What Are the Best Car Loans When You Have Bad Credit?

If you have bad credit and need a car loan, there are some challenges when compared to obtaining a standard car loan. However, pick your head up because there are a handful of great lenders that specifically tailor their programs to people with bad credit. We researched the landscape of lenders that can help you get a car loan even if you have a below-average credit score.

Based on our study, OneMain Financial and LightStream are two of the top lenders offering bad credit card loans. This is due to factors including loan options, requirements to qualify, and interest rates offered. Of course, we offer in-depth reviews of all the top lenders who offer bad credit car loans further down in this piece.

Apply now with our top pick: OneMain Financial

In this guide we also help you understand the factors that go into selecting the right auto lender, and how to get the best rate you can.

Most Important Factors for Bad Credit Car Loans

If you’re in the market for a bad credit car loan, there are a plethora of factors to consider and compare. Here are the main loan details we looked at in our study, and the ones you should prioritize as you select the best car loan for your needs.

  • Check your credit score. And understand what is in your credit report.
  • FICO scores under 579 is considered ‘poor’. But you may need a bad credit loan with a score as high as 669.
  • Interest rates and fees matter. These can make a huge difference in how much you pay for an auto loan each month.
  • Compare loan terms. Consider your repayment timeline and compare lenders with this in mind.
  • Getting prequalified online can help. Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report.
  • Watch out for loan restrictions. Some lenders impose restrictions on what car you can purchase. Keep this in mind to avoid unpleasant surprises later.

The Best Bad Credit Car Loans of 2021

The best bad credit car loans make it easy for consumers to qualify for the financing they need. The following lenders made our list due to their superior loan offerings, excellent customer service, and reputation in this industry.

Car Loan Company Best For… Get Started
onemain financial bad credit car loan Best for Flexibility Apply Now
bad credit car loan upgrade Best Personal Loan Option Apply Now
autocreditexpress logo Best Loan for Bad Credit and No Credit Apply Now
myautoloan bad credit car loan logo Best Loan Comparison Site Apply Now
capitalone logo Best Big Bank Loan for Bad Credit Apply Now
lightstream logo Best for Fast Funding Apply Now

Why Some Lenders Didn’t Make the Cut

While the lenders we are profiling are the best of the best, there are plenty of bad credit car loans that didn’t quite make the cut. We didn’t include any lenders that only offer auto loan refinancing, for example, since we know many people need a car loan in order to purchase a new or used car or truck. We also stayed away from bad credit car loans that charge outrageous fees for consumers with the lowest credit scores.

Bad Credit Auto Loan Reviews

We listed the top companies we selected in our study above, but we also aim to provide readers with more insights and details on each. The reviews below highlight the highlights of each lender that made our list, plus our take on who they might be best for.

OneMain Financial: Best for Flexibility

OneMain Financial offers personal loans and auto loans with interest rates that range from 18.00% to 35.99%. You can repay your auto loan in 24, 36, 48, or 60 months, and you can use this lender to borrow up to $20,000 for a new or used car. You can apply for your auto loan online and from the comfort of your own home, and it’s possible to get approved within a matter of minutes.

While OneMain Financial doesn’t list a minimum credit score requirement, it’s believed they will approve consumers with scores as low as 600. You should also note that auto loans from OneMain Financial come with an origination fee of up to 5% of your loan amount.

Sign Up With OneMain Financial Today

Why This Lender Made Our List: OneMain Financial offers a lot of flexibility in terms of your loan terms, including the option to repay your auto loan over five years. OneMain Financial also has pretty decent reviews from users for a bad credit lender, and they have an A+ rating with the Better Business Bureau.

Potential Downsides to Be Aware Of: OneMain Financial charges some pretty high rates for its bad credit loans, and don’t forget that you may need to pay an origination fee that is up to 5% of your loan amount. Their loans are also capped at $20,000, which means this lender won’t work for everyone.

Who It’s Best For: This lender is best for consumers with really poor credit who need auto financing but can’t get approved for a better loan.

Upgrade: Best Personal Loan Option

Upgrade is an online lender that offers personal loans with fixed interest rates, fixed monthly payments, and a fixed repayment timeline. You can borrow up to $50,000 in an unsecured loan, which means you won’t actually use the car you purchase as collateral for the loan.

You can repay the money you borrow over 36 to 60 months, which makes it possible for you to tweak your loan offer to secure a monthly payment you can afford. Upgrade has a minimum credit score requirement of 620 to qualify, although they’ll consider additional factors such as your income and employment history.

Sign Up With Upgrade Today

Why This Lender Made Our List: Upgrade lets you “check your rate” online without a hard inquiry on your credit report. This makes it easy to shop around and compare this loan offer to others without having to fill out a full loan application. Also note that Upgrade has an A+ rating with the BBB.

Potential Downsides to Be Aware Of: Upgrade charges APRs as high as 35.89% for consumers with the worst credit, and an origination fee of up to 6% of your loan amount might also apply.

Who It’s Best For: Upgrade is best for consumers with decent credit who need to borrow a larger loan amount. This loan is also best for anyone who wants an auto loan that isn’t secured by their vehicle.

AutoCreditExpress.com: Best Loan for Bad Credit and No Credit

AutoCreditExpress.com is an online platform that lets consumers with bad credit and even no credit get the financing they need. Once you fill out some basic loan information, you’ll be connected with a lender who can offer you financing as well as a dealership in your area. From there, you’ll head to the local dealership and pull the pieces of your auto loan together, including the purchase price of the car you want.

Sign Up With Autocreditexpress.com Today

Why This Lender Made Our List: AutoCreditExpress.com has an A+ rating with the Better Business Bureau. This platform also makes it possible for consumers with no credit at all to finance a car, which is a welcome relief for people who are building credit for the first time.

Potential Downsides to Be Aware Of: This website is a loan platform but they don’t offer loans directly to consumers. This means you won’t have any idea on rates and terms until you fill out an application and get connected with a lender.

Who It’s Best For: This loan is best for consumers with no credit or minimal credit history who cannot get approved for a loan elsewhere.

MyAutoLoan.com: Best Loan Comparison Site

MyAutoLoan.com is a loan comparison site that makes it easy to compare up to four auto loan offers in a matter of minutes. You can use this website to apply for a new auto loan, but you can also utilize it to consider refinancing offers for an auto loan you already have. You can also use funds from this platform to purchase a car from a dealer or from a private seller.

Sign Up With MyAutoLoan.com Today

Why This Lender Made Our List: Comparing auto loans in terms of their terms, rates, and fees is the best way to save money and wind up with the best deal. Since MyAutoLoan.com is a loan comparison site, they make it easy to shop around and compare competing offers.

Potential Downsides to Be Aware Of: Loan comparison sites connect you with other lenders who have their own loan terms and minimum requirements for approval. Make sure you know and understand all the details of loans you’re considering before you sign on the dotted line.

Who It’s Best For: MyAutoLoan.com is best for consumers who want to do all their auto loan shopping with a single website.

Capital One: Best Big Bank Loan for Bad Credit

Capital One offers online auto loan financing in conjunction with a program called Auto Navigator®. This program lets you get prequalified for an auto loan online, then work with a participating dealer to coordinate a loan for the car you want. Capital One also lets you search available vehicles at participating dealerships before you apply for financing, making it easy to figure out how much you might need to borrow ahead of time.

Sign Up With Capital One Today

Why This Lender Made Our List: Capital One offers the huge benefit of letting you get prequalified online without a hard inquiry to your credit report. Capital One is also a reputable bank with a long history, which should give borrowers some comfort. They have an A+ rating with the BBB and plenty of decent reviews from consumers.

Potential Downsides to Be Aware Of: You should be aware that Capital One auto loans only work at participating dealers, so you may be limited in terms of available cars to choose from.

Who It’s Best For: Capital One auto loans are best for consumers who find a car they want to buy at one of the participating lenders that works with this program.

LightStream: Best for Fast Funding

LightStream offers online loans for a variety of purposes, including auto financing. Their auto loans for consumers with excellent credit start at just 3.99% with autopay, and even their loans for consumers with lower credit scores only run as high as 16.79% with autopay.

You can apply for your LightStream loan online and get approved in a matter of minutes. This lender can also send your funds as soon as the same business day you apply.

A minimum credit score of 660 is required for loan approval, although other factors like your work history and income are considered.

Sign Up With LightStream Today

Why This Lender Made Our List: LightStream offers auto loans with exceptional terms, and that’s even true for consumers with less than perfect credit. You can also get your loan funded as soon as the same business day you apply, which is crucial if you need auto financing so you can get back on the road.

Potential Downsides to Be Aware Of: With a minimum credit score requirement of 660, these loans won’t work for consumers with the lowest credit scores.

Who It’s Best For: LightStream is best for people with decent credit who need to get auto loan financing as quickly as possible.

What You Need To Know When Applying For A Car Loan With Bad Credit

Interest rates and fees matter.

If you think your interest rate and loan fees won’t make a big difference in your monthly payment, think again. The reality is that rates and fees can make a huge difference in how much you pay for an auto loan each month. Consider this: A $10,000 loan with an APR of 35.89% will require you to pay $361 per month for five years. The same loan amount at 21.99% APR will only set you back $276 per month. At 9.99%, you would pay only $212 per month for five years. The bottom line: Make sure to compare auto loans for bad credit so you wind up with the lowest possible APR you can qualify for.

Take steps to improve your credit score before you apply.

It’s not always possible to wait to apply for a car loan, but you may be able to secure a lower interest rate and better loan terms if you can improve your credit score before you borrow money. The most important steps you can take to improve your score include paying all your bills early or on time, as well as paying down debt in order to decrease your credit utilization. You should also refrain from opening or closing too many credit card accounts in order to avoid new inquiries on your credit report and maintain the longest average length of your credit history possible.

Compare loan terms.

Some lenders let you borrow money for up to 84 months, while others let you repay your loan over 36 or 60 months at most. If you need to repay your loan over a longer timeline in order to secure an affordable monthly payment, make sure to compare lenders based on this factor. If you’re having trouble figuring out how much can you can afford, gauging affordability based on the monthly payments you can handle can also help in that effort.

Getting prequalified online can help.

Some lenders, including ones that made our ranking, let you get prequalified for a loan online without a hard inquiry on your credit report. This makes it considerably easier to compare rates and shop around without formally applying for an auto loan. Getting prequalified with more than one lender can also help you determine which one might offer the lowest rate without having to fill out a full loan application.

Watch out for loan restrictions.

As you compare the lenders on this list, keep in mind that not all lenders extend loans for any car you want. Some only let you finance cars with participating lenders in their network, which can drastically limit your options and make it impossible to purchase a car from a private seller. If you hope to purchase a car from someone you know or a website like craigslist.org, you may want to consider reaching out to your personal bank or a credit union you have a relationship with.

Bad credit car loans don’t have to be forever.

Finally, you should know that a car loan for bad credit doesn’t have to last forever. You may need to borrow money for a car right now regardless of the interest rate and terms you can qualify for, but it may be possible to refinance your loan into a better loan product later on. This is especially true if you focus on improving your credit score right away, and if you use your auto loan as an opportunity to prove your creditworthiness.

How to Get the Best Rate

1. Check your credit score.

Your credit score is one of the most important defining factors that dictate loan costs. Before you apply for an auto loan, it can help you check your credit score to see where you stand. Your score may not be as bad as you realize, but it could also be worse than you ever imagined. Either way, it helps to know this important information before you start shopping for an auto loan.

2. Improve your credit over time.

If your credit score needs work, you’ll want to take steps to start improving it right away. The most important steps you can take to boost your credit score include paying all your bills early or on time and paying down debt to decrease your credit utilization. Also, make sure you’re not opening or closing too many credit accounts within a short amount of time.

3. Check your credit reports.

Use the website AnnualCreditReport.com to get a free copy of your credit reports from all three credit bureaus. Once you have this information, check over your credit reports for errors. If you find false information that might be hurting your score, take the steps to have the incorrect information removed.

4. Compare loan offers from at least three lenders.

A crucial step to get the best rate involves shopping around and comparing loan offers from at least three different lenders. This is important since lenders with different criteria might offer a lower APR or better terms than others.

5. Be flexible with repayment terms.

Also consider a few different loan terms provided you can afford the monthly payment with each. Some auto lenders offer better rates for shorter terms, which can help you save money if you can afford to repay your loan over 24 or 36 months instead of 60+.

How We Chose the Best Auto Loans

The lenders on our list weren’t plucked out of thin air. In fact, the team behind this guide spent hours comparing auto lenders based on a wide range of criteria. Here’s everything we considered when comparing the best bad credit car loans of 2021:

Interest Rates and Loan Terms: Our team looked for loans that offer reasonable rates and terms for consumers with poor credit. While higher APRs are typically charged to consumers with a low credit score, we only considered lenders that offer sensible rates that don’t seem out of line for the auto loan market.

Ratings and Reviews: We gave preference to lenders who have decent reviews online, either through Consumer Affairs, Trustpilot, or another third party website. We also gave higher marks to lenders who have a positive rating with the Better Business Bureau (BBB).

Online Availability: Lenders who offer full loan details online were definitely given top priority in our ranking, and lenders who let you get prequalified online without a hard inquiry on your credit report were given the most points in this category. But since not everyone wants to apply for a loan online, we also included some lenders that let you apply over the phone.

Approval Requirements: Finally, we looked for lenders that extend credit to consumers with low credit scores in the first place. Not all lenders offer specific information on approval requirements, but we did our best to sort out lenders that only accept borrowers with good or excellent credit.

Summary: Best Bad Credit Card Loans of 2021

  • Best for Flexibility: OneMain Financial
  • Best Personal Loan Option: Upgrade
  • Best Loan for Bad Credit and No credit: AutoCreditExpress.com
  • Best Loan Comparison Site: MyAutoLoan.com
  • Best Big Bank Loan for Bad Credit: CapitalOne
  • Best for Fast Funding: LightStream

The post What Are the Best Car Loans When You Have Bad Credit? appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Prepare for Holiday Shopping with These Timely Credit Tips

According to a YouGov Parent Survey in 2019, a quarter of parents entered the 2019 holiday shopping seasonstill paying down debt related to 2018 holiday spending. Deloitte numbers put holidayretail salesgrowth in 2019 at 4.1% year-over-year. In 2020, Deloitte predicts growth of between 1% and 1.5% year-over-year for the holiday season.

It might be that some people no longer want to pay for holiday gifts, decorations and food a year down the road. But it’s also true that the COVID-19 pandemic has hit consumerwallets and some people might be cutting back this year.

That doesn’t mean that people aren’t shopping. Google and other thought leaders note that changes to shopping habits and the need for social distancing and other measures will likely spread the holiday shopping season out longer. Shoppers are also likely to turn to online shopping.

With a ton of shopping opportunities, a longer holiday shopping season and pent-up pandemic energy, it might be easy to overspend and create debt you’ll deal with into the future. Follow these tips to prepare for holiday shopping so you can protect your financial standing, save money and make the most of the resources you have this season.

1. Check your credit scores

Begin by checking your credit scores and reports. They tell you where you stand if you want to apply for credit. They also give you a baseline of where you are so you know if your score goes up or down later with no explanation.

An unexplained drop in your credit score can be a sign your financial information is compromised. Unfortunately, the holidays are prime time for many scammers. Using a service, such as ExtraCredit’s Track It feature to keep tabs on 28 of your FICO scores, helps you know when you need to act to protect your credit.

2. Ask for a credit limit increase

If you have existing credit cards and you’re a cardholder in good standing, the months prior to the holidays can be a good time to ask for a credit limit increase. You’re not asking so you can spend more-it’s typically advisable to keep spending in line with your budget no matter how much credit you have.

You’re asking for a higher limit so you can spend what you already planned to without hurting your credit utilization. Credit utilization is the second-most important factor in determining your credit score-second only to payment history. It’s the ratio between your credit limit and how much of that credit you have used.

If you have a card with a limit of $1,000 and you spend $300, that’s a utilization rate of 30%. But if you get approved for a credit limit of $2,000 and you spend $300, that’s a utilization rate of only 15%, which is better for your score.

3. Apply for a credit cardwith a 0% APR introductory offer

Those with good or excellent credit might want to consider applying for a card with a 0% APR introductory offer. If you qualify for such a card, you typically have one or two years to pay off purchases made during the introductory period without accruing any interest.

This can be a way to finance your entire holiday without paying anything more for the privilege of doing so. However, it’s still important to maintain your budget and not overspend just because you won’t be paying the balance off until later. Otherwise, you make this season’s holiday festivities next season’s problem.

4. Pay down debt before-and after-the holidays

Speaking of last season’s debt: If you can pay it down before you start spending this season, that’s a great accomplishment. It also frees up your credit and your budget so you can better enjoy the current holiday season. If you’re paying $100 a month on your debt, that’s $100 a month that might go toward gifts or celebrations that you don’t have to put on a card this year.

If you do use credit to pay for the 2020 holidays, have a plan for paying it down as soon as possible. That’s especially true with 0% interest cards. The longer you wait, the greater the chance you’ll miss the introductory period and potentially be on the hook for a lot of interest expense.

5. Create a holiday spending budget

Whether you’re using cash or credit-or a mix of both-enter the 2020 holiday shopping season with a plan. Take an honest look at your personal budget. If you don’t have a budget, create one before you move forward. Then decide how much you can realistically spend during the holidays.

Consider which gifts you want to buy and which events you want to host or attend. You might not be able to do everything, and that’s OK. Be honest with yourself, your family and your friends about what you can afford to do with your time and money this year.

Then make a list and assign each item a monetary budget. That can include:

  • Gifts as a total
  • Gift extras, such as wrapping and tags
  • Shipping, both for receiving items you buy and for shipping gifts to others
  • Food and drinks
  • Travel
  • Decor
  • General festivities, such as tickets to holiday events

Once you assign a dollar amount to a category, stick to it. That’s a good idea even if you’re spending with credit.

6. Align budgeted spendingwith credit cardrewards

Once you know how much you want to spend, decide how best to spend it. If you’re using credit cards for the holidays, check your accounts to see if any offer cash back or rewards points. If they do, double-check which categories or stores you can shop in to earn the most points with each card.

For example, some travel rewards cards offer 6x points when you shop at supermarkets. You could use such a card to cover the food-and-drink portion of your holiday budget and reap the biggest rewards possible from that spending. You might also be able to maximize rewards when purchasing gift cards.

7. Guard your financial information and identity

As you enjoy holiday shopping, be on guard. Don’t use debit card PIN numbers unless you have to, and shield the keypad when you enter your information. Keep a close eye on your wallet or purse, and check your credit card statements regularly to ensure all charges are yours. You can also use ExtraCredit’s Guard It feature to help keep your identity and account information safe during and beyond the season.

Sign up for ExtraCredit today!

The post Prepare for Holiday Shopping with These Timely Credit Tips appeared first on Credit.com.

Source: credit.com

What Does Having a Derogatory Public Record on My Credit Report Mean

I Found a Judgment on My Credit Report. Now What?

Since the National Consumer Assistance Plan went into effect in 2017, public records must meet strict requirements in order to appear on consumer credit reports. Civil judgments and tax liens do not meet these new requirements, so they were removed from credit reports. At this point, the only derogatory public record that should appear on your credit report is bankruptcy. If a tax lien or civil judgment still appears on your credit report, you should dispute that record with the credit reporting agencies.

How Much Do Public Records Affect Credit Scores?

Bankruptcy can cause a FICO score to drop by 200 points or more. A filing may lower credit scores for seven to 10 years and be difficult to remove from a credit report unless any information is inaccurate.

The decision to exclude other public records slightly increased FICO scores for many consumers and resulted in increases of 20 to 40 points in some cases.

Bankruptcies and Your Credit Report

Bankruptcies are the one public record that are still included on your credit report. In most cases, they will remain on your report for seven to 10 years.

You can dispute an inaccurate report of bankruptcy or one being reported beyond the statute of limitations. Review your report for any inaccuracies and contact the credit bureaus to dispute inaccuracies if need be. If a credit bureau claims to have court verification of a bankruptcy, you should send a procedural letter to determine how they verified the public record on credit report. Follow up with the courts to determine whether the bankruptcy was actually verified.

〉 Learn more about when and why you should file bankruptcy and how doing so will affect your credit.

Civil Judgments and Your Credit Report

Civil judgments result when a creditor sues you for an outstanding debt and wins. That creditor then has more avenues for pursuing payment: they may now satisfy delinquent or outstanding debt through wage garnishment or by seizing funds from checking or savings accounts.

Judgments are no longer factored into credit scores, though they are still public record and can still impact your ability to qualify for credit or loans. Lenders may still check to see whether any outstanding judgments against a potential borrower exist. You should pay legitimate judgments and dispute inaccurate judgments to ensure these do not affect your finances unduly.

〉 Learn more about how to deal with civil judgments.

If a civil judgment is still on your credit report, file a dispute with the appropriate credit reporting agencies to have it removed.

Tax Liens and Your Credit Report

Tax liens are filed by the IRS when you don’t pay your taxes. A lien is automatically filed when you owe more than $10,000. When the IRS files a tax lien against you, it essentially gives the agency first dibs on any payment you receive from selling or liquidating your assets to pay your debts.

While tax liens are no longer reported on credit reports, they can significantly impact your financial situation in ways that indirectly affect your credit score.

〉 Learn more about tax liens.

If a tax lien is being reported on your credit report, file a dispute.

How to Deal with Derogatory Public Records

Although judgments and tax liens are no longer filed on credit reports or factored into credit scores, these penalties can undermine your financial standing. If a derogatory public record is filed against you‚ you should monitor the effects on your credit and ensure that information pertaining to your filing is accurate.

Check your reports regularly to ensure they are fair, accurate and up-to-date. You can watch for changes by getting your free Credit Report Card and credit score monitoring from Credit.com.

〉Sign up now!

The post What Does Having a Derogatory Public Record on My Credit Report Mean appeared first on Credit.com.

Source: credit.com

Average credit card interest rates: Week of February 10, 2021

The average credit card interest rate is 16.12%

The national average credit card APR held steady this week after inching up two weeks in a row. This is the second consecutive week that the average APR for brand-new credit cards has registered 12 basis points above 16%, according to the CreditCards.com Weekly Credit Card Rate Report.

Meanwhile, this is the 46th consecutive week that the average new card APR has remained within rounding distance of 16%.

The average APR is still historically expensive

CreditCards.com has tracked the standard APRs of a representative sample of 100 online card offers every week since mid-2007. 

Currently, APRs on brand-new credit cards are down considerably compared to recent years. For example:

  • The average yearly APR in 2019 was 17.57%.
  • In 2018, it was 16.8%.
  • In 2020, it was 16.32%.

But historically, interest rates on brand new offers are still quite high. For example:

  • In 2017, for example, the average yearly APR stood at 15.89%.
  • In 2016, it was 15.18%.
  • And between 2011 and 2015, it remained stubbornly within rounding distance of 15% every year.

When CreditCards.com first began checking interest rates, by contrast, new card APRs were even lower – in part because lenders had more freedom then to quickly hike cardholders’ APRs once a brand-new card was opened.

For example, the average lender advertised an 11.54% APR in 2008, according to CreditCards.com data. In 2009, the average credit card APR started at 12.34%. But at the time, a cardholder who opened a card with such a low rate was at higher risk than they are today to watch their credit card APRs go up quickly.

The Credit CARD Act of 2009 sought to protect cardholders from surprise rate hikes by requiring lenders to give anyone with an open credit card account at least 45 days’ advance notice before hiking their APR. As a result, lenders appeared to become significantly more cautious about the starting rates they advertised. For example, in 2010, the average card APR climbed from 12.87% in January to 14.68% in December. Average rates then remained near 15% for several consecutive years.

Lenders clearly became more comfortable with revising new card APRs after 2016, though.  When the Federal Reserve revises its benchmark interest rate, most new card APRs change by the same amount.

Lenders also began independently revising card offers more often, particularly between 2017 and early 2020. But the economy soured last spring, prompting the Federal Reserve to slash federal interest rates to near zero. As a result, lenders have become much more reluctant to significantly revise offers.

Majority of lenders appear to be avoiding major changes

None of the lenders tracked by CreditCards.com shook up credit card terms this week. But these days, that’s nothing new. Most credit card issuers have become much slower than they were in recent years to dramatically alter credit card pricing. As a result, many of the most popular credit cards have appeared frozen in time for much of the past year.

Among the 100 cards checked weekly by CreditCards.com, for example, more than 90% of cards currently advertise the exact same APR that they advertised months ago. Meanwhile, a majority of cards included in the weekly rate report haven’t advertised a new credit card APR since last spring.

U.S. Bank has remained the one exception: it has made a number of dramatic rate changes in recent months and has been responsible for most of the rate changes CreditCards.com has recorded since November 2020.

See related: How do credit card APRs work?

CreditCards.com’s Weekly Rate Report

Avg. APR Last week 6 months ago
National average 16.12% 16.12% 16.03%
Low interest 12.90% 12.90% 12.83%
Cash back 15.94% 15.94% 16.09%
Balance transfer 13.93% 13.93% 13.93%
Business 14.22% 14.22% 13.91%
Student 16.12% 16.12% 16.12%
Airline 15.56% 15.56% 15.48%
Rewards 15.81% 15.81% 15.82%
Instant approval 18.47% 18.47% 18.65%
Bad credit 25.30% 25.30% 24.43%
Methodology: The national average credit card APR is comprised of 100 of the most popular credit cards in the country, including cards from dozens of leading U.S. issuers and representing every card category listed above. (Introductory, or teaser, rates are not included in the calculation.)
Source: CreditCards.com
Updated: February 10, 2021

Historic interest rates by card type

Some credit cards charge even higher rates, on average. The type of rate you get will depend in part on the category of credit card you own. For example, even the best travel credit cards often charge higher rates than basic, low interest credit cards.

CreditCards.com has been calculating average rates for a wide variety of credit card categories, including student cards, balance transfer cards, cash back cards and more, since 2007.

How to get a low credit card interest rate

Your odds of getting approved for a card’s lowest rate will increase the more you improve your credit score. Some factors that influence your credit card APR will be out of your control, such as the length of time you’ve been handling credit.

However, even if you’re new to credit or are rebuilding your score, there are steps you can take to ensure a lower APR. For example:

  1. Pay your bills on time. The single most important factor influencing your credit score – and your ability to win a lower rate – is your track record of making on-time payments. Lenders are more likely to trust you with a competitive APR – and other positive terms, such as a big credit limit – if you have a lengthy history of paying your bills on time.
  2. Keep your balances low. Lenders also want to see that you are responsible with your credit and don’t overcharge. As a result, credit scores take into account the amount of credit you’re using, compared to how much credit you’ve been given. This is known as your credit utilization ratio. Typically, the lower your ratio, the better. For example, personal finance experts often recommend that you keep your balances well below 30% of your total credit limit.
  3. Build a lengthy and diverse credit history. Lenders also like to see that you’ve been successfully using credit for a long time and have experience with different types of credit, including revolving credit and installment loans. As a result, credit scores, such as the FICO score and VantageScore, factor in the average length of your credit history and the types of loans you’ve handled (which is known as your credit mix). To keep your credit history as long as possible, continue to use your oldest credit card so your lender doesn’t close it.
  4. Call your lender. If you’ve successfully owned a credit card for a long time, you may be able to convince your lender to lower your interest rate – especially if you have excellent credit. Reach out to your lender and ask if they’d be willing to negotiate a lower APR.
  5. Monitor your credit report. Check your credit reports regularly to make sure you’re being accurately scored. The last thing you want is for a mistake or unauthorized account to drag down your credit score. You have the right to check your credit reports from each major credit bureau (Equifax, Experian and TransUnion) once per year for free through AnnualCreditReport.com.

Source: creditcards.com

Repossession Credit Scores: What You Need to Know

One of the harsh truths of secured loans is that your asset can be repossessed if you fail to make the payments. In the words of the FTC, “your consumer rights may be limited” if you miss your monthly payments, and when that happens, both your financial situation and your bank balance will take a hit.

On this guide, we’ll look at what can happen when you fall behind on your car payments, and how much damage it can do to your credit score.

What is a Car Repossession?

An auto loan is a loan acquired for the sole purpose of purchasing a car. The lender covers the cost of the car, you get the vehicle you want, and in return you pay a fixed monthly sum until the loan balance is repaid.

If you fail to make to make a payment or you’re late, the lender may assume possession of your car and sell it to offset the losses. At the same time, they will report your missed and late payments to the main credit bureaus, and your credit score will take a hit. What’s more, if the sale is not enough to cover the remainder of the debt, you may be asked to pay the residual balance.

The same process applies to a title loan, whereby your car is used as collateral for a loan but isn’t actually the purpose of the loan.

To avoid repossession, you need to make your car payments on time every month. If you are late or make a partial payment, you may incur penalties and it’s possible that your credit score will suffer as well. If you continue to delay payment, the lender will seek to cover their costs as quickly and painlessly as possible.

How a Repossession Can Impact Your Credit Score

Car repossession can impact your credit history and credit score in several ways. Firstly, all missed and late car payments will be reported to the credit bureaus and will remain on your account for up to 7 years. They can also reduce your credit score. 

Secondly, if your car is repossessed on top of late payments, you could lose up to 100 points from your credit score, significantly reducing your chances of being accepted for a credit card, loan or mortgage in the future. 

And that’s not the end of it. If you have had your car for less than a couple of years, there’s a good chance the sale price will be much less than the loan balance. Car repossession doesn’t wipe the slate clean and could still leave you with a sizable issue. If you have a $10,000 balance and the car is sold for $5,000, you will owe $5,000 on the loan and the lender may also hit you with towing charges.

Don’t assume that the car is worth more than the value of the loan and that everything will be okay. The lender isn’t selling it direct; they won’t get the best price. Repossessed vehicles are sold cheaply, often for much less than their value, and in most cases, a balance remains. 

Lenders may be lenient with this balance as it’s not secured, so their options are limited. However, they can also file a judgment or sell it to a collection agency, at which point your problems increase and your credit score drops even further.

How Does a Repo Take Place?

If you have a substantial credit card debt and miss a payment, your creditor will typically take it easy on you. They can’t legally report the missed payment until at least 30-days have passed and most creditors won’t sell the account to a collection agency until it is at least 180-days overdue.

This leads many borrowers into a false sense of security, believing that an auto loan lender will be just as forgiving. But this is simply not true. Some lenders will repo your car just 90-days after your last payment, others will do it after 60 days. They don’t make as many allowances because they don’t need to—they can simply seize your asset, get most of the money back, and then chase the rest as needed.

Most repossessions happen quickly and with little warning. The lender will contact you beforehand and request that you pay what you owe, but the actual repo process doesn’t work quite like what you may have seen on TV. 

They’re not allowed to break down your door or threaten you; they’re not allowed to use force. And, most of the time, they don’t need to. If they see your car, they will load it onto their truck and disappear. They’re so used to this process that they can typically do it in less than 60-seconds.

It doesn’t matter whether you’re at home or at work—you just lost your ride.

What Can You Do Before a Repo Hits Your Credit Score?

Fortunately, there are ways to avoid the repo process and escape the damage. You just need to act quickly and don’t bury your head in the sand, as many borrowers do.

Request a Deferment

An auto loan lender won’t waste as much time as a creditor, simply because they don’t need to. However, they still understand that they won’t get top dollar for the car and are generally happy to make a few allowances if it means you have more chance of meeting your payments.

If you sense that your financial situation is on the decline, contact your lender and request a deferment. This should be done as soon as possible, preferably before you miss a payment.

A deferment buys you a little extra time, allowing you to take the next month or two off and adding these payments onto the end of the term. The FTC recommends that you get any agreement in writing, just in case they renege on their promise.

Refinance

One of the best ways to avoid car repossession, is to refinance your loan and secure more favorable terms. The balance may increase, and you’ll likely find yourself paying more interest over the long-term, but in the short-term, you’ll have smaller monthly payments to contend with and this makes the loan more manageable.

You will need a good credit score for this to work (although there are some bad credit lenders) but it will allow you to tweak the terms in your favor and potentially improve your credit situation.

Sell the Car Yourself

Desperate times call for desperate measures; if you’re on the brink of facing repossession, you should consider selling the car yourself. You’ll likely get more than your lender would and you can use this to clear the balance. 

Before you sell, calculate how much is left and make sure the sale will cover it. If not, you will need to find the additional funds yourself, preferably without acquiring additional debt. Ask friends or family members if they can help you out.

How Long a Repo Can Affect Your Credit Score

The damage caused by a repossession can remain on your credit score for 7 years, causing some financial difficulty. However, the damage will lessen over time and within three or four years it will be negligible at best.

Derogatory marks cease to have an impact on your credit score a long time before it disappears off your credit report, and it’s the same for late payments and repossessions.

Still, that doesn’t mean you should take things lightly. The lender can make life very difficult for you if you don’t meet your payments every month and don’t work with them to find a solution.

What About Voluntary Repossession?

If you’re missing payments because you’ve lost your job or suffered a major change in your financial circumstances, it may be time to consider voluntary repossession, in which case there are no missed payments and you don’t need to worry about repo men knocking on your door or coming to your workplace.

With voluntary repossession, the borrower contacts the lender, informs them they can no longer afford the payments, and arranges a time and a place to return the car. However, while this is a better option, it can do similar damage to the borrower’s credit score as a voluntary repossession, like a traditional repossession, is still a defaulted loan.

Missed payments aside, the only difference concerns how the repossession shows on the borrower’s credit report. Voluntary repossession will look better to a creditor who manually scans the report, but the majority of lenders run automatic checks and won’t notice a difference.

Summary: Act Quickly

If you have student loan, credit card, and other unsecured debt, a repo could reduce your chances of a successful debt payoff and potentially prevent you from getting a mortgage. But it’s not the end of the world. You can get a deferment, refinance or reinstate the loan, and even if the worst does happen, it may only take a year or so to get back on track after you fix your financial woes.

Repossession Credit Scores: What You Need to Know is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

What Is the FICO Resilience Index?

Three young colleagues wearing aprons look at FICO Resilience Index scores on a laptop

By the end of May 2020, more than 40 million people had filed unemployment claims due to COVID-19 and the resulting economic shutdowns. Governments, charities, and even creditors scrambled to put programs in place to support people during this time while also mitigating future economic fallout.

And this isn’t the first time creditors have found themselves working to support borrowers while worrying about their own bottom lines. It’s an issue that occurred during the 2008 recession and one that occurs regionally during national disasters. The new FICO Resilience Index is a tool that creditors might use to help better prepare for times of economic crisis. Find out more about this Index and how it might impact you below.

What Is the FICO Resilience Index?

The FICO Resilience Index is a numeric score each
person is given. The score is supposed to tell creditors how likely a person is
to continue paying their bills as agreed during an economic downturn.

The Index, which is brought to you by the makers of the
popular FICO Score for creditworthiness, ranges from 1 to 99. In contrast to
credit scores, where a higher number is better, a lower FICO Resilience Index score
is better. Here’s how the range breaks down:

  • 1–44: More resilient to changes in economic
    conditions
  • 45–59: Moderately resilient to changes in
    economic conditions
  • 60–69: Sensitive to changes in economic
    conditions
  • 70–99: Very sensitive to changes in economic
    conditions

So, if you have a FICO Resilience Index of 10, it indicates that there’s a good chance that during economic upheaval such as a pandemic or recession, you’re still going to pay your bills on time. If you score a 90, that’s considered much less likely.

How Is the Resilience Index Different from a Credit Score?

A credit score is meant to indicate the likelihood that you will pay your bills on time and as agreed at any time. The Resilience Index rates how sensitive you might be to economic changes and the likelihood that you may be unable to pay bills during a downturn or crisis.

For example, the top factor in your credit score is
whether or not you pay your bills in a timely manner. Your FICO Resilience
Index score is more concerned by your total balance and number of open
accounts. If you balance is high and you have a lot of open accounts, you may
be less able to pay these off during times of crisis.

Here’s what the FICO Resilience Index looks for:

  • Low total balance on revolving credit in comparison to limits
  • A lower number of open, active credit accounts
  • Fewer hard inquiries within the past 12 months
  • A longer credit age, which indicates more experience managing credit

You can improve your FICO Resilience Index by reducing hard inquiries and not opening new credit accounts unless they’re necessary. But the index relies heaviest on credit utilization. Keeping your credit card and other revolving account balances as low as possible can improve your index score.

Does the FICO Resilience Index Matter to You?

As of mid-2020, the FICO Resilience Index is new, and
not a lot of organizations have integrated it into their lending processes yet.
In the beginning, it might not be especially relevant to consumers. However, as
organizations start to integrate it, there’s a good chance creditors may
consider both your credit score and your resilience number when approving—or
denying—your application.

Where Can You See Your FICO Resilience Index?

To have a FICO Resilience Index score, you must have at least one account that was reported to the credit bureau in question in the past 6 months. You must also have at least one account that is at least six months old.

As of July 2020, the FICO Resilience Index is being
provided in pilot testing to lenders. FICO is partnering with Equifax and
Experian to include the index alongside credit scores when lenders conduct a
hard credit inquiry. As of July 2020, the index scores were not yet made
available to consumers.

Does This New Number Make Credit Scores Less Important?

The FICO Resilience Index doesn’t reduce the importance
of your credit score. Lenders are still concerned with whether or not someone
is a “good risk.” Even with a strong resilience number, you may find yourself
getting turned down for loans or credit cards if you have a poor credit score.

You can’t check your FICO Resilience Index number at this time. But you can check your credit report and scores and make good financial decisions. In many cases, what’s good for your credit score is also good for your Resilience Index. Start today by signing up for Credit.com’s Credit Report Card or ExtraCredit. ExtraCredit offers 28 of your FICO scores for review, and they’re updated regularly—helping you stay on top of your credit trends.

Sign Up Now

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Source: credit.com

6 Damaging Side Effects of Having a Bad Credit Score

Side effects of a bad credit score

As you make another large purchase against your credit card, inching closer towards maxing out, you might not realize the negative ramifications this activity will have on your credit score. The same goes for making the odd late payment on your hydro bill or car loan payment. Mounting debt that is not paid off in time or in full can have a major impact on your credit score.

A bad credit score can have more negative consequences than you may think

So what’s the big deal about having a low credit score? These days many institutions – from loan officers, to businesses, to insurance companies – look to your credit history before making a move. You could find your low credit score putting you in a position where you can’t get approved for a loan, get a job, or even find a place to live. Here are 6 damaging side effects of having bad credit.

1. Your Loan Applications Might Not Be Approved

Lenders and creditors see borrowers with poor credit as high risk, which means they’ll be less inclined to lend you the money you need. Whether you’re looking for a mortgage to buy a home, or a loan to finance a new car, you might find your loan applications being denied.

2. You’ll Be Subject to High Interest Rates

If you do get approved for a loan, you’ll most likely end up being stuck with a really high interest rate. Since lenders see people with a poor credit score as risky business, they’ll make you pay for it by attaching your loan with a sky-high interest rate. The higher your interest rate on your loan, the more you’ll be paying towards interest rather than the principle over the long run of your loan period.

3. You’ll Be Subject to Higher Insurance Premiums

Even insurance companies check background credit scores. Their claim is that poorer credit scores are associated with an increased number of claims filed. This theory prompts insurance providers to check a person’s credit background. If they find that you’ve got a credit score that’s less-than-par, you’ll most likely be charged a higher premium, no matter how many claims you’ve actually filed.

Do you know the ramifications of having a bad credit report?

Fixing a bad credit score

4. You Might Have a Tougher Time Landing a Job

Many jobs – especially ones in upper management or in the financial industry – have specific criteria that potential employees need to meet, including having a strong credit score. You might find it a lot more challenging to land the job you want because of your bad credit history, particularly if you’ve got exorbitant debts amounts outstanding, or even a history of bankruptcy.

5. Starting Your Own Business Might Be a Challenge

Not only will finding a job be more difficult with a low credit score, but even starting your own business might be a challenge. Many new businesses need the assistance of a bank loan to get started. With a low credit score, banks will be less likely to approve your loan application, even if your business idea is a great one.

6. You’ll Have a Harder Time Getting Approved for an Apartment

Even landlords check the credit history of potential tenants. If you’ve got bad credit, the landlord might be less inclined to approve a lease, and will sign it over to a tenant with good credit instead. Landlords, much like insurance companies and banks, make the assumption that those with poorer credit are more likely to be delinquent on monthly payments, which puts them at a greater financial risk.

The consequences of having poor credit may be a lot more extensive than you may have thought. Your best bet is to do everything you can to get your credit back into shape, which can be done a lot more easily with effective tools like those at Mint.com.

You can quickly and easily put your finances in order, with Mint doing all the organizing and categorizing of your spending on your behalf. By being able to see where all of your spending is going, you’ll be better able to make better spending decisions, which will only have a positive impact on your credit.

Click here for a free trial.

The post 6 Damaging Side Effects of Having a Bad Credit Score appeared first on MintLife Blog.

Source: mint.intuit.com

What Credit Score Do I Need to Buy a Car?

What Credit Score Do You Need to Get An Auto Loan?

Article Updated July 18, 2018.

If it’s time to purchase a new vehicle, you may be wondering about one obstacle that could get in your way: your credit. Maybe you’re unsure how good your credit is, and you don’t know what credit score is needed to buy a car either. It is better to educate yourself with the knowledge you need to move forward with the car buying process to help alleviate any frustration or challenges you may find along the way to car ownership.

No matter your credit score, you can probably find a way to finance a car loan if you absolutely must buy a new vehicle. The real question is what your credit score will cost you when you make the purchase. The better your credit score, the better your chances may be of receiving a cheaper and more affordable interest rate and payment per month.

So, while there’s no minimum credit score required for car loans, your credit history and credit score can definitely make a big difference in the car buying process.

Bad Credit Scores Mean Much Higher Interest Rates

According to data from Experian Automotive, the difference in interest rates on a new car loan for someone with excellent credit versus someone with very poor credit is over 11 percentage points.

In fact, 2.84% was the average interest rate someone with a super-prime (excellent) credit score paid in the first quarter of 2017, while those with deep subprime (very poor) credit paid an average interest rate of 13.98% or higher.

To illustrate this difference, consider that you apply for a 60-month loan on a car that costs $25,000. With a 2.84% interest rate, the total cost of your car would be $26,847 with payments of $447 per month. Not too shabby.

For the same loan but an interest rate of 13.98%, your car loan would cost you $34,887, and you’d pay $581 per month. That’s more than $8,000 extra! Clearly, poor credit can result in you paying a lot more for your new vehicle.

The difference was even starker in comparison to those financing used cars. Those with super-prime credit paid an average rate of 3.56%, while those with deep subprime credit paid an average of 19.62%—more than 16 percentage points higher.

Average New Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime (781–850): 2.84%
  • Prime (661–780): 3.77%
  • Nonprime (601–660): 6.60%
  • Subprime (501–600): 11.05%
  • Deep subprime (300–500): 13.98%

Note that the credit labels above represent Experian’s credit ranges. Other credit reporting agencies use different scales and labels so the information may differ between each credit bureau.

Experian uses a scoring model of 300 to 850. You will find the prime borrowers on the top of this spectrum, and the deep subprime borrowers are at the lower end of the spectrum.

Even if your credit score doesn’t fall into the average ranks as outlined below, you may still be able to qualify for a vehicle loan with a score of between 600 and 660.

Average Used Car Loan Rate by Credit Score (Q1 2017)

  • Super-prime: 3.56%
  • Prime: 5.29%
  • Nonprime: 9.88%
  • Subprime: 16.48%
  • Deep subprime: 19.62%

The dealer may also evaluate your credit using another type of credit score called VantageScore. VantageScore, which was developed by all three of the major reporting agencies, assigns different weights to different parts of your credit history, such as on-time payments, balances, and utilization.

Some people may benefit from a lender using their VantageScore, while others may be at a disadvantage.

Subprime Auto Loans

If you find that you are ineligible for a traditional car loan because you have a low credit score or less than perfect credit, or your income is below where it needs to be, then you will need to look into a subprime auto loan.

Subprime auto loans tend to be a lot riskier than regular or traditional car loans, and they typically come attached to much higher interest rates and fees, and you are paying for much longer terms.

Subprime lending is also often referred to as near-prime, subpar, non-prime, and second-chance lending. However, instead of using this type of high interest loan, if available, you should instead improve your credit, so it is no longer less-than-perfect-credit. You could also see if you could instead qualify for in-house financing at the dealership, so you do not have to be a subprime borrower and risk putting yourself under even more financial strain.

Where to Start If You’re Unsure

If you’re nervous about letting a car dealer check your credit—but even if you aren’t—it’s helpful to check your score yourself in advance. You can check your credit report for free to make sure you don’t have any surprises and to find mistakes.

Note that the credit scores an auto lender uses may be slightly different because it will be tailored for an auto loan. Still, it’s a good start—if your general credit score is strong, you can also bet that the score the dealer uses is strong.

We also recommend that you try to get pre-approved for a car loan from a bank or credit union before setting foot in the dealership. With a set interest rate in hand, if the dealer can offer you a better rate, perfect! If not, you’ll be prepared to pay what your bank approved you for.

How to Get Pre-approved for a Car Loan

You can apply for pre-approval for a car loan easily online, in person, or even over the phone. The lender will perform a hard credit check to see the state of your credit, and they will then gather all of your financial information such as your monthly income, and they will then have a better idea about whether or not they will provide you with the car loan.

All of these factors will figure into the interest rate, monthly payment, loan amount, and even the length of the loan. There is also something called pre-qualification, but this process will not be as accurate as the pre-approval process because they are not able to take such a close look at your credit.

If and when you are pre-approved, the lender will provide you with an offer statement in the form of a letter, certificate, or another form of proof so you can take it to the car dealership of your choice and begin the car buying process.

Remember, even if you are pre-approved, you will want to set a very realistic budget for yourself prior to looking at cars so you will have a better idea of what you can afford and what you should be looking into.

Getting the Best Auto Loan

Getting the best auto loan is important when it comes to affordability and value. It is recommended that you look at options from different banks and credit unions and other online lenders to make sure you are getting the lowest possible interest rate you can get. Finding a car dealership that offers financing may also prove to be a beneficial idea as well; especially if your credit is less than ideal.

When planning to finance a new or used car, it is always best to take your time and plan it out because it is a big purchase and investment. If you are able and have the time, you should consider working on your credit score to improve your credit, so you are able to lock in a much better deal.

Pull your credit report and look through it thoroughly. Always be on the lookout for any errors so you can dispute them and get them removed. It is also important to make sure you are paying all of your bills on time, your credit balances are low, and you are not opening any new lines of credit except when you actually need to.

You will be presented with better financing options if you can show the potential lenders that you are responsible and can pay your bills on time and maintain good credit.

A Word of Caution

Credit inquiries related to auto loans made within a short time frame (usually 14 days, or 45 days depending on the credit score model being used) are supposed to count as a single inquiry. However, some of our readers have found their credit scores dropping after multiple car dealers sent credit inquiries for financing. This is another reason why getting pre-approved before going to the dealership is a good idea.

 

If want to make sure your credit is good enough to purchase a car, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.com’s free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter grades—plus you get a free credit score updated every 14 days.

You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

Here’s What Else You Should Know about Auto Loans:

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Source: credit.com