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Can I Inherit Debt?
When someone passes away leaving debts behind, you might be wondering if you have any personal liability to pay them. If you have aging parents, for instance, you may be worried about having to assume responsibility for their mortgage payments, credit cards or other debts. If youâve asked yourself, âCan I inherit debt?â the answer is typically no, even though those debts donât automatically disappear. But there are situations in which you may have to deal with a loved oneâs creditors after theyâre gone.
How Debts Are Handled When Someone Passes Away
Debts, just like assets, are considered part of a personâs estate. When that person passes away, their estate is responsible for paying any and all remaining debts. The money to pay those debts comes from the asset side of the estate.
In terms of who is responsible for making sure the estateâs debts are paid, this is typically done by an executor. An executor performs a number of duties to wrap up a personâs estate after death, including:
- Getting a copy of the deceased personâs will if they had one and filing it with the probate court
- Notifying creditors and other entities of the personâs death (for example, the Social Security Administration would need to be notified so any Social Security benefits could be stopped)
- Completing an inventory of the deceased personâs assets and their value
- Liquidating those assets as needed to pay off any debts owed by the estate
- Distributing the remaining assets to the people or organizations named in the deceased personâs will if they had one or according to inheritance laws if they did not
In terms of debt repayment, executors are required to give notice to creditors who may have a claim against the estate. Creditors are then giving a certain window of time, according to state laws, in which to make a financial claim against the estateâs assets for repayment of debts.
If a creditor doesnât follow state guidelines for making a claim, then those debts wonât be paid from the estateâs assets. But if creditors are less than reputable, they may try to come after the deceased personâs spouse, children or other family members to collect whatâs owed.
Not all assets in an estate may be used to repay debts owed by a deceased person. Any assets that already have a named beneficiary, such as a life insurance policy, a 401(k), individual retirement account, payable on death accounts or annuity, would be transferred to that beneficiary automatically.
Can I Inherit Debt From My Parents?
This is an important question to ask if your parents are carrying high amounts of debt and youâre worried about having to pay those bills when they pass away. Again, the short answer is usually no. You generally donât inherit debts belonging to someone else the way you might inherit property or other assets from them. So even if a debt collector attempts to request payment from you, thereâd be no legal obligation to pay.
The catch is that any debts left outstanding would be deducted from the estateâs assets. If your parents were substantially in debt when they passed away, repaying them from the estate may leave little or no assets for you to inherit.
But you should know that you can inherit debt that you were already legally responsible for while your parents were alive. For instance, if you cosigned a loan with them or opened a joint credit card account or line of credit, those debts are legally yours just as much as they are your parents. So, once they pass away, youâd be solely responsible for repaying them.
And itâs also important to understand what responsibility you may have for covering long-term care costs incurred by your parents while they were alive. Many states have filial responsibility laws that require children to cover nursing home bills, though they arenât always enforced. Talking to your parents about long-term care planning can help you avoid situations where you may end up with an unexpected debt to pay.
Can I Inherit Debt From My Children?
The same rules that apply to inheriting debt from parents typically apply to inheriting debts from children. Any debts remaining would be paid using assets from their state.
Otherwise, unless you cosigned for the debt, then you wouldnât be obligated to pay. On the other hand, if you cosigned private student loans, a car loan or a mortgage for your adult child who then passed away, as cosigner youâd technically have a legal responsibility to pay them. Federal student loans are an exception.
If your parents took out a PLUS loan to pay for your higher education costs and something happens to you, the Department of Education can discharge that debt due to death. And vice versa, if your parents pass away then any PLUS loans they took out on your behalf could also be discharged.
Can I Inherit Debts From My Spouse?
When marriage and money mix, the lines on inherited debt can get a little blurred. The same basic rule that applies to other situations applies here: if you cosigned or took out a joint loan or line of credit together, then youâre both equally responsible for the debt. If one of you passes away, the surviving spouse would still have to pay.
But what about debts that are in one spouseâs name only? Thatâs where itâs important to understand how living in a community property state can affect your liability for marital debts. If you live in a community property state, debts incurred after the marriage by one spouse can be treated as a shared financial obligation. So if your spouse opened up a credit card or took out a business loan, then passed away you could still be responsible for paying it. On the other hand, debts incurred by either party before the marriage wouldnât be considered community debt.
Consider Getting Help If You Need It
If a parent, spouse, sibling or other family member passes away, it can be helpful to talk to an attorney if youâre being pressured by debt collectors to pay. An attorney who understands debt collection laws and estate planning can help you determine what your responsibilities are for repaying debts and how to handle creditors.
The Bottom Line
Whether or not youâll inherit debt from your parents, child, spouse or anyone else largely hinges on whether you cosigned for that debt or live in a community property state in the case of married couples. If youâre concerned about inheriting debts, consider talking to your parents, children or spouse about how those financial obligations would be handled if they were to pass away. Likewise, you can also discuss what financial safety nets you have in place to clear any debts you may leave behind, such as life insurance.
Tips for Estate Planning
- Consider talking to a financial advisor about how to manage and pay off debts you owe or any debts you might inherit from someone else. If you donât have a financial advisor yet, finding one doesnât have to be difficult. SmartAssetâs financial advisor matching tool can help you connect with an advisor in your local area. It takes just a few minutes to get your personalized advisor recommendations online. If youâre ready, get started now.
- The Fair Debt Collection Practices Act caps the statute of limitations for unpaid debt collections at a maximum of six years, although most states specify a much shorter time frame. However, some debt collectors buy so-called zombie debts for pennies on the dollar and then â unscrupulously â try to collect on them. Hereâs how to deal with such operators.
Photo credit: ©iStock.com/NiseriN, ©iStock.com/AndreyPopov, ©iStock.com/FatCamera
The post Can I Inherit Debt? appeared first on SmartAsset Blog.
Source: smartasset.com
What Is a Recourse Loan?
In borrowing, there are two types of debts, recourse and nonrecourse. Recourse debt holds the person borrowing money personally liable for the debt. If you default on a recourse loan, the lender will have license, or recourse, to go after your personal assets if the collateralâs value doesnât cover the remaining amount of the loan that is due. Recourse loans are often used to finance construction or invest in real estate. Hereâs what you need to know about recourse loans, how they work and how they differ from other types of loans.
What Is a Recourse Loan?
A recourse loan is a type of loan that allows the lender to go after any of a borrowerâs assets if that borrower defaults on the loan. The first choice of any lender is to seize the asset that is collateral for the loan. For example, if someone stops making payments on an auto loan, the lender would take back the car and sell it.
However, if someone defaults on a hard money loan, which is a type of recourse loan, the lender might seize the borrowerâs home or other assets. Then, the lender would sell it to recover the balance of the principal due. Recourse loans also allow lenders to garnish wages or access bank accounts if the full debt obligation isnât fulfilled.
Essentially, recourse loans help lenders recover their investments if borrowers fail to pay off their loans and the collateral value attached to those loans is not enough to cover the balance due.
How Recourse Loans Work
When a borrower takes out debt, he typically has several options. Most hard money loans are recourse loans. In other words, if the borrower fails to make payments, the lender can seize the borrowerâs other assets such as his home or car and sell it to recover the money borrowed for the loan.
Lenders can go after a borrowerâs other assets or take legal action against a borrower. Other assets that a lender can seize might include savings accounts and checking accounts. Depending on the situation, they may also be able to garnish a borrowerâs wages or take further legal action.
When a lender writes a loanâs terms and conditions, what types of assets the lender can pursue if a debtor fails to make debt payments are listed. If you are at risk of defaulting on your loan, you may want to look at the language in your loan to see what your lender might pursue and what your options are.
Recourse Loans vs. Nonrecourse Loans
Nonrecourse loans are also secured loans, but rather than being secured by all a personâs assets, nonrecourse loans are only secured by the asset involved as collateral. For example, a mortgage is typically a nonrecourse loan, because the lender will only go after the home if a borrower stops making payments. Similarly, most auto loans are nonrecourse loans, and the bank or lender will only be able to seize the car if the borrower stops making payments.
Nonrecourse loans are riskier for lenders because they will have fewer options for getting their money back. Therefore, most lenders will only offer nonrecourse loans to people with exceedingly high credit scores.
Types of Recourse Loans
There are several types of recourse loans that you should be aware of before taking on debt. Some of the most common recourse loans are:
- Hard money loans. Even if someone uses their hard money loan, also known as hard cash loan, to buy a property, these types of loans are typically recourse loans.
- Auto loans. Because cars depreciate, most auto loans are recourse loans to ensure the lender receive full debt payments.
Recourse Loans Pros and Cons
For borrowers, recourse loans have both pros and and at least one con. You should evaluate each before deciding to take out a recourse loan.
Pros
Although they may seem riskier upfront, recourse loans are still attractive to borrowers.
- Easier underwriting and approval. Because a recourse loan is less risky for lenders, the underwriting and approval process is more manageable for borrowers to navigate.
- Lower credit score. Itâs easier for people with lower credit scores to get approved for a recourse loan. This is because more collateral is available to the lender if the borrower defaults on the loan.
- Lower interest rate. Recourse loans typically have lower interest rates than nonrecourse loans.
Con
The one major disadvantage of a recourse loan is the risk involved. With a recourse loan, the borrower is held personally liable. This means that if the borrower does default, more than just the loanâs collateral could be at stake.
The Takeaway
Loans can be divided into two types, recourse loans and nonrecourse loans. Recourse loans, such as hard money loans, allow the lender to pursue more than what is listed as collateral in the loan agreement if a borrower defaults on the loan. Be sure to check your stateâs laws about determining when a loan is in default. While there are advantages to recourse loans, which are often used to finance construction, buy vehicles or invest in real estate, such as lower interest rates and a more straightforward approval process, they carry more risk than nonrecourse loans.
Tips on Borrowing
- Borrowing money from a lender is a significant commitment. Consider talking to a financial advisor before you take that step to be completely clear about how it will impact your finances. Finding a financial advisor doesnât have to be difficult. In just a few minutes our financial advisor search tool can help you find a professional in your area to work with. If youâre ready, get started now.
- For many people, taking out a mortgage is the biggest debt they incur. Our mortgage calculator will tell you how much your monthly payments will be, based on the principal, interest rate, type of mortgage and length of the term.
Photo credit: ©iStock.com/aee_werawan, ©iStock.com/PictureLake, ©iStock.com/designer491
The post What Is a Recourse Loan? appeared first on SmartAsset Blog.
Source: smartasset.com
Does Paying the Minimum Hurt Your Credit Score

Credit card bills can be confusing. If everything was straightforward and clear, credit card debt wouldn’t be such a big issue. But it’s not clear, and debt is a massive issue for millions of consumers.Â
One of the most confusing aspects is the minimum payment, with few consumers understanding how this works, how much damage (if any) it does to their credit score, and why it’s important to pay more than the minimum.
We’ll address all of those things and more in this guide, looking at how minimum credit card payments can impact your FICO score and your credit report.
What is a Credit Card Minimum Payment?
The minimum payment is the lowest amount you need to pay during any given month. It’s often fixed as a fraction of your total balance and includes fees and interest. Â
If you fail to make this minimum payment, you may be hit with late fees and if you still haven’t paid after 30 days, your creditor will report your activity to the major credit bureaus and your credit score will take a hit.
When this happens, you could lose up to 100 points and gain a derogatory mark that remains on your credit report for up to 7 years. Making minimum payments will not result in a derogatory mark, but it can indirectly affect your credit score and we’ll discuss that a little later.
Firstly, it’s important to understand why you’re being asked to pay a minimum amount and how you can avoid it.
How Much is a Minimum Credit Card Payment?
Prior to 2004, monthly payments could be as low as 2% of the balance. This caused all kinds of problems as most of your monthly payment is interest and will, therefore, inflate every month so that every time you reduce the balance it grows back.Â
Regulators forced a change when they realized that some users were being locked into a cycle of credit card debt, one that could see them repaying thousands more than the balance and taking many years to repay in full.
These days, a minimum payment must be at least 1% of the balance plus all interest and fees that have accumulated during that month, ensuring the balance decreases by at least 1% if only the minimum payment is met.
Do I Need to Make the Minimum Payment?
If you have a rolling balance, you need to make the minimum monthly payment to avoid derogatory marks. If you fail to do so and keep missing those payments, your account will eventually default and cause all kinds of issues.
However, you can avoid the minimum payment by clearing your balance in full.
Let’s assume that you have a brand-new credit card and you spend $2,000 in the first billing cycle. In the next cycle, you will be required to pay this balance in full. However, you will also be offered a minimum payment, which will likely be anywhere from $30 to $100. If this is all that you pay, the issuer will start charging you interest on your balance and your problems will begin.
If you spend $2,000 in the next billing cycle, you have just doubled your debt (minus whatever principal the minimum payment cleared) and your problems.
This is a cycle that many consumers get locked into. They do what they can to pay off their balance in full, but then they have a difficult month and that minimum payment begins to look very tempting. They convince themselves that one month won’t hurt and they’ll repay the balance in full next month, but by that point they’ve spent more, it has grown more, and they just don’t have the funds.
To avoid falling into this trap, try the following tips:
- Only Spend What You Have: A credit card should be used to spend money you have now or will have in the future. Don’t spend in the hope you’ll somehow come into some money before the billing period ends and the credit card balance rolls over.
- Get an Introductory Interest Rate: Many credit card issuers offer a 0% intro APR for a fixed period of time, allowing you to accumulate debt without interest. This can help if you need to make some essential purchases, but it’s important not to abuse this as you’ll still need to clear the full balance before the intro period ends.
- Use a Balance Transfer: If you’re in too deep and the intro rate is coming to an end, consider a balance transfer credit card. These cards allow you to move your full balance from one card (or cards) to another, taking advantage of yet another 0% APR and essentially extending the one you have.
- Pay the Minimum: If you can’t pay the balance in full, make sure you at least pay the minimum. A missed payment or late payment can incur fees and may hurt your credit score.Â
Why Pay More Than the Minimum?
You may have heard experts recommending that you pay more than the minimum every month, but why? If you’re locked into a cycle of credit card debt, it can seem counterproductive. After all, if you have a debt of $10,000 that’s costing you $400 a month, what’s the point of taking an extra $100 out of your budget?
Your interest and fees are covered by your minimum payment and account for a sizeable percentage of that minimum payment. By adding just 50% more, you could be doubling and even tripling the amount of the principal that you repay every month.
What’s more, your interest accumulates every single day and this interest compounds. Imagine, for instance, that you have a balance of $10,000 today and with interest, this grows to $10,040. The next day, the interest will be calculated based on that $10,040 figure, which means it could grow to $10,081, which will then become the new balance for the next day.Â
This continues every single day, and the larger your balance is, the more interest will compound and the greater the amount will be due over the term. By paying more than your minimum payment when you can, you’re reducing the balance and slowing things down.
Does Paying the Minimum Hurt My Credit Score?
Paying the minimum amount every month ensures you are doing the bare minimum to avoid hurting your credit history or accumulating fees. However, it can indirectly reduce your score via your credit utilization ratio.
Your credit utilization ratio is a score that compares the credit limit of all available credit cards to the total debt on those cards. It accounts for 30% of your credit score and is, therefore, a very important aspect of the credit scoring process.
The more credit card debt you accumulate, the lower your credit utilization rate will be and the more your score will be impacted. If you only pay the minimum, this rate will become stagnant and may take years to improve. By increasing the payment amount, however, you can bring that ratio down and improve your credit score.
You can calculate your credit utilization score by adding together the total amount of credit limits and debts and then comparing the latter to the former. A combined credit limit of $10,000 and a balance of $5,000, for instance, would equate to a 50% ratio, which is on the high side.
Can Credit Card Fees Hurt My Credit Score?
As with interest charges, credit card fees will not directly reduce your score but may have an indirect effect. Cash advance fees, for instance, can be substantial, with many credit card companies (including Capital One) charging 3% with a $10 minimum charge. This means that every time you withdraw cash, you’re paying at least $10, even if you’re only withdrawing $10.
What many consumers don’t realize is that these fees are also charged every time you buy casino chips or pay for some other form of gambling, and every time you purchase money orders and other cash products.Â
Along with foreign transaction fees and penalty fees, these can increase your balance and your minimum payment, making it harder to make on time payments and thus increasing the risk of a late payment.
Does Paying the Minimum Hurt Your Credit Score is a post from Pocket Your Dollars.
Source: pocketyourdollars.com
Increasing Your Savings on a Low-Income Salary
A low-income salary can create challenges when it comes to reaching your financial goals. You may want to take a vacation, buy a new car, or just put some cash away for a rainy day, but how can you do that with a limited income? Although you may struggle to add to your savings, there […]
The post Increasing Your Savings on a Low-Income Salary appeared first on Credit Absolute.
Source: creditabsolute.com
[Targeted] Best Buy Credit Card: Spend $1,500+ Outside Best Buy & Get A $75 Reward Certificate
Update 1/18/21: Some people also have an offer for 11% back on rewards on a single purchase by 1/31/21. Hat tip to reader JJ
The Offer
Offer sent out via e-mail, unknown subject line
- Some Best Buy credit cardholders are being offered a $75 reward certificate when you spend $1,500 or more outside of Best Buy by 2/28/21.
Our Verdict
High spend requirement.
Hat tip to reader JJ
Source: doctorofcredit.com
Best Credit Cards for Bad Credit
When it comes to excuses consumers give for their poor credit scores, banks and lenders have heard it all.Â
Maybe you lost your job and couldnât pay your student loan payment for a few months. Or perhaps you thought youâd gotten a deferment but were too busy job hunting to find out for sure.Â
Maybe you thought you paid your credit card bill but itâs actually sitting on your kitchen counter waiting for the mail.
Whatever the reason for your low credit score, one thing is for certain â lenders donât care.
In fact, banks and other lenders lean on your credit score and other factors to determine whether they should approve you for a credit card or a loan â and thatâs about it. Your personal situation is never considered, nor should it be.
It would be wonderful if credit card companies understood that âlife happensâ and made special exceptions to help people out, but that’s not the world we live in. As most of us already know, thatâs not typically how credit works. Credit cards are backed by banks, and banks have rules for a reason.
Now, hereâs the good news: Credit cards can help rebuild your credit, earn cash back for each dollar you spend, make travel easier, and serve as an emergency fund if youâre stuck paying a huge bill at the last minute. This is true even if you have poor credit, although the selection of credit cards you can qualify for may be somewhat limited.Â
Keep reading to learn about the best credit cards for bad credit, how they work, and how you can get approved.
Best Cards for Bad Credit This Year
Before you give up on building credit, you should check out all the credit cards that are available to consumers who need some help. Our list of the best credit cards for bad credit includes some of the top offers with the lowest fees and fair terms.
- Total Visa®
- Discover it® Secured
- Credit One Bank® Visa® Credit Card
- Secured Mastercard® from Capital One®
- Milestone® Gold Mastercard®
- Credit One Bank® Unsecured Visa® with Cash Back Rewards
#1: Total Visa®
The Total Visa® is one of the easiest credit cards to get approved for in today’s market, and itâs easy to use all over the world since itâs a true Visa credit card. However, this card does come with high rates and fees since itâs available to consumers with poor credit or a limited credit history.
Processing your application will cost $89, which is extremely high when you consider the fact that most credit cards donât charge an application fee. Youâll also pay an initial annual fee of $75 and a $48 annual fee for each year thereafter.
Once you sign up, youâll be able to pick your preferred card design and your credit card payments will be reported to all three credit reporting agencies â Experian, Equifax, and TransUnion. This is the main benefit of this card since your on-time payments can easily help boost your credit score over time.Â
For the most part, the Total Visa® is best for consumers who donât mind paying a few fees to access an unsecured line of credit. Since this card doesnât dole out rewards, however, there are few cardholder perks to look forward to.Â
- APR: 35.99% APR
- Fees: Application fee and annual fee
- Minimum Credit Score: Not specified
- Rewards: No
#2: Discover it® Secured
While secured cards donât offer an unsecured line of credit like unsecured credit cards do, they are extremely easy to qualify for. The Discover it® Secured may not be ideal for everyone, but it does offer a simple online application process and the ability to get approved with little to no credit history.
Keep in mind, however, that secured cards do work differently than traditional credit cards. With a secured credit card, youâre required to put down a cash deposit upfront as collateral. However, you will get your cash deposit back when you close your account in good standing.
Amazingly, the Discover it® Secured lets you earn rewards with no annual fee. Youâll start by earning 2% back on up to $1,000 spent each quarter in dining and gas. Youâll also earn an unlimited 1% back on everything else you buy.
The Discover it® Secured doesnât charge an application fee or an annual fee, although youâll need to come up with the cash for your initial deposit upfront. For the most part, this card is best for consumers who have little to no credit and want to build their credit history while earning rewards.
- APR: 24.74%
- Fees: No annual fee or monthly fees
- Minimum Credit Score: Not specified
- Rewards: Yes
#3: Credit One Bank® Visa® Credit Card
The Credit One Bank® Visa® Credit Card is another credit card for bad credit that lets you earn rewards on your everyday spending. Youâll earn a flat 1% cash back for every dollar you spend with this credit card, and since itâs unsecured, you donât have to put down a cash deposit to get started.
Other benefits include the fact you can get pre-qualified for this card online without a hard inquiry on your credit report â and that you get a free copy of your Experian credit score on your online account management page.
You may be required to pay an annual fee up to $95 for this card for the first year, but it depends on your creditworthiness. After that, your annual fee could be between $0 and $99.
- APR: 19.99% to 25.99%
- Fees: Annual fee up to $95 the first year depending on creditworthiness; after that $0 to $99
- Minimum Credit Score: Not specified
- Rewards: Yes
#4: Secured Mastercard® from Capital One®
The Secured Mastercard® from Capital One® is another secured credit card that extends a line of credit to consumers who can put down a cash deposit as collateral. This card is geared to people with bad credit or no credit history, so itâs easy to get approved for. One downside, however, is that your initial line of credit will likely be just $200 â and that doesn’t give you much to work with.Â
On the upside, this card doesnât charge an annual fee or any application fees. That makes it a good option if you donât want to pay any fees you wonât get back.
Youâll also get access to 24/7 customer service, $0 fraud liability, and other cardholder perks.
- APR: 26.49%
- Fees: No ongoing fees
- Minimum Credit Score: Not specified
- Rewards: No
#5: Milestone® Gold Mastercard®
The Milestone® Gold Mastercard® is an unsecured credit card that lets you get pre-qualified online without a hard inquiry on your credit report. You wonât earn any rewards on your purchases, but you do get benefits like the ability to select your cardâs design, chip and pin technology, and easy online account access.
You will have to pay a one-time fee of $25 to open your account, and thereâs an annual fee of $50 the first year and $99 for each year after that.
- APR: 24.90%
- Fees: Account opening fee and annual fees
- Minimum Credit Score: Not specified
- Rewards: No
#6: Credit One Bank® Unsecured Visa® with Cash Back Rewards
The Credit One Bank® Unsecured Visa® with Cash Back Rewards lets you earn 1% back on every purchase you make with no limits or exclusions. Thereâs no annual fee or application fee either, which makes this card a winner for consumers who donât want to get hit with a lot of out-of-pocket costs.
As a cardholder, youâll get free access to your Experian credit score, zero fraud liability, and access to a mobile app that makes tracking your purchases and rewards a breeze. You can also get pre-qualified online without a hard inquiry on your credit report.
- APR: 25.99%
- Fees: No annual fee or application fee
- Minimum Credit Score: Not specified
- Rewards: Yes
The Downside of Credit Cards with Bad Credit
While your odds of getting approved for one of the credit cards for bad credit listed above are high, you should be aware that there are plenty of pitfalls to be aware of. Here are the major downsides youâll find with these credit cards for bad credit and others comparable cards:
- Higher fees: While someone with excellent credit can shop around for credit cards without any fees, this isnât the case of you have bad credit. If your credit score is poor or you have a thin credit profile, you should expect to pay higher fees and more of them.
- Higher interest rates: While some credit cards come with 0% interest for a limited time or lower interest rates overall, consumers with poor credit typically have to pay the highest interest rates available today. Some credit cards for bad credit even come with APRs as high as 35%.
- No perks: Looking for cardholder benefits like cash back on purchases or points toward airfare or movie tickets? Youâll need to wait until your credit score climbs back into âgoodâ or âgreatâ territory. Even if you can find a card for applicants with bad credit that offers cash back, your rewards may not make up for the higher fees.
- No balance transfers: If youâre looking for relief from other out-of-control credit card balances, look elsewhere. Credit cards for bad credit typically donât offer balance transfers. If they do, the terms make them cost-prohibitive.
- Low credit limits: Credit cards for bad credit tend to offer initial credit limits in the $300 to $500 range with the possibility of increasing to $2,000 after a year of on-time monthly payments. If you need to borrow a lot more than that, youâll have to consider other options.
- Security deposit requirement: Secured credit cards require you to put down a cash deposit to secure your line of credit. While this shouldnât necessarily be a deal-breaker â and it may be required if you canât get approved for an unsecured credit card â youâll need to come up with a few hundred dollars before you apply.
- Checking account requirement: Most new credit card accounts now require cardholders to pay bills online, which means youâll need a checking account. If youâre mostly âunbanked,â you may need to open a traditional bank account before you apply.
Benefits of Improving Your Credit Score
People with bad credit often consider their personal finances a lost cause. The road to better credit can seem long and stressful, and itâs sometimes easier to give up then it is to try to fix credit mistakes youâve made in the past.
But, there are some real advantages that come with having at least âgoodâ credit, which typically means any FICO score of 670 or above. Here are some of the real-life benefits better credit can mean for your life and your lifestyle:
- Higher credit limits: The higher your credit score goes, the more money banks are typically willing to lend. With good credit, youâll have a better chance at qualifying for a car loan, taking out a personal loan, or getting a credit card with a reasonable limit.
- Lower interest rates: A higher credit score tells lenders youâre not as risky as a borrower âa sign that typically translates into lower interest rates. When you pay a lower APR each time you borrow, you can save huge amounts of money on interest over time.
- Lower payments: Borrowing money with a lower interest rate typically means you can usually get lower payments all your loans, including a home loan or a car loan.
- Ability to shop around: When youâre an ideal candidate for a loan, you can shop around to get the best deals on credit cards, mortgages, personal loans, and more.
- Ability to help others: If your kid wants to buy a car but doesnât have any credit history, better credit puts you in the position to help him or her out. If your credit is poor, you wonât be in the position to help anyone.
- More options in life: Your credit score can also impact your ability to open a bank account or rent a new apartment. Since employers can request to see a modified version of your credit report before they hire you, excellent credit can also give you a leg up when it comes to beating out other candidates for a job.Â
In addition to the benefits listed above, most insurance companies now consider your credit score when you apply for coverage. For that reason, life, auto, and home insurance rates tend to be lower for people with higher credit scores.
This may seem unfair, but you have to remember that research has shown people with high credit scores tend to file fewer insurance claims.
How to Improve Your Credit: Slow and Steady
When you have a low credit score, there are two ways to handle it. If you don’t mind the consequences of poor credit enough to do anything about it, you can wait a decade until the bad marks age off your credit report. Depending on when your creditors give up and write off your debt, you may not even need to wait that long.
If you donât like the idea of letting your credit decay while you wait it out, you can also try to fix your past credit mistakes. This typically means paying off debt â and especially delinquent debts â but it can also mean applying for new loan products that are geared to people who need to repair their credit.
If you decide to take actionable steps to build credit fast, the credit cards on this page can help. Theyâll give you an opportunity to show the credit bureaus that youâve changed your ways.
Before you take steps to improve your credit score, however, keep in mind all the different factors used to determine your standing in the first place. The FICO scoring method considers the following factors when assigning your score:
- On-time payments: Paying all your bills on time, including credit cards, makes up 35% of your FICO score. For that reason, paying all your bills early or on time is absolutely essential.
- Outstanding debts: How much you owe matters, which is why paying off your credit cards each month or as often as possible helps your score. According to myFICO.com, the amounts you owe in relation to your credit limits make up another 30% of your FICO score.
- New credit: Apply for too many new cards or accounts at once can impact your score in a negative way. In fact, this determinant makes up another 10% of your FICO score.
- Credit mix: Having a variety of open accounts impresses the credit bureau algorithm Gods. If all you have are personal loans right now, mixing in a credit card can help. If you already have four or five credit cards, it may be wise to back off a little.
- Length of credit history: The length of your credit history also plays a role in your score. The longer your credit history, the better off you are.
If you want to improve your credit score, consider all the factors above and how you can change your behavior to score higher in each category. Itâs pretty easy to see how paying all your bills early or on time and paying off debt could make a big positive impact on your credit score when you consider that these two factors alone make up 65% of your FICO score.
If you want a way to track your progress, also look into an app like Credit Karma, one of my favorite tools. This app lets you monitor your credit progress over time and even receive notifications when your score has changed. Best of all, itâs free.
Should You Use a Credit Card to Rebuild Your Credit Score?
If youâre on the fence about picking up a credit card for bad credit, your first step should be thinking over your goals. What exactly are you trying to accomplish?
If youâre looking for spending power, the cards on this list probably wonât help. Some are secured cards, meaning you need a cash deposit to put down as collateral. Others offer low credit limits and high fees and interest rates, making them costly to use over the long-term.
If you really want to start over from scratch and repair credit mistakes made in the past, on the other hand, one of these cards may be exactly what you need. If youâre determined to improve your score, they can speed things along.
You may pay higher fees and interest rates along the way, but itâs important to remember that none of the cards on this list need to be your top card forever. Ideally, youâll use a credit card for poor credit to rebuild your credit and boost your score. Once youâve reached your goal, you can upgrade to a new card with better benefits and terms.
The post Best Credit Cards for Bad Credit appeared first on Good Financial Cents®.
Source: goodfinancialcents.com
Learning How To Survive On A College Budget
College is expensive and everyone knows that.
Between paying for tuition, parking, textbooks, extra fees, and everything else, you also have basic living expenses to pay for as well.
All of these costs are either brand new or somewhat new to you most likely as well, so you might not even know how to survive on a budget, let alone a college budget.
Don’t worry, though, surviving on a college budget is possible. Learning how to save money in college is possible!
Related post: How I Paid Off $40,000 In Student Loans In 7 Months
Whether you are trying to survive the whole year off of what you made over the summer or if you have a steady job throughout the school year, there are ways to budget your money and not fall into any extra debt. Plus, you can still enjoy your college years on a low budget as well!
Below are my tips on how to survive on a college budget.
Use your student ID.
Your student ID is good at many places beyond just your college campus. Before you buy anything, I highly recommend seeing if a company offers a student discount.
Your student ID can be used to save money at restaurants, clothing stores, electronics (such as laptops!), at the movies, and more. You may receive a discount, free items, and more all just by flashing your student ID.
After all, you are paying to go to college and you are paying a lot. You might as well reap one benefit of paying all of those high college costs.
Make extra money.
You may need to look into making extra money if you just don’t have enough to survive on. I am a firm believer in making extra money and I think extra time can be wisely spent doing this.
Some online side gigs with flexible schedules include:
- Blogging is how I make a living and just a few years ago I never thought it would be possible. I made over $150,000 last year by blogging and will make more than that in 2015. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.
- Survey companies I recommend include Survey Junkie, American Consumer Opinion, Product Report Card, Pinecone Research, Opinion Outpost, and Harris Poll Online. They’re free to join and free to use! It’s best to sign up for as many as you can because that way you can receive the most surveys and make the most money.
- InboxDollars is an online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming coupons, and more. Also, by signing up through my link, you will receive $5.00 for free!
- Swagbucks is something I don’t use as much, but I do earn Amazon gift cards with very little work. Swagbucks is just like using Google to do your online searches, except you get rewarded points called “SB” for the things you do through their website. Then, when you have enough points, you can redeem them for cash, gift cards, and more. You’ll receive a free $5 bonus just for signing up today!
- Check out 75 Ways To Make Extra Money for more ideas.
- Read Best Online Jobs For College Students
Use coupons to stay on a college budget.
Just like with the above, you may want to start using coupons.
By doing so, you can save money on nearly everything. You can find coupons in newspapers, online, and in the mail. They are everywhere so you should have no problem finding them and saving money today.
Related post: How To Live On One Income
Learn how to correctly use a credit card or don’t have one at all.
Many college students fall into credit card debt, but I don’t want you to be one of them.
Many college students will start relying on their credit cards in order to get them through their low college budget, but this can lead to thousands of dollars of credit card debt which will eventually seem impossible to get out of due to significant interest charges that keep building up.
In order to never get into this situation, you should avoid credit cards at all costs if you think you will rely on them too heavily.
You should think long and hard about whether you should have one or not. Just because many others have them doesn’t mean they know what they’re doing! However, if you think you will be good at using them, then there are many advantages of doing so.
Related post: Credit Card Mistakes That Can Lead To Debt
Only take out what you need in student loans.
Many students take out the full amount in student loans that they are approved for even if they only need half.
This is a HUGE mistake. You should only take out what you truly need, as you will need to pay back your student loans one day and you will most likely regret it later.
I know someone who would take out the max amount each semester and buy timeshares, go on expensive vacations, and more. It was a huge waste of money and I’m still not even sure why they thought it was a good idea.
Just think about it – If you take out an extra $2,000 a semester, that means you will most likely take out almost $20,000 over the time period that you are in college.
Do you really want to owe THAT much more in student loans?
Skip having a car.
Most campuses have everything you need in order to survive – food, stores, and jobs. In many cases, you do not need to have a car whatsoever.
By foregoing a car, you may save money on monthly payments, maintenance costs, car insurance, gas, and more.
Related post: Should We Get Rid Of A Car And Just Have One?
Eat out less.
Now, I’m not saying you should stop eating out entirely if you are trying to survive on a college budget. I know how it is to be in college and to want to hang out with everyone. These are your college years after all.
However, you should try to eat in as much as you can, make your own meals, and try to eat out only during happy hours or when food is cheaper, such as during lunch time. Eating out can ruin your college budget!
Have a roommate.
The more people you live with, generally the less you will pay when it comes to rent and utilities. If you are living on your own, then you may want to find roommates so that you can split the costs with them.
This will help you to lower your college budget and you may even find some awesome friends.
Related post: What I Learned Having Roommates
What college budget tips do you have?
The post Learning How To Survive On A College Budget appeared first on Making Sense Of Cents.
Source: makingsenseofcents.com