success Cycle include:

  • Information: get help and informed on where you are financially.
  • Confidence: create a plan to achieve your goal.
  • Progress: create small steps to take to see your successes.

“Communication is a key part of building a strong relationship and financial conversations are no different. You will have this conversation at some point; either now to start your relationship or far too late when it is ending. There is too much at stake to wait,” said Huettner.

12. See how one CFP talks to their spouse.

Getting your finances together can seem like a pretty daunting task. And it’s certainly going to take some hard work—from both you and your spouse. The other 11 tips contained in this article can help you out, but it’s always nice to see healthy financial practices in action.

That’s why we’ll leave with you with this snapshot from Certified Financial Planner Krista A. Cavalieri, owner of Evolve Capital (@EvolveCap), of how she and her husband talk to each other about money:

“My husband and I have a pretty decent baseline of healthy communication which is key to any conversation but especially so when it comes to money because as we all know, money is a very sensitive topic.

“We do not have formal monthly or weekly meetings, which are sometimes needed depending on the couple. We have a very open line of communication and both log into our budgeting tool quite often to ensure things are moving along. We casually chat about money about once a week often in relation to going to dinner or a possible weekend trip. These conversations help us reconnect and confirm that we are on the same page about the overall goal of our money.

“We often clear out of the ordinary purchases with one another. While it used to be of a certain dollar amount (about $100) we have found that because of the Amazon prime and the good old add on items, we talk about purchase more frequently.

“We also discuss activities for the children and try to come to a common ground on what activities we feel are worth spending money on and when. Such as gymnastics for our middle child, we both agree it might be better to wait until she can do it without needing a parent.

“While we haven’t settled on a date for retirement we talk about it in theory, such as if we might relocate and also to confirm with one another that we would like to travel.”

Talking to your spouse about money isn’t something you can do in a one-time-only session; it’s a conversation you two will be having for the rest of your lives. If you want some financial topics to help carry you through the decades, check out these related posts and articles from OppLoans:

How do you handle money issues with your partner? We want to hear from you! You can find us on Facebook and Twitter.

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Contributors

Cecilia Case is a Money Coach and founder of Bountiful Money. Money intertwines with nearly every aspect of our lives, and its power can make it an intimidating problem to fix. Cecilia uses a direct but gentle method of exploring your past, understanding your values and goals, and helping you find your own path to money health and success. You can heal your relationship with money, and find peace and prosperity in your personal finances!
Krista Cavalieri started Evolve Capital (@EvolveCap) when she realized there was no way for young people (like her) to get good financial advice tailored to them. Not one size fits all financial products or minimums they can’t reach. Just because they are young doesn’t mean they should be ignored. Krista has been in financial planning since 2010 and prior to that traded foreign exchange with UBS after graduating from The Ohio State University. She also holds the CERTIFIED FINANCIAL PLANNING designation.
Kassandra Dasent (@kassandradasent) is a Certified Financial Education Instructor, certified credit analyst, and personal finance expert. “Minding Your Money” is what Kassandra Dasent specializes in. Focusing on how the emotional quotient can have a direct and lasting impact on one’s relationship with money, she successfully communicates to her audiences practical ways on how to improve their financial circumstances. To learn more, visit KassandraDasent.com.
A recognized real estate and personal finance expert with over twenty years of experience, Todd Huettner is frequently quoted in the business press including The Wall Street Journal, CNBC, Credit Karma, and Realtor.com. He is President of Huettner Capital (@HuettnerCapital), a residential mortgage bank located in Denver, CO.  In addition to earning an economics degree and an M.B.A., Todd has held his real estate license in multiple states and been an underwriter, financial analyst, and consultant.
Carrie Krawiec (@CarrieJKLMFT) is a Licensed Marriage and Family Therapist at Birmingham Maple Clinic in Troy, MI. Carrie provides individual, couple and family therapy with interest areas including a variety of relationship issues such as adult family conflict, family business conflict,  family conflicts between parents and teens, relationship and marriage counseling,  peer relationships, communication, and emotional regulation. Carrie has specific training in Parent Management Training-Oregon (PMT-O Specialist); a behavior management technique for parents to utilize with children to prevent and reduce behavior issues in children age 7 to 17.
Denise Myhand is a personal finance advocate who is passionate about people, life, knowledge and new experiences. She is the founder of The Wealth Culture, an organization dedicated to the narrowing the wealth gap for women and minorities where they advocate four core principles: budgeting, debt repayment, generational wealth, socializing financial responsibility and empowerment. In addition to the Wealth Culture, Denise has recently completed her first ebook: The Debt Slay Guide – An autobiographical and instructional guide to paying off debt.
Holly Peterson is the owner of Elite Retirement Strategies in Twin Falls, Idaho.
Chad Rixse was born and raised in Anchorage, Alaska until the age of 18. He then spent the next 11 years in Seattle where he graduated from the University of Washington and got his start in the financial services industry. Chad has since moved back to Anchorage to found Far North Capital (@farnorthcapital) and continue pursuing his lifelong passion for helping others. He finds the positive difference he’s able to make in people’s lives the most rewarding aspect of his work. Outside of work, Chad loves enjoying all that Alaska has to offer. In the summer, he loves to camp, hike, fish, and golf. In the winter, he downhill skis and gets to the rock gym a few times per week. Chad is also active in the Anchorage Chamber of Commerce’s Young Professionals Group.
The creator of Money Habitudes (@moneyhabitudes), Syble Solomon, is an educator and coach who specializes in the psychology of money. Since 1995, she has been an executive coach and adjunct faculty member with the Center for Creative Leadership. She was a doctoral fellow at University of Pittsburgh, received her Masters in Education at George Washington University and her B.A. in Economics with a minor in psychology from Rutgers University beginning her career as a Peace Corps volunteer, teaching in the Philippines.

What is VantageScore?

You might think that your FICO score is the only credit score out there—but you’d be wrong!

There are so many scores to keep track of these days! Sure, the Super Bowl score was low enough to keep track of without any trouble, but that’s far from the only score out there. You have baseball scores, basketball scores, and, perhaps most importantly, your credit score.

But now there’s a new score on the block. Well, if twelve-years-old is new. It’s called your VantageScore.

So what exactly is this score, and do you have to worry about it? We spoke to the experts to find out!


VantageScore: Origins.

To understand the creation of the VantageScore, it helps to go back to the creation of the FICO credit score, i.e., THE credit score.

As we’ve explained before, lenders used to determine whether someone was credit-worthy on a very personal basis. If you wanted a personal loan from the town banker, you might have to get recommendations from other trustworthy individuals in said town.

As banks and other lenders became national enterprises, it was less practical to check in with a potential client’s neighbors to find out if they returned the tools they borrowed in a timely manner.

That all changed in 1956 when mathematician Earl Isaac joined engineer Bill Fair to create Fair, Isaac, and Company. This new company began collecting financial information to create a standard credit scoring system that banks could reference when making their decisions.

FICO continued to develop their credit scoring methods and in 1989, they introduced the modern FICO Score. The FICO credit score uses information gathered by the three major credit bureaus, Experian, Equifax, and TransUnion, to generate a number between 300 and 850.

Cut to 2006, when those three credit bureaus decided they wanted to offer a score of their own to compete with the FICO score. They jointly created the VantageScore using their own distinct formula.

“Originally it was meant to be a much more consumer-friendly score, based on the rating similar to school grades (A, B, C, D, F) rather than FICO’s 300-850,” explained Todd Christensen, education manager for Money Fit (@MoneyFitbyDRS). “Those grades were based on a 501 to 990 scale. The more recent iterations use a scale that’s much more similar to FICO’s score.”

FICO took some issues with all of this and sued the company that administers VantageScore. After years in court, VantageScore emerged victorious and now stands as an alternative to FICO scores that lenders may consider.

The Vantage advantage.

Now that you know the history of the two credit scores, both alike in dignity, how do they differ today?

“VantageScores are grouped into six categories and each category has a different influence on the credit score,” advised Katie Ross, Education and Development Manager at American Consumer Credit Counseling (@TalkCentsBlog). “VantageScore is able to get a score from one month’s history and an account that that has reported at least once in the last 24 months.”

This is in contrast with the FICO score, which requires at least six months of credit history to generate a score. The factors that go into creating a VantageScore are also not broken down in terms of percentages like they are for your FICO score.

Ross told us roughly how heavily the different VantageScore factors are weighted:

  • “Payment history: extremely influential.
  • “Age and type of credit: highly influential.
  • “Percentage of credit limit used: highly influential.
  • “Total balances and debt: moderately influential.
  • “Recent credit behavior and inquiries: less influential.
  • “Available credit: less influential.”

So are VantageScores a better way to assess credit-worthiness than FICO Scores? It’s up for debate, though you likely won’t have a choice in the matter unless you’re the lender in a potential loan transaction.

“The problem is, it is essentially for ‘educational purposes’ only, since no lenders that I know of actually use the score in their credit-based decisions,” Christensen told us. “Still, it can serve some great purposes to help consumers.”

That may be quickly changing if VantageScore itself is to be believed. They’ve found that there has been a 300 percent increase in use by lenders and other individuals or institutions looking to review applicants’ credit scores. That’s why you might as well try to improve your VantageScore as well.

How to take advantage of VantageScore.

Thankfully, the steps you’ll take to improve your VantageScore are all pretty similar to the steps you’d take to improve your FICO score.

We’ll let Ross list those steps:

  • “Make payments on time.
  • “Pay off your credit cards in full each month–not just the minimum!
  • “Avoid credit card debt. Only spend what you can afford.
  • “Use credit for small, routine purchases and pay them off immediately.
  • “Limit the number of open accounts.
  • “Check credit reports & remove errors.
  • “Beware of unsolicited increases to your credit limit.
  • “Don’t max out your cards. Maintain a good credit utilization ratio (don’t exceed 30% of available credit).”

It might be hard enough keeping track of one credit score. Thankfully, as long as you’re paying your bills on time and using your credit responsibly, both of your scores should grow.

Your credit score is important.

Good credit is the foundation for a positive financial outlook. With a healthy score, you can borrow more money at lower rates and qualify for the best credit cards. Not only that, but it’ll help you get that sweet new apartment you have your eye on.

If your credit score is lousy, on the other hand, you’ll find your lending options are pretty limited. That’s how people end up relying on short-term bad credit loans and predatory no credit check loans like payday loans, title loans, and cash advances to make ends meet.

That’s something you really want to avoid. Trust us. To learn more about managing your credit score, check out these related posts and articles from OppLoans:

Have a question about credit scores? Let us know! You can find us on Facebook and Twitter.

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Contributors

Author and Accredited Financial Counselor®, Todd R. Christensen, MIM, MA, is Education Manager at Money Fit (@MoneyFitbyDRS) by DRS, Inc, a nationwide nonprofit financial wellness and credit counseling agency. Todd develops educational programs and produces materials that teach personal financial skills and responsibilities to all ages. Having facilitated nearly two thousand workshops since 2004 on the fundamentals of effective money management, he based his first book, Everyday Money for Everyday People (2014), on the discussions, tips, stories and ideas shared by the tens of thousands of individuals and couples in attendance.
Katie Ross joined the American Consumer Credit Counseling (@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.

Should You Use an Installment Loan to Pay Off Your Credit Cards?

Consolidating all of your credit card debt into a single installment loan will likely save you money, but it’ll probably mean larger monthly payments.

Spending yourself into credit card debt is fairly simple: You spend more money on the cards than you currently have and repeat until you’re maxed out. Getting yourself out of credit card debt, on the other hand, is a bit more complicated. You have many options, and none of them are easy.

One of the ways you could pay off that debt is to consolidate all those cards into a single debt: a personal installment loan. You use that loan to pay off all your credit cards, leaving you with only one easy payment to make each month. Is this the best method for you? Read on to find out …


Here’s how installment loans work.

When you take out a personal loan, it’s going to be structured as an installment loan. This means that you pay the loan off in a series of fixed, regular payments. You’ll be borrowing a single lump sum of money that you will repay plus interest.

The interest rate on your personal loan will vary depending on your credit score. The higher your score, the more creditworthy you will be to a potential lender and the less interest they will charge you. The lower your score, the riskier you will seem and the more interest they will charge you in order to account for it.

Interest on installment loans is accrued over time. The longer a loan is outstanding, the more interest it will accrue. However, that interest will accrue based on the remaining principal, so the actual amount of money you accrue in interest will grow smaller over time.

Lastly, installment loans are amortizing, which means that every payment you make goes towards both the principal owed and the interest. The amount that goes towards each is determined by the loan’s amortization schedule, but you can rest assured that every on-time payment you make will bring you one step close to being out of debt.

Will the loan save you money?

Okay, so this question is actually pretty simple to answer: Yes, paying off your credit cards with an installment will almost certainly save you money in the long run.

Here’s why: The standard term for a personal installment loan is anywhere between one and five years. And no matter how long the loan’s repayment term is, it’s pretty much guaranteed to be shorter than the length of time it would take you to pay off your credit cards making only the minimum payments.

The monthly minimums for credit cards are often very small, with each payment only accounting for something like one to three percent of the amount owed. When interest rates are factored in, it could take you well over a decade to pay off those cards.

Remember, the longer a loan or credit card is outstanding, the more money you will end up paying towards interest. All things being the same, the shorter repayment option will always be the one that saves you money overall.

What’s the interest rate?

As we mentioned up above, interest rates for both personal loans and credit cards will vary depending on your credit score. So if you have good credit, you’ll probably be able to qualify for some personal loans at a reasonable interest rate.

Furthermore, the interest rates for personal loans are generally lower than the interest rates for credit cards. So even if the rate is higher than you might prefer, it’s still probably lower than the rate you’re paying on your credit card.

However, racking up a lot of excess credit card debt is going to lower your credit score, as the amount of debt you owe is the second most important factor in your credit score. This decreases the likelihood that you’ll find an online loan or a loan from brick-and-mortar lender with a great rate.

It’s a bit of a Catch-22 scenario: You want to find a low-cost personal loan to pay down your credit card debt, but you need to pay down your credit card debt in order to qualify for the low-cost personal loan.

If you have a lousy score, you might be stuck with bad credit loans that actually have a higher interest rate than your credit cards. Way higher. Even if these loans don’t have rates as high as no credit check loans like payday loans, title loans, and cash advances, you’re still probably best off skipping debt consolidation and just trying to pay down your credit cards outright.

What are your monthly payments?

We mentioned earlier that the monthly minimum payments for credit cards are very small. It’s a double-edged sword; those small payments make it much harder to get out of debt but it also means they’re fairly affordable—especially relative to the amount of debt you owe in total.

This is where we arrive at the biggest issue with consolidating your debt through a personal installment loan: Even with a lower interest rate, those shorter repayment terms almost guarantee that your monthly payment will be larger than the monthly minimums on your credit cards.

If you’re struggling to afford your monthly minimum payments, this could make consolidation a non-starter for you. Saving money in the long run is great, but you still have to be able to afford your payments in the here and now.

Here’s the flipside: Any debt repayment plan is going to involve paying more each month than you’re currently paying towards your monthly minimums. Don’t let those larger payments discourage you: trim your budget, maybe pick up a second job or side hustle, and get crackin’.

What are other methods of debt repayment?

Consolidating your credit cards onto a personal installment loan is a viable method of debt repayment—especially if you’ve got a decent credit score—but it’s far from the only method out there.

The two most popular debt repayment methods are the Debt Snowball and the Debt Avalanche. Both of these involve putting all of your extra debt repayment funds towards one debt at a time, rather than spreading them around evenly. The difference comes in how they prioritize which debts to pay off first.

With the Debt Snowball, you pay off your debt with the lowest balance first, working your way up to the debt with the largest balance. This will actually cost you a little more money in the end, but it prioritizes early victories to help you get the encouragement you need to keep going.

The Debt Avalanche, on the other hand, keeps its eyes on the numbers. It has you prioritize your debts by interest rate, paying off the highest-rate debt first and then working your way down to the debt with the lowest rate. This saves you money compared to the Debt Snowball, but it could leave you waiting awhile before you notch your first debt pay-off victory.

Lastly, you could transfer your credit card balances onto other cards using a zero percent APR offer. This gives you an interest-free grace period to work with, but carries the sizeable risk of leaving you with more credit card debt than when you began.

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

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

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What Happens if You Pay Off a Bad Credit Loan Early?

Paying off your bad credit loan early could help you save money or it could save you no money whatsoever. So what gives?!

Paying off a loan feels great, but paying off a loan early feels even better. By getting out of debt faster you not only get to save money on interest, but you’ll also free up a bunch of extra room in your monthly budget!

But does the same thing hold true for bad credit loans? Will you really save money by paying the loan off early? As it turns out, there’s no one right answer to this question. It really depends on which kind of bad credit loan you’re paying off.


There are two types of bad credit loans.

If you have poor credit and you need a loan, you’re unfortunately going to find yourself locked out from traditional lending institutions. When a bank or personal lender looks at your credit score, they’ll see a person who cannot be relied upon to uphold their debt obligation.

Instead, you’ll find yourself taking out a bad credit loan, which will come with a much higher interest rate than a regular personal loan. Some of these loans can be a fine way to cover emergency expenses if you don’t have an emergency fund, but many others could potentially trap you in a dangerous cycle of debt.

Bad credit loans can be generally sorted into two categories: Short-term loans and long-term loans. Short-term loans have repayment periods that average two weeks to one month, while long-term loans can have terms anywhere from six months to three years.

The most common types of short-term bad credit loans are payday loans and title loans:

  • Payday loans (also known as “cash advance” loans) have an average repayment term of 14 days and standard loan amounts of a few hundred dollars.
  • Title loans have an average repayment term of one month and are secured by the title to your car or truck;  that collateral means you can borrow more with a title loan than you can with a payday loan.

Long-term bad credit loans, on the other hand, are generally structured as installment loans. Unlike payday and title loans, which are designed to be repaid in a single lump-sum balloon payment, installment loans are paid back in a series of smaller, regularly scheduled payments.

How is interest being charged—and paid off?

The rates for payday loans, title loans, and installment loans will vary from lender to lender—and will also depend on your state of residence, even for online loans. However, the average annual percentage rate (APR) for payday loans is almost 400 percent, while the average APR for a title loan is 300 percent. The APRs for installment loans are often lower than the APRs for payday and title loans, but not always.

Still, when it comes to paying off your bad credit loan early, there’s something more important than the interest rate: How that interest is being calculated.

With short-term loans like payday and title loans, interest is charged as a flat fee. If you were to take out a $300 payday loan with a 15 percent interest charge, $45 in interest is added onto the loan immediately.

With a bad credit installment loan, the interest accrues over time—much the same way it would with a standard personal loan. The longer the loan is outstanding, the more interest it accrues. And the earlier you pay the loan offthe less you’ll pay towards interest.

The same isn’t true for payday and title loans. Since interest is charged as a flat fee on those loans, paying the loan off early won’t save you any money at all. While it’s always a good idea to get ahead of your loan obligations if you can, paying off a payday loan early won’t have the same tangible benefits as it would with an installment loan.

There’s one exception to this rule when it comes to installment loans: prepayment penalties. These are extra fees included in certain loan agreements that only get charged if the borrower pays the loan off early. If you’re taking out a bad credit installment loan, look for a lender that doesn’t include them.

Watch out for loan rollover.

While short-term no credit check loans might seem like they’re fairly easy to pay back, that isn’t necessarily true. In fact, the Pew Research Centers have found that over 80 percent of payday loan borrowers don’t have the funds to make their payments. High interest rates are a factor, but so are the lump-sum repayment terms.

When a short-term loan borrower doesn’t have room in their budget to cover their loan payment, they are sometimes given the option to roll the loan over. This means that they pay off the interest owed on the loan and extend the due date—in return for a brand-new interest charge.

It’s the opposite of paying off your loan early. While early repayment on a payday loan won’t bring you any extra savings on your interest owed, paying the loan off late in this fashion will send your costs soaring—and possibly leave you stuck in a debt trap.

Finding a bad credit loan that will reward you for early pay-off is great, but avoiding a bad credit loan that lets you rack up extra fees without ever actually getting you out of debt? That’s way better.

If you have a lousy credit score and you’re looking to improve it, check out these related posts and articles from OppLoans:

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

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8 Tips To Help You Stick To Your Budget

Creating a budget is one thing, but actually sticking to that budget is another thing entirely. Here’s what you need to do!

We’ve been writing quite a few articles to help you make a budget for the new year. Here’s one of them, for example. We’ve been doing this because budgets are an incredibly important tool to get your finances in order.

But, as we’re also fond of saying, a budget is no good if you don’t stick to it. Hence these tips to help you actually keep to the budget you’ve made. Read on, and learn how you can commit and put a ring on the budget you’ve chosen.


1. Create your budget in advance.

While this may seem obvious, making a budget as you go along isn’t that much better than making no budget at all. It’s good to have some flexibility so you can adjust if any surprises come up, but if it’s too flexible then you won’t really have anything to keep to.

“Complete the budget before the month begins, in agreement with your spouse, and make it specific for what’s happening in the upcoming month,” advised money coach Beverly Miller (@moneycoachbev).  “Make a plan for every dollar, including ‘blow money’ and ‘miscellaneous.’”

2. Keep it realistic.

You can’t stick to a budget that you literally can not keep. Ambition is good, but not if it leads to worse results.

“When making a budget it’s important to set realistic goals,”, advised Money Elevation Coach Roslyn Lash (@RosLash). “For example, if your goal is to save $600 in six months, it would be unrealistic to expect to contribute $100 monthly to a savings fund if you only have $75 in discretionary income. In this case, a more realistic goal would be to save $75 for six months for a total of $450.”

3. Work on your cooking.

While making your own food is more time-consuming and rarely as fun as eating out, it also gets pricey very quickly.

“Whether you’re single or have a family, cooking and eating at home is probably going to be better for your wallet,” advised insurance advisor Willie Anderson in a blog post he shared with us. “No one could deny that eating out can be expensive, and the cost can quickly add up. Prep meals ahead of time and pack your lunches and snacks.”

You could also try batch cooking and meal planning for extra convenience and savings. Here’s some advice towards that end.

4. Consider dropping the gym.

It’s important to keep your body and your budget fit. But one doesn’t have to come at the expense of the other.

“Exercise at home,” recommended Danielle Kunkle Roberts, co-founder of Boomer Benefits (@BoomerBenefits). “Dropping your $50/month gym membership and going for a walk or run at home is an easy way to free up $600/year in your budget. If you are a senior on Medicare, you can also look into $0 premium Medicare Advantage plans that offer free gym memberships like SilverSneakers or Silver and Fit.”

5. Let the robots handle it.

Technology can be very helpful when it comes to keeping to your budget. Aside from the many apps that can help you craft and keep to your budget, automating your savings will help you stick to them.

“It can be easy to forget to manually move money around from your accounts,” said Holly Peterson, owner of Elite Retirement Strategies. “But if you automate retirement contributions or other savings, you won’t have to think twice about it. If the money is directed into these accounts from your paychecks, you might not even miss it.”

6. Keep the credit card in your wallet.

While proper credit card use can be vital to building up your credit score, reckless credit card use can be fatal to maintaining a proper budget.

“Minimize credit card usage,” advised Lash. “Studies show that people spend up to 100 percent more money when using their credit cards. Psychologically, we think that we’re not using ‘real’ money when we swipe a card. However, we know that’s not true when we receive the monthly statement. Therefore, you should leave the card at home!”

7. Factor in some little joys.

Budgets aren’t particularly fun, but if they’re without any fun at all, they’ll be even more difficult to keep to.

“Celebrate the small things,” Peterson told us. “All saving and no spending can make anyone grumpy, and if you’re building responsible spending habits, you’ll still need to be able to have fun now and again.

“Budget for the small victories, like treating yourself to a reasonably priced gift after completing a goal like paying off a loan or reaching a milestone in your retirement savings account.

“If you’ve been using your credit card responsibly, your treat can be spending your reward points on something you’ve had your eye on.”

8. Be sure to check in.

Remember how we said earlier that it’s good to have some flexibility? That’s why it’s important to regularly check in on your budget so you can make adjustments if need be.

Robert Morlot, managing partner of Clearwater Business Advisers, gave us advice on business budgets, but it also applies to personal budgeting:

“Managing a budget is not a once a year exercise. If you’re waiting for the end of the year or quarter to look at budget details, you’ve lost the opportunity to change course and make improvements that can affect your results. Expense management should include a monthly review detailing actual versus budget results.”

Stick these tips in your belt and you’ll have most of the tools you need to be a budget hero. Time to go and save the financial day!

Building and sticking to a budget is one of the best ways to protect yourself from predatory no credit check loans and short-term bad credit loans like payday loans, title loans, and cash advances. To learn more about budgeting, check out these related posts and articles from OppLoans:

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

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Contributors

Willie Anderson is a private client insurance and financial advisor helping families to be prepared financially for all walks of life, be it college planning, estate building, protecting their homes, and retirement planning. He believes nothing beats helping families maintain a sense of security and protection.
Roslyn Lash (@RosLash), the Money Elevation Coach, is an Accredited Financial CounselorⓇ, Real Estate Investor, and the Author of The 7 Fruits of Budgeting. She works virtually with single women helping them to gain clarity around their finances, reduce debt, and increase their net worth so that they can live a more abundant life. Her advice has been featured in national publications such as USA Today, Forbes, TIME, Huffington Post, Los Angeles Times, and a host of other media outlets.
Beverly Miller (@moneycoachbev) is a personal finance coach in the Pittsburgh, PA area.  As a Ramsey Preferred Coach, she has completed Ramsey Solutions Master Financial Coach Training, and has been helping couples and individuals since 2011 to learn how to budget, get out of debt, save and invest for the future, and give generously. She and her husband have lived by the principles she teaches for many decades and are living proof that they do indeed work.
Robert Morlot is an experienced operating executive with significant management consulting and market development experience across multiple business environments – large company, boutique, start-up, and turn around. During his career he has held individual contributor and senior leadership roles in several large consulting firms amassing a consistent track record of building businesses and teams, and exceeding financial targets. He is the Managing Partner ofClearwater Business Advisers LLC. The firm helps senior leaders of early stage and mid-market companies build (or recover) operating performance by providing deep expertise in finance, corporate governance, sales, organization effectiveness and talent management.
Holly Peterson is the owner of Elite Retirement Strategies in Twin Falls, Idaho.
Danielle K. Roberts is a founding partner and senior executive at Boomer Benefits (@BoomerBenefits), a national agency specializing in Medicare-related insurance products since 2005. Serving thousands of Medigap policyholders in 47 states, Boomer Benefits helps baby boomers learn the ropes regarding Medicare.

Looking for a Loan with No Credit Check? Here Are the Pros and Cons

If you’re going to apply for a no credit check loan, you need to consider all your options and understand exactly what you’ll be getting yourself into.

If you take just a few minutes to check out the Financial Sense Blog (and you should, we work hard on it) you’ll see many articles about how you can improve your credit and why your credit is so important.

And the main reason why your credit score is so important is that it allows you to get better rates on loans and credit cards. Unless you’re the kind of rich where you use Benjamins as napkins, you’re going to need to borrow money at some point. So what can you do if you need a personal loan, but you don’t have good credit?

One option you might consider is a no credit check loan. Even though that might sound too good to be true, they do exist! But they come with a catch. Multiple catches, actually. Let’s get into it.


Credit check check-in

Before we get into the details of no credit check loans, let’s just go over what a credit check is. On a basic level, when a potential lender performs a credit check on you, they’re looking to get a copy of your credit report, which contains information on how you’ve used credit in the past.

You actually have three credit reports, one each from the three major credit reporting agencies: Experian, TransUnion, and Equifax. Information across the credit reports can vary, which means that your credit score can change depending on which report is used to calculate it. To request a free copy of your credit report, visit www.AnnualCreditReport.com.

There are two kinds of credit checks: hard credit checks and soft credit checks. Hard credit checks show up on your credit report temporarily and will negatively affect your credit score. Soft credit checks will not. So if you are considering a loan that requires a credit check, that’s one factor to take into account.

Pro: they don’t require a credit check. 

The advantage of no credit check loans is right there in the name. You don’t have to undergo a credit check to get one, so you could qualify for one even if you can’t pass a credit check.

As for the negatives … there are quite a few.

Con: they’re more expensive.

“Typically, when a loan calls for no credit check, it attracts individuals who might not have stellar credit histories,” explained CPA Riley Adams (@TheRiles89). “As a result, these loans can sometimes have higher hidden costs in the form of higher fees, interest rates, or onerous terms which make repaying the loan difficult.

“While advisable to avoid taking out such loans, the reality is a lot of people rely on low incomes, have little-to-no-savings, and haven’t been able to build a solid credit history to be attractive to the most advantageous lenders.

Pro: they’re fast and easy.

“A benefit of a no credit check loan is that quite often,” said Adams, “the application and work required to receive the money are fairly straightforward and easy and the money is available the same day or next.

“However, as mentioned before, there are likely to be hidden costs in exchange for this easy access to cash in times of need.”

Con: predatory lenders abound.

Not only do no credit check loans appeal to those have negative credit histories, but they’re also marketed to those who may not always have the best financial knowledge.

“The problem with these unconventional loans is they are typically marketed to people who are the least financially sophisticated and capable of understanding and evaluating the risks that they are taking with these loans,” warned bankruptcy attorney Bradley R. Bailyn.

“Obviously this type of loan presents a higher risk for the lender which is going to translate into much higher interest and fees for the borrower. There are situations when someone who can afford the mortgage would take such a loan, but generally, it’s going to be people who are not qualified for this kind of financing and who are going to end up losing the down payment which may constitute their entire life savings.”

Con: they could trap you in a debt cycle.

And it can be very hard to undo the damage done by taking on one of these no credit check loans.

“Taking out a no credit check loan is putting yourself on the fast track to getting trapped in a debt cycle,” Leslie H. Tayne Esq. (@LeslieHTayneEsq), Founder and Head Attorney at Tayne Law Group (@taynelawgroup), told us.

“Because of the extremely high interest rates, you may end up taking out another loan or paying to extend the length of your current loan. Both of these means you’re paying even more in interest and getting stuck in a vicious cycle that is incredibly difficult to break out of.”

Consider all your options.

So what are your options if you don’t have great credit but you’re worried about the dangers of no credit check loans?

Here are some alternatives Tayne suggested:

Many smaller community banks and credit unions will offer small personal loans to customers with poor credit. These will have capped interest rates, which will be much more reasonable than a no credit check loan.

Get a cosigner: Rather than opting for a no credit check loan, consider asking a friend or relative to be a cosigner on a personal loan. However, be sure you recognize the responsibility of having a cosigner. If you default on the loan, the cosigner is responsible for repaying the loan.

“If money is very tight, consider negotiating some of your bills. You can talk to your landlord, cable provider, phone company, etc. about lowering your monthly payment or extending your due date. It’s very possible that they will say no, but you’ll never know if you don’t ask. And if they agree to it, it can provide you with some relief for the time being.

Turn to your emergency fund: Rather than taking out a loan, use your own money if possible. If the situation is truly a financial crisis, your emergency fund is there for a reason.

Improve your credit score: Working to improve your credit score will improve your overall financial health and help you get approved for a traditional personal loan, should you need one. The most effective way to improve your score is to make your payments on time and as completely as possible.”

Should you check out a soft credit check loan?

You could also look at different kinds of bad credit loans and installment loans that may require a soft credit check or another way of verifying your ability to repay. The right bad credit lender will be better than payday loans, cash advances, and title loans, which should be considered an absolute last resort at best.

“Other services also exist which can provide access to credit at better rates than say, ‘payday lenders,’ who can charge rates in excess of 400-500 percent in order to guarantee they recoup their money and receive a profit,” Adams confirmed. “These lenders are some of the worst you can deal with given their penchant to charge the highest costs on the least creditworthy borrowers. There is almost always a better choice if you look hard enough.”

Having bad credit isn’t an easy situation. But if you aren’t careful about the kinds of loans you seek out, it can get even worse. To learn more about how you can improve your financial situation, check out these related posts and articles from OppLoans:

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

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram


Contributors

Riley Adams (@TheRiles89) is a licensed CPA in the state of Louisiana working as a Senior Financial Analyst for a Fortune 500 company in New Orleans. He has a personal finance blog dedicated to helping young professionals find financial independence at YoungAndTheInvested.com.
Bradley R. Bailyn has a lifelong background in and passion for finding legal solutions to financial challenges for individuals and small businesses. His knowledge and skills are diverse by necessity, including lawsuit defense and asset protection strategies, structuring real estate transactions, modifying costly loans, mortgages and business contracts, fighting foreclosures and evictions, structuring commercial real estate leases, employment law compliance, government investigations, fines and penalties, due diligence in the M&A process, and fighting bills for tax and utility arrears.
Leslie H. Tayne, Esq. (@LeslieHTayneEsq) has nearly 20 years’ experience in the practice area of consumer and business financial debt-related services. Leslie is the founder and head attorney at Tayne Law Group (@taynelawgroup), which specializes in debt relief.

So Your Identity’s Been Stolen … Now What?

The damage caused by a stolen identity could take years to fix. Here’s what you can do to limit that damage as much as possible.

The bank can take your house. A pickpocket could grab your wallet. And if you don’t watch out, the witch who lives in that candy house down the street will steal your children away to turn them into gingerbread.

But at least there’s one thing no one can take from you: your identity … right?

Unfortunately not. Identity theft is very, very real. That’s why it’s important to know how to tell if your identity has been stolen and what to do when it has. Lucky for you, we spoke to the experts to get the answers to each of those questions!


Identity theft is only growing worse.

“Identity theft continues to grow due to a growing number of data breaches,” warned Justin Lavelle, Chief Communications Officer at BeenVerified.com (@BeenVerified).

“A data breach involves a company’s customers’ records being accessed in a fraudulent manner. These records often include the customer’s name, Social Security number, date of birth, home address, and driver’s license number. When large companies have a data breach, millions of customers are affected.

“Online shopping is another reason why identity theft is on the rise,” he continued. “Shoppers who are not knowledgeable of the risks of online shopping may use their credit card or bank information to make a purchase online and compromise their personal information.

“Online shopping presents one of the greatest opportunities for fraud. The long-term trend shows that it will continue to grow as consumers shop more online than in person and these criminals get more sophisticated in their knowledge of compromising online data.”

How do you know that your identity has been stolen?

Most of the time, when something is stolen from you, you’ll know it. If your car isn’t parked in front of your house where you left it, then it was either stolen, towed, or gained a life of its own and you’re living in a Stephen King book. But if your identity was stolen, It may not be quite so obvious

Lavelle offered the following common identity theft warning signs:

  • “Bank withdrawals have been made from your account that you didn’t authorize.
  • “You receive calls from debt collectors regarding debts that are not yours.
  • “You stop receiving your mail.
  • “Merchants will not accept your checks due to insufficient funds when you are certain you have the funds to cover your purchase.
  • “Your credit report lists accounts that you didn’t open.
  • “The IRS notifies you that you have two tax returns which were filed under your name.
  • “You are notified that a company where you have an account has had a data breach.”

Lavelle also warned that it might be more subtle than that with this example:

“You discover a small ‘test charge’ on your credit card. A hacker will often place a small charge on your card as a test to see whether or not the charge will be accepted. Once it is accepted, they will charge a larger amount at a later time.

“You may start receiving phone calls or mail soliciting you to purchase a car, take out a personal loan, or other grand expenses. These could be due to someone spending a lot of your money and often, thus making you seem like a viable prospect for these solicitors.”

Now what?

OK, so you’re pretty sure that your identity has been stolen in some form. What do you do now?

“Depending on the nature of the identity theft issue, first steps are fixing what’s broke,” explained identity theft expert and CEO of Safr.Me Robert Siciliano (@RobertSiciliano). “

That might mean ‘New account fraud’ and contacting a creditor that appears on a credit report or contacts you for nonpayment, and informing them that you weren’t the one that opened up the account, having those lines of credit shut down, and being made whole.”

Additionally, it can be worth reaching out to the credit agencies themselves.

“If your identity has been stolen you want to obtain a copy of your credit report directly from Experian, TransUnion, and Equifax,” advised nationally recognized credit expert Jeanne Kelly, (@creditscoop).

“You can add a freeze on your credit report for free. You can file a police report and bring the credit reports and any other accounts that funds were taken out of or charged on.”

You should also reach out to the credit card companies directly, if appropriate. Steve Weisman, a lawyer, author, and identity theft expert who writes at Scamicide.com (@Scamicide), suggested the following:

“If your credit card was used by identity thieves, you should report the crime to your credit card issuer, have the phony charges removed, have the account closed and get a new credit card.

“If your name or credit was used to make fraudulent purchases, you should contact the company where the fraudulent purchase was made and inform them that the charge was fraudulent and they should remove the charge.

“You also should report the crime to the police. They are unlikely to catch the criminal, but it serves as a good record for later proving your innocence of any wrongdoing.

“You also should check your credit reports at each of the three major credit reporting agencies to have any faulty information removed from your credit report. The credit reporting agencies will remove fraudulent charges after they do an investigation.

“You should then freeze your credit reports at each of the credit reporting agencies to prevent the identity thief from using your personal information, such as your Social Security number, for future large purchases or lines of credit.

“Freezing your credit is the single best thing anyone can do to help prevent identity theft.”

Be diligent and change your passwords.

Even if you’ve taken the steps listed above, you won’t quite be out of the woods. You’ll have to be especially careful in the coming months.

“Change all your passwords, your login usernames, and your email address,” urged Drew Kellerman, founder of Phase 2 Wealth Advisors in Gig Harbor, Washington.

“If you direct your new email address to ‘pull’ mail from the old one, you don’t need to alert everyone you know about the change. Just make sure you do NOT instruct the old address forward messages to the new email. Doing so would provide a potential hacker with a portal to access your new email.

Kellerman also offered some advice to make your password more secure:

“Use a space. Security researchers obtained a list of 550 million passwords and found that only 0.03% used a space. A space works just like any other character in a password, but using one or more spaces increases the password’s strength.

“It turns out the longer the password, the more secure. It doesn’t need to be an unrecognizable mass of letters, numbers, and symbols. It simply needs to be long. Let’s assume that one of your favorite movies is the original Star Wars. What famous line will you NEVER forget from that film? ‘May the force be with you.’

“Many sites require symbols, numbers, upper and lower-case letters. You can work these requirements into your new passwords in a consistent manner that is easy to remember. For example, always start the sentence with an upper-case letter and finish the quote with the same symbol/number combination.

“Are you in the habit of writing down your passwords somewhere? Say you have an online bank account and are using ‘May the force be with you @1’ as the password. Put a memo in your smartphone or tablet that simply reads, ‘Bank: Mtfbwy@1.’ This will help trigger your memory of which password you are using with this account but will likely bewilder anyone else who gets ahold of your device.”

This password advice will be useful to prevent future identity theft as well. And speaking of preventing future identity theft, we’ll have more to say on that subject soon…

To learn more about protecting yourself from scammers, check out these related posts and articles from OppLoans:

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

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram


Contributors

Drew Kellerman is the founder of Phase 2 Wealth Advisors in Gig Harbor, Washington.
Jeanne Kelly (@creditscoop) is an author, speaker, and coach who educates people to achieve a higher credit score and understand credit reporting. #HealthyCredit is her motto. As the founder of The Kelly Group in 2000 and the author of The 90-Day Credit Challenge, Jeanne Kelly is a nationally recognized authority on credit consulting and credit score improvement.
Justin Lavelle is a Scams Prevention Expert and the Chief Communications Officer of BeenVerified.com (@BeenVerified). BeenVerified is a leading source of online background checks and contact information. It helps people discover, understand and use public data in their everyday lives and can provide peace of mind by offering a fast, easy and affordable way to do background checks on potential dates. BeenVerified allows individuals to find more information about people, phone numbers, email addresses, and property records.
Robert Siciliano (@RobertSiciliano) is a #1 Best-Selling Author and CEO of Safr.Me. Safr.Me is funny but serious about teaching you and your audience fraud prevention and personal security. Robert is a United States Coast Guard Auxiliary Flotilla Staff Officer of the U.S. Department of Homeland Security whose motto is Semper Paratus (Always Ready). His programs are cutting edge, easily digestible and provide best practices to keep you, your clients and employees safe and secure. Your audience will walk away as experts in identity theft prevention, online reputation management, online privacy and data security.
Steve Weisman is a lawyer, college professor at Bentley University and author.  He is one of the country’s leading experts in identity theft.  His most recent book is “Identity Theft Alert.”  He also writes the blog Scamicide.com (@Scamicide) where he provides daily updated information about the latest scams and identity theft schemes.

Will a Bad Credit Loan Impact Your Credit Score?

The impact that a bad credit loan could potentially have on your score will depend on what kind of loan you’ve taken out.

When you’re borrowing money, you usually have more immediate concerns than whether or not it’s going to affect your credit score—doubly so if your score is already lousy and you’re taking out a bad credit loan. In cases such as these, the odds are good that you’re in the middle of an emergency; your credit score is the last thing on your mind!

But that doesn’t mean you should be ignoring it entirely. Your credit score is incredibly important to your overall financial wellness. With a strong score, after all, you wouldn’t have to be relying on bad credit payday loans and cash advances to bridge those gaps in your cash flow.

And when it comes to your credit score, some bad credit loans have advantages over others.


The three types of bad credit loans.

Before moving on, it’s important we cover the three basic types of bad credit loans. All these loans are made available to people whose low scores lock them out from traditional lenders.

Unlike traditional loans, these don’t require a credit check, which is why they’re also (very creatively) known as “no credit check loans.”

Since they are being offered to people whose scores make them less creditworthy, these loans come with much higher annual interest rates than traditional personal loans. This is to protect the lender from the much higher default rates that they’re going to encounter.

However, these rates can vary wildly depending on where you live and who you’re borrowing from. It might depend also on whether you’re applying for a loan at a local storefront lender or if it’s an online loan.

Payday loans.

Payday loans are the most common type of bad credit loan. They are short-term, small-dollar loans, with an average repayment term of only two weeks and average principal amounts of a few hundred dollars.

Your typical two-week payday loan has an interest rate of 15 percent, which seems pretty good until you realize that it adds up to an annual percentage rate (APR) of 391 percent!

Oh, and if you see an ad for a “cash advance” loan, then you should know that it’s basically just a payday loan being advertised under a different name.

Title loans.

Title loans are similar to payday loans; their one-month average repayment term is slightly longer and their average principal amount is higher, but their average 300 percent APR is right in line with their short-term cousins.

They do, however, come with one crucial difference: Title loans use the title to your car or truck as collateral. So if you can’t pay the loan back, this gives the lender the right to repossess your car and sell it in order to make up their losses. Yikes!

Installment loans.

Lastly, you have bad credit installment loans. These loans come with much longer repayment terms, usually anywhere between six to 36 months, and they often come with higher principal amounts as well.

Unlike payday and title loans, bad credit installment loans aren’t designed to be paid back all at once. Instead, the borrower pays them back in a series of regular installments. That’s how they got their name.

How do regular loans affect your credit score?

With regular loans, there are two ways that they affect your credit score. First, the lenders report the amount that you borrowed, which is added to the “Amounts Owed” portion of your score.

Second, lenders report whether or not you make your payments on time (or miss payments entirely); that information is included in your Payment History.

Both your Payment History and your Amounts Borrowed are incredibly important to your score. In fact, they are literally the two most important factors.

Your Payment History accounts for 35 percent of your overall score and your Amounts borrowed makes up another 30 percent. Together, they account for 65 percent of your score!

For reference, no other factor accounts for more than fifteen percent.

Do bad credit loans affect your score?

With payday loans and title loans, it’s almost guaranteed that your lender isn’t reporting any of this information. On the bright side, this means that you won’t get dinged for adding onto your total debt load.

On the not-so-bright side, any on-time payments you make won’t get added to your score, either. You won’t be getting credit for being a responsible borrower!

With installment loans, the odds are much better that your lender is reporting payment information to the credit bureaus, which means that those payments are being reflected in your score.

If you make all your payments on a bad credit installment loan from a lender like OppLoans, you could end up helping your credit score!

Defaulting on any loan will hurt your score.

Even if a payday lender isn’t reporting information to the credit bureaus, there is one way that those loans will end up affecting your score. Spoiler alert: It won’t be good.

If you default on a payday loan—which means that you fail to pay the loan back—then the lender will likely end up selling it to a debt collector. Once the loan is with them, that debt collector will report it to the credit bureaus as an open collection account.

This is going to hurt your score. The entire point of the credit scoring process is to express whether or not a person can be trusted to pay back the money they borrow. An open collection account on a person’s report is proof that they borrowed a loan that they then didn’t repay.

The only exception here comes with secured bad credit loans like title loans and pawn shop loans. If the lender is able to recoup their losses by repossessing your car or selling your pawned item, then they probably won’t need to notify a debt collector or report your account.

Take care of your credit score.

There is no miracle cure for a bad credit score. While paying down a large amount of your outstanding consumer debt (like personal loans and credit cards) will likely result in some immediate improvement, you’ll still need a solid payment history to shore things up.

While payday can only ever hurt your credit score, a bad credit installment loan can help, so long as you stick with the right lender and make all your payments on time.

You might not be thinking about your credit score when you’re looking for a bad credit loan, but ignoring it entirely is probably not the best idea.

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

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

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN |Instagram

What 5 Factors Determine Your Credit Score?

If you have a bad credit score, the way to fix it isn’t a mystery! Just take a look at these five factors and figure out where you need to improve.

Your credit score was important in 2018. And guess what? It’s going to continue being important in 2019. Whether you’re shopping for an online loan, applying for a credit card, looking to rent an apartment, or even applying for car insurance, your credit score is going to be vital.

With so much riding on your creditworthiness, a lousy score is something you’re going to want to fix pronto. But it’s not always obvious what the best way to fix your credit score is.

That’s because your credit score isn’t based off just one thing. Your credit score is based on the information in your credit reports, which are compiled by the three major credit rating agencies. That information is broken down into five major categories that determine whether your score is great, good, or bad.

Once you know a little bit more about these five factors are and how you can better manage them, you’ll be on your way to becoming the 2019 Credit Score Champion!


Payment history.

This is the big one. It’s also the one you were probably already aware of. If you’re not paying your bills, it’s going to reflect poorly on your credit score. At 35 percent, it’s worth over a third of your total score, more than any other single factor.

“When trying to improve your score, the number one factor is ensuring that your payments are paid on time and as agreed,” explained Nathalie Noisette, owner of Credit Conversion (@credconversion). “Since payment history accounts for 297.5 points of your score, I’d pretty much do whatever it takes to make sure that those payments were in on time.

“With that being said,’ she added, “automating payments ensures that your bills are getting paid and you don’t run the risk of forgetting to pay. The number one reasons most of my clients don’t pay is not because they don’t have the money, its because they don’t have the memory.

“Automating payments is a good tool. As a precautionary measure, I would also advise setting up alerts. When your bill is due, daily balance updates and even changes to your score are all good alerts to be in the know of.”

Amounts owed.

The amount of debt you actually owe is the next most important factor, worth a little less than a third of your total score.

“The second most important factor used in determining a credit score is how much of your available lines of credit you actually use,” outlined RJ Mansfield (@DebtAssassin1), consumer’s rights advocate and author of Debt Assassin: A Black Ops Guide to Cleaning Up Your Credit.

“This determines thirty percent of your score. You can pay your bills on time forever and still have a poor credit score because you carry too much debt.”

Another sub-factor within your amounts owed is your credit utilization ratio. This measures how much of your available credit you’re currently using. In order to maximize your score, try to keep your open revolving balances under 30 percent of your total credit limit.

Length of credit history.

If owing too much in debt is a drag on your credit score, surely the smartest move would be to never take on any debt at all, right? Wrong!

15 percent of your credit score is determined by the length of your credit history. The longer, the better, which means not having any credit history at all is not a good thing for your score.

But this also doesn’t mean that you need decades of credit use to have a good score.

“A short credit history can be great as long as you’ve made your payments on time,” advised financial coach and author Karen Ford.

It does mean, however, that closing lines of credit isn’t always the best choice.

“It usually does not make sense to close out credit cards because you want to establish a long credit history,” warned Alissa Todd, financial advisor with The Wealth Consulting Group (@WealthCG).

Once you’ve paid an old credit card off, it’s probably a good idea to keep the card open. This is especially true for older cards that you’ve had open for a long time.

Just make sure that you don’t end up using it! Giving in to that temptation and racking up additional debt could end up undoing all your hard work.

Credit mix.

The last two factors are worth 10 percent each. One of those factors is “credit mix.” So what does that mean?

“Credit mix isn’t nearly as weighted as the other factors,” explained Jacob Dayan, CEO of Community Tax, LLC (@communitytaxllc). “However, if you want to further improve your credit score to earn the lowest interest rates or top credit cards, you’ll want to mix it up with different loans, like auto, home mortgage loans, different types of credit cards, etc.”

New credit inquiries.

OK, now what’s this one?

Well, every time you apply for a personal loan, auto loan, mortgage, or credit card from a traditional lender, the lender will run a credit check on your application. This results in “hard inquiry” being listed on your report.

Hard inquiries usually ding your score, but the effect won’t last that long. Still, why would you risk any unnecessary harm to your score? If you don’t need credit, don’t apply for it.

“New credit is a little complicated and requires some further research on your own,” Dayan suggested. “But, the best way to improve it is to only open lines of credit as needed. If you open too many lines of credit within a short time, it can signal that you’re in financial distress and need to borrow money.”

Most short-term bad credit loans—like payday loans, title loans, cash advances—don’t result in hard credit inquiries. This is why they’re also known as “no credit check loans.” But don’t be fooled: there are plenty of other reasons to avoid these products.

Some bad credit installment loans, meanwhile, will result in a “soft” inquiry on your credit, but that won’t affect your score. You can learn more about the difference between hard and soft credit inquiries in this post.

But wait, there’s more!

It’s not just your actions that can have an effect on your credit score.

“If you cosigned a loan or are married and hold a joint credit account, it is important to realize that your credit behavior does affect your joint account holder and vice versa,” warned Todd.

Now that you know the five credit score factors and what you can do to improve them, you’re all set to tackle your credit-related resolutions in the new year. May your credit score reach 2019!

(But actually the highest score is 850 so you’ll probably be shooting for something closer to that.)

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

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

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Instagram


Contributors

Jacob Dayan is the CEO and Co-Founder of Community Tax, LLC (@communitytaxllc) and Finance Pal, LLC. He began his career in Wall Street New York at Bear Stearns working in the Financial Analytics and Structured Transactions group. He continued to work in Wall Street until early 2009. When he then left New York and returned to Chicago to be with his family and pursue his lifelong dream of self-employment. There he co-founded Community Tax, LLC followed by Finance Pal in late 2018.
Karen Ford is a Master Financial Coach, Public Speaker, Entrepreneur, and Best- Selling Author. Her #1 Amazon Best Selling Book “Money Matters” is a discovery for many.  In “Money Matters” she provides keys to demolishing debt, shares how to budget correctly, and gives principles in wealth building.
RJ Mansfield (@DebtAssassin1) is a consumer’s rights advocate and author of Debt Assassin: A Black Ops Guide to Cleaning Up Your Credit.
Nathalie Noisette is the Founder of Credit Conversion, a credit counseling, and repair company located in Avon, MA. Credit Conversion uses principles of behavioral change to not only allow clients to improve their score but understand the habits that lend to poor credit. “Through our repair and training, it is our vision to see all of our clients repair and maintain near perfect credit scores.”
Alissa Todd is a Wealth Advisor at The Wealth Consulting Group where her team helps clients simplify their financial life and use money to live a life they love. She learns what is most important to you and then creates an implementable action plan to help you pursue financial independence so that you can live your life by design, not default. Alissa grew up in Europe (The Netherlands & Ireland) prior to moving to California 10 years ago. Growing up in a bilingual household of English and Japanese, Alissa stays involved in the community by being a board member of the Japanese American Citizens League San Diego chapter. Outside of work, you can catch her on one of many hikes in San Diego, practicing yoga.