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September 27, 2023 by Brett Tams

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A personal loan is money borrowed from a lender that can be used for almost any purpose, from debt consolidation to home improvement projects.

Most people don’t have $5,000+ sitting in their bank accounts—that’s where personal loans come in. Just like a mortgage or auto loan, personal loans allow you to cover large purchases or expenses under the terms that you’ll pay off the loan over time, typically with interest.

If you’re considering taking out a personal loan, here’s all you need to know to ensure you’re making the right money moves to fund your future investment.

What Is a Personal Loan?

A personal loan is money borrowed from a bank, credit union, or other financial institution that can be used for virtually any personal expense. Like any other installment loan, personal loan borrowers are expected to pay the money back over a set period.

The typical amount you can take out for a personal loan can range anywhere from $1,000 to $50,000, depending on several factors. Interest rates are just as variable—they can be as low as 6% and as high as 36%, depending on your unique financial situation. The current average interest rate for personal loans is 11.04% as of May 2023.

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Why Would I Need a Personal Loan?

If you’re planning on making a big purchase, getting a better handle on your debt, or have run into some unexpected expenses, applying for a personal loan can help cover the costs. People usually take out personal loans for:

Debt consolidation
Unexpected medical expenses
Home remodeling
Emergency expenses
Vehicle repairs or financing
Moving expenses
Vacations
Wedding expenses

While you could technically use this type of loan for, well, anything, there are a few things you should avoid using a personal loan for, like:

College tuition: It’d make more financial sense to use a federal student loan vs. a personal loan to pay for college tuition. Federal student loans typically come with lower interest rates, plus most don’t require a credit check. You may even qualify for a subsidized loan or an income-driven repayment plan.
Home down payment: Most mortgage lenders won’t accept a personal loan as a down payment, and even if they did, the increase a personal loan could cause to your debt-to-income ratio might disqualify you from the loan anyway.
Starting a business: Taking out a personal loan to open a business won’t help you build business credit since the loan is in your name. Instead, consider applying for a business credit card to start building credit so you can apply for a business loan down the road.
Everyday expenses: If you’re strapped for cash now, taking out a personal loan to cover bills and other living expenses may just create a bigger problem in the long run since you’ll have to repay the loan amount plus interest. Consider re-budgeting or finding ways to increase your income instead.

Personal Loans vs. Lines of Credit vs. Payday Loans

Personal loans, personal lines of credit, and payday loans are all money-borrowing options that can help you manage your finances or cover a significant expense. However, they’re typically used for different purposes.

Personal loans vs. lines of credit: Personal loans are typically used to cover large purchases or expenses since all the money is available upfront. On the other hand, personal lines of credit allow the borrower to use the credit available as needed and pay it off on their own timeline, so they’re more ideal for smaller everyday purchases.
Personal loans vs. payday loans: Whereas personal loans allow you to borrow a large sum of money with a loan term typically spanning several years, payday loans offer borrowers a small amount of cash—typically around $500 or less—at a higher interest rate that has to be repaid within 2-4 weeks. Payday loans are best if you have an urgent expense and know you can repay the loan within the term offered.

	Definition	What it’s best for
Personal loan	Supplies the borrower with a large sum of money upfront that must be paid back in fixed monthly payments throughout the loan term	Large purchases or expenses
Personal line of credit	Lets the borrower use credit as needed and pay it back on their own timeline with a variable interest rate	Building credit on everyday purchases
Payday loan	Gives the borrower a small sum of money—around $500 or less—at a high-interest rate that usually has to be repaid within 2-4 weeks	Quick cash for urgent needs, especially if the borrower does not qualify for a traditional loan

Types of Personal Loans

Before you apply for a loan, research the type of personal loan that will best serve your unique financial needs. Your credit history, credit score, and reason for needing the loan will determine which is best for you.

Here’s a quick breakdown of the seven most common types of personal loans:

Type of personal loan	Definition	Who it’s best for
Unsecured personal loans	Do not require any sort of collateral to qualify	Borrowers with excellent credit and a steady source of income
Credit-builder loans	Allow you to take out a small sum of money to demonstrate that you’re a reliable borrower by making regular on-time payments	Borrowers with low or no credit history looking to improve their credit score
Debt consolidation loans	Typically can be borrowed at a lower interest rate than most credit cards or other bills you plan to consolidate, saving you money on interest	Borrowers with multiple debt balances or balances with high interest rates
Co-signed and joint loans	Allow a co-signer to assume responsibility for a loan if the borrower does not qualify	Borrowers who do not qualify for a traditional loan or are hoping to be approved for a lower interest rate
Fixed-rate loans	Come with an interest rate that does not change over the repayment term, so the borrower pays the same amount every month	Borrowers who plan on paying off their loan over an extended period
Variable-rate loans	Come with a fluctuating interest rate that could increase or decrease monthly payments over time, but rates are sometimes lower vs. fixed-rate loans	Borrowers who only need to borrow funds for a short period

How Do Personal Loans Work?

You have to receive a personal loan through an authorized lender, typically a bank or credit union. Here’s how the personal loan process works:

You must first apply for a personal loan. The lender will decide if you qualify based on your creditworthiness, income, and the type of personal loan you’re interested in.
If you qualify for a loan, your lender will usually set a loan term to determine how long you have to pay the money back. This can range anywhere from months to years, depending on the lender and your needs. A fixed or variable interest rate—the cost of taking out the loan—will also be applied to your monthly payments.
If you qualify for a loan, you’ll be issued a lump sum deposited into your bank account. You’re free to do with the money as you wish, but you’re expected to make regular monthly payments until the loan is paid off.

How to Apply for a Personal Loan

Personal loans are a great tool for financing some of life’s most important—and unexpected—milestones. If you’re ready to apply for a personal loan, follow these steps:

Check your credit: Your credit history will be one of the biggest determinants of whether or not you’re approved for a loan, so it’s important you know where you stand. Most lenders will want to see a “good” credit score (620) or above to ensure you can be trusted to meet your loan terms.
Decide how much to borrow: You may qualify for a $50,000 loan, but before you sign on the dotted line, you need to know how much you can realistically afford to borrow. Carefully consider your current and future financial situation before jumping into any personal loan.

Pro tip: Try our loan payment calculator to easily estimate monthly payments for different personal loan options.

Know your consumer rights: According to the Truth in Lending Act, lenders must disclose the APR finance charges, principal amount, and any fees and penalties associated with a loan offer. If you come across a lender that refuses to share this information, you’ll want to look for a different lender.
Gather essential documents: In addition to your credit report, potential lenders may also want to see the following documents to speed up the application process.
1. Proof of your annual income
1. Your debt-to-income ratio
1. Your Social Security number
1. Recurring monthly debt (like your house payment)
1. Employer information
1. Your cosigners financial information (if applicable)

Research loan options: Personal loan requirements and terms vary by the type of loan and lender, so you’ll want to research before applying. Details that may sway your decision include the loan amount, APR, monthly payments, loan term, secured or unsecured, and more. Ask lenders for this information in advance before applying for a personal loan.
Submit your application: Once you’ve settled on a loan that meets all your requirements, fill out your application, read it carefully for typos or errors, and submit it to your potential lender. You’ll likely know whether your application was approved within a day or two whether your application was approved.

How to Qualify for a Personal Loan

Each lender is different, so minimum requirements for personal loans vary. However, if you’re hoping to qualify for a large unsecured personal loan with a competitive interest rate, here are a few general requirements most lenders will want to see:

A minimum credit score of 620
A positive and established credit history
A debt-to-income ratio less than 36%
A steady income with proof of employment

Again, these requirements vary from lender to lender. In some cases, you may qualify for a loan with no credit at all. Some lenders even prioritize things like education and work history when evaluating applicants. Inquire with potential lenders before you apply for a personal loan to better understand what you need to qualify.

Personal Loan Alternatives

If credit history, high interest rates, or substantial fees are preventing you from applying for a personal loan, there are money-borrow alternatives that may be a better fit, like:

Home equity loans: Home equity loans or lines of credit (HELOC) are secured by the equity a borrower has built in their home. Because this is a type of secured loan, interest rates tend to be lower compared to an unsecured personal loan. The repayment terms are also longer than most personal loans, sometimes up to 20 years.
Credit Cards: Credit cards allow borrowers to use credit and pay it back as they go, offering more flexibility than personal loans. Many credit cards also offer rewards like cash back or airline miles for money spent.
Personal lines of credit: Like credit cards, personal lines of credit allow you to borrow money and pay it back as you go. However, personal lines of credit have a set draw period—once the period is over, you won’t be able to tap your line of credit and will need to pay back your balance. Interest rates for personal lines of credit are typically lower than credit cards, so they’re ideal for large ongoing projects.
Retirement loan: If you’re looking for more relaxed loan requirements, you may be able to borrow from your employer-sponsored retirement plan in the form of a 401(k) loan. This is a great alternative for borrowers with less-than-stellar credit, but keep in mind that you’ll be restricted to your current retirement accounts, and you may have to repay the loan early if you leave your current job before the loan term ends, often with penalties.

FAQs

Still weighing your personal financing options? We answered some of the most frequently asked questions about personal loans to help with your decision.

Will a Personal Loan Affect Your Credit Score?

Applying for a personal loan may cause a light dip in your credit score because lenders will run a hard inquiry on your credit. While a hard inquiry shouldn’t affect your credit score too much, it’s important to narrow down your options before applying to avoid multiple hard inquiries from multiple potential lenders.

It’s also wise to wait to apply for a personal loan if you’ve just opened another line of credit, which could cause an even bigger drop in your score.

Do You Need a Down Payment for a Personal Loan?

You do not need a down payment for a personal loan. However, In the case of a secured loan, you’ll need collateral, such as a car or money in a savings account.

Can You Use a Personal Loan for Whatever You Want?

A personal loan can be used for just about any purpose. Some lenders may want to know what the money will be used for, but others just want to be certain you’ll be able to pay it back. However, a better financing option may be available if you plan on using your loan for things like tuition or daily expenses. Research your options before applying for a personal loan.

How Big of a Loan Can I Get With a 700 Credit Score?

You’ll likely be able to borrow higher limits with a 700 credit score or higher, but other factors, including your income, employment status, and the type of loan you’re applying for will also impact how big of a loan you qualify for.

How Often Can You Apply for a Personal Loan?

There is no limit to how often you can apply for a personal loan. You can have multiple personal loans open at once, but remember that too much existing debt may lead lenders to disqualify you from taking out more loans or opening new lines of credit.

Researching personal loans can be daunting, especially if you’ve run into sudden unexpected expenses. The best loan for you will depend on your unique financial situation. Check out the personal loans at Credit.com to quickly compare options and see potential APR, terms, and maximum loan amounts.

Source: credit.com

Apache is functioning normally

September 26, 2023 by Brett Tams

Does being an authorized user affect your credit? Well, becoming an authorized user can help you build your credit under the right circumstances. Before you agree to be an authorized user or add an authorized user to your account, it’s important to understand the potential risks and benefits. This article provides more information about how adding an authorized user works and how it could impact your credit.

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What Is an Authorized User?

An authorized user is a person who has the authority to use another person’s credit card account. In many cases, the authorized user receives a credit card in their name. Unlike co-signers and joint account holders, authorized users aren’t financially responsible for making payments.

Typically, cardholders only add someone they trust, such as a child or significant other, as an authorized user. There are a few reasons a cardholder might want to add an authorized user to their account, including:

To help the person build their credit history
To make it easier for the authorized user to make payments when the cardholder isn’t available
To allow someone to make purchases on the cardholder’s behalf

The primary reason a person wants to become an authorized user is that they’re unable to secure a credit card on their own. For example, a child may not have the established credit to get a credit card, so a parent adds their child as an authorized user under their account.

Authorized Users Versus Joint Accounts

Authorized users aren’t the same as joint account holders. Authorized users can charge money to your account, but they can’t add other authorized users and they can’t dispute charges. They also can’t request credit limit increases, transfer balances, or close your account.

In contrast, joint account holders can do all of those things and more. Joint account holders are jointly liable for the account, and they’re also jointly liable for repayments.

How Do Authorized Users Work?

The process of adding an authorized user to your account varies between credit card companies. Some credit card providers may have age and other requirements that must be met before you can add an authorized user. You may also be able to set limits on how much the authorized user can charge to your credit card.

You’ll need basic information about the person you’re adding, such as name, date of birth, and Social Security number. You should contact your credit card company directly to see how this process works.

Once the application process is complete, the authorized user receives their card. They can use it just like any other credit card. Depending on the specific credit card company and your preferences, you may be able to give the authorized user access to your account information so they can track packages and report a lost card, errors, or potential fraud. Keep in mind that giving the authorized user access to your account may also allow them to see your purchase history and redeem special rewards.

It’s important to note that authorized users don’t receive credit card bills and aren’t responsible for making payments. This responsibility lies solely with the cardholder.

Can I Build Credit as an Authorized User?

For a long time, authorized users were able to build credit by “piggybacking” on the primary account holder’s own good credit record. Many modern scoring models no longer recognize this loophole—but a few still do. If you’re hoping to build credit by becoming an authorized user, you need to do two things:

Check if the card company reports authorized users to credit bureaus.
See if authorized users are reported as if they’re account holders.

If the account holder’s card company does report authorized user activity, you’ll see an individual account on your credit report. Providing the primary cardholder continues to make payments and handle the account responsibly, you’ll likely benefit from the listing.

Can Adding Authorized Users Hurt Your Credit?

Before adding an authorized user to your credit card account, you need to ask yourself several questions.

Does adding an authorized user affect my credit?
Will adding an authorized user hurt my account?
Will adding an authorized user help their credit?

The answer to these questions depends a lot on your specific credit card company. Not all credit card companies report authorized users to the credit bureaus. If your credit card company doesn’t report authorized users, adding them to your account will have no impact on their credit score. If, on the other hand, your credit card company does report authorized users, it can help them start building up credit.

Either way, adding an authorized user to your credit card account shouldn’t automatically effect your credit history. However, there are several ways taking this step could hurt your credit score over time.

First, if the authorized user charges too much to your credit card, you may have difficulty making your monthly payments. Payment history makes up 35% of your FICO score. So if you can’t make your monthly payment because of charges accrued by an authorized user, your credit profile, and wallet, could take a hit. If possible, set limits for how much your authorized user can charge to your credit card account. This step can help to reduce the risk of overspending.

Secondly, additional charges to your credit card account can also increase your credit utilization ratio. The more you charge to your credit card, the higher your credit utilization ratio is. Your outstanding debt accounts for about 30% of your overall credit score. You should try to keep your debt ratio under 30%.

What if an Authorized User Misuses Their Card?

Let’s imagine you are the primary account holder, and your teenager is the authorized user. What would happen if they decided to buy a new wardrobe without telling you? The answer is simple—you’d be on the hook for the whole amount. Your wallet could take a serious hit.

Does Removing an Authorized User Hurt Their Credit?

If your authorized user doesn’t behave, you can remove them from your account pretty quickly. At that point, they can no longer use their card and can’t charge any more money to your account.

Credit age history makes up 15% of your credit score. If your credit card company previously reported the authorized user as an individual account holder and they suddenly get removed from your account, the removal might look like a closed account, regardless, it will likely be removed for age calculations. In that case, the formerly authorized user’s credit score could dip.

Does Being an Authorized User Affect Your Credit?

Becoming an authorized user could affect your credit if the credit card company reports your status to the credit reporting agencies. If the credit card company doesn’t report your authorized user status, taking this step won’t impact your credit score at all. However, you’ll still have the benefit of charging purchases to a credit card.

How being an authorized user impacts your credit depends largely on the cardholder’s payment history. If the cardholder has a strong history of making on-time credit card payments, it could help you build your credit and increase your credit score. On the other hand, if the cardholder has frequent missed or late payments, it could hurt your credit score.

It’s important to understand the cardholder’s credit history before agreeing to become an authorized user. It’s also important to repay the cardholder for any purchases you make as quickly as possible. This step will help the cardholder make their payments on time.

How Long Does It Take an Authorized User to Show Up on Credit Report?

It takes about 30 days for your authorized user status to reflect on your credit report. However, not all credit card companies report authorized users to the credit bureaus. In these cases, your credit report may never show that you’re an authorized user.

What to Consider About Authorized Users

If you want to build your credit by becoming an authorized user, start by talking to friends and family members you trust. Be sure the cardholder has good credit and makes on-time payments.

If a friend or family member agrees to add you as an authorized user, it’s important to set clear boundaries right from the start. For example, determine your specific credit limit right away and whether the cardholder wants you to ask for permission before using the card.

You also need to make a clear payment agreement. Determine exactly how much you’ll pay each month and the date monthly payments are due. Make sure you create a budget so you know exactly how much you can afford to pay each month. Also, be sure to track your purchases so you know exactly how much you owe.

It’s crucial to have this agreement in place before becoming an authorized cardholder. This agreement allows you to know exactly what’s expected of you. It can also help you determine if this is the right option for you.

Four Tips to Bear in Mind

Set clear spending rules before you make family members authorized users.
Talk to prospective authorized users about credit, including credit utilization.
Set up text message alerts to make sure you know when authorized users make purchases.
Remove authorized users if they don’t stick to the rules you make.

Simply Adding Authorized Users Won’t Hurt Your Credit—but Be Careful

Ultimately, authorized users aren’t a threat to your credit unless they misuse your credit card account. Many authorized users coexist happily with main account holders for many years. Problematic authorized users, unlike joint account holders, can be easily removed.

If you’re thinking of adding an authorized user and you want to keep track of your credit, why not subscribe to ExtraCredit from Credit.com? ExtraCredit is great if you’re an authorized user—tools like Build It can help you strengthen your credit profile by letting you add rent and utilities as trade lines to your credit history.

Source: credit.com

Apache is functioning normally

September 26, 2023 by Brett Tams

According to reports from the second quarter of 2022, the total of all household debt in the United States is a whopping $16.15 trillion. Mortgages make up the bulk of that debt, with student loan, auto loan and credit card debt trailing behind.

On average, adults in the United States carry debt loads ranging between $20,800 and $146,200. If you’re in debt and looking for a way to pay it off, making a plan is a critical step. Find out more about how to get out of debt below.

1. Collect All Your Paperwork in One Place

Before you can get out of debt, you need to know how much debt you actually have. You should also know who you owe and what the terms are, as this can help you prioritize debt payments to pay them off faster.

Start by collecting all your debt paperwork in one place and creating a master list of everything you owe. You can do this in a spreadsheet or with a pen and paper. Information to gather includes:

Statements for all your debts. One way to do this is to spend a month saving all your financial mail and email so you have a comprehensive picture of your debt.
Regular bills that aren’t debts. Your cell phone and utility bills, as well as your rent, should all be included when you gather this financial information.
Information about income. Look at paycheck stubs or your bank accounts so you know what, on average, you can expect in income each month.
Your credit reports. Get your free credit reports at AnnualCreditReport.com to ensure you know about all the debt you owe.

Tip: Sign up for ExtraCredit to see your credit reports and 28 FICO® scores in one place.

2. Create a Budget and Determine What You Can Pay Every Month

Using the information you gathered in the above step, create a monthly budget. Make sure you cover all your bills and minimum debt payments. When possible, include an amount that can go toward building your savings. Allocate funds for essentials, such as groceries and gas.

Once you cover all the needs for the month, figure out how much money you have left. How much of that can you put toward extra debt payments so you can start getting ahead on debt?

3. Manage Your Debts in Collections

If you see that you have any debts in collections when you pull your credit reports, make sure you have a plan for taking care of them. Collection accounts have a serious negative impact on your credit score. Creditors may also sue you and try to collect on these accounts via wage garnishments or bank levies if you don’t take action to manage collections. That can throw a huge wrench into your plan for getting out of debt.

Tip: If you don’t enjoy manual calculations, check out Tally. You can use Tally to total up your expenses, pay down credit card bills, and generally figure out where you stand.

4. Consider Your Options

There are two main approaches to paying off debt as quickly as possible: the snowball method and the avalanche method.

The snowball method involves paying off accounts with the lowest balances first. You take any extra money you have—even if it’s just $50—and add it to your regular minimum monthly payment on that small balance. When that balance is paid off, you take the extra $50 plus the minimum payment and add it to the next biggest balance. You keep doing this as you work your way up to larger balances, paying your debt off faster and faster.

With the avalanche method, you tackle accounts according to interest rates. You start by paying off accounts with the highest interest rates first. The thought behind this method is that you save money in the long run by tackling high-interest debt first.

5. Try to Reduce Your Interest Rates

Interest refers to how much your debt costs. If you have a lower interest rate, your debt costs less and you can pay it off faster. Here are some ways you can try to reduce interest rates on your debts:

Ask for a lower interest rate. If you’re a credit card account holder in good standing and your credit history and score has improved since you got the card, you may be able to get a better rate. Call customer service for your card and let them know you are looking for a better deal. They may agree to lower the rate to keep you as a cardholder.
Look into debt consolidation or refinancing. A debt consolidation loan provides funds you can use to pay off higher-interest debts. Refinancing occurs when you get a new loan for a home or car. If you had lackluster credit when you got your auto loan, for example, you may be able to refinance it for a lower rate if your credit has improved.
Get a balance transfer credit card. You may be able to transfer balances from a credit card with a high interest rate to one that has an introductory low APR offer. This may allow you to pay off the debt over the course of 12 to 22 months without incurring any more interest expense.

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Do Your Best to Pay More Than the Minimum

Only paying the minimum on high-interest debt, such as credit card debt, doesn’t get you out of debt fast. It can take years—dozens of them—to pay off credit card balances if you’re only making minimum payments.

Instead, put more than the minimum on your debt whenever possible. You may also want to put any additional funds you receive—such as a tax refund—on your debt to help with this process.

Consider More Options for Getting Out of Debt

Creating a budget, managing your money wisely, and making extra payments toward your debt all help you get out of debt. Here are some other ways you can deal with debt:

Increase your income while cutting unnecessary spending. Join the gig economy with a side job to earn extra money, or sell things you don’t need via online marketplaces.
Undergo credit education and counseling. These services can help you make the most of your monthly budget.
Engage in debt settlement. You may be able to negotiate with creditors, especially for accounts in collections, to settle debts for less than you owe. Just make sure you understand any effects on your credit.
Enter a debt management plan. During such a plan, you make a single payment to a trustee. They use those funds to pay your debts, hopefully in a way that gets you out of debt faster.
Declare bankruptcy. If you find you’re unable to pay your debts, much less make extra payments, you may need another option. Chapter 7 and Chapter 13 bankruptcy are potential considerations.

How to Avoid Getting into Debt

Paying off debt doesn’t have to be impossible, but it can be challenging. For many people, it requires altering years’ worth of financial habits. If you’re not already in debt, it may be easier to stay out of it. Create a budget and stick to it, spend wisely and avoid using credit cards for things you don’t need or can’t afford to buy with cash.

Source: credit.com

Apache is functioning normally

September 26, 2023 by Brett Tams

By the end of 2022, 27 million Americans had an outstanding personal loan balance with the average amount owed being $11,116. The interest rates of these loans are also the highest they’ve been since 2011 at 11.23 percent.

Sources: TransUnion and the St. Louis Federal Reserve

As of the second quarter in 2022, Americans owed over $192 billion in personal loans, according to TransUnion®. This was a 31% increase from 2021 and is thought to be due to the financial hardships Americans experienced during the COVID pandemic that overwhelmed the nation in 2020.

If you’re one of the many Americans who took out a personal loan in early 2022, the good news is that interest rates were very low, according to the St. Louis Federal Reserve. Since then, rates have reached new highs, so many Americans are struggling to pay back these loans.

Understanding the current trends in personal loans can help you see where you stand financially. We’ve gathered 10 personal loan statistics that include the most common reasons people take out personal loans, delinquency rates and which states have the highest personal loan debt to help you make better financial decisions if you’re accumulating too much debt.

In This Piece

Must-know Personal Loan Statistic Findings

Millions of Americans are taking out personal loans, and the following are some of the most interesting facts on the topic.

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loan that’s right for you today.

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27 million Americans have personal loan debt (TransUnion)
At the end of 2022, the average new loan amount was $8,018 (TransUnion)
The average amount owed in personal loan debt was $11,116 at the end of 2022 (TransUnion)
In November of 2022, personal loan interest rates were the highest they’ve been since May of 2011 (St. Louis Federal Reserve Bank)
New Jersey has the highest average new personal loan account balance at $13,494 (TransUnion)

Average Personal Loan Debt in America

According to TransUnion, Americans owed roughly $9,896 on average as of the first quarter in 2022, the highest it’s been in recent years. Americans took out loans at an average of $6,656 per loan, which was over $1,000 more than in the previous quarter of 2022.

The amount owed per borrower dropped significantly between Q2 and Q3 in 2022, but by the end of the fourth quarter, the average amount owed increased by over 100 percent with the new loan amount dropping to $8,018.

The increase in personal loan debt may have been due to the inflation the country experienced in 2022. TransUnion also reports that there were more loans approved to “super prime borrowers,” or those with credit scores over 720, stating, “On a percentage basis, personal loan originations for subprime and near-prime borrowers increased in the single digits [year over year] whereas super prime borrowers experienced a 33% rise in the third quarter.”

How Many Americans Have Personal Loans?

The amount of Americans taking out personal loans increased 12 percent from 23.9 million in the first quarter of 2022 to 27 million by the fourth quarter.

Prior to the beginning of the COVID-19 pandemic, the total amount of personal loan borrowers was 23.3 million at the end of 2019 and dropped to 21.2 million by the end of 2020. The number of borrowers then grew back to 22.8 million in the following fourth quarter of 2021 and continued to grow as the pandemic regressed.

Quarter	Q4 2022 Average new account balance
Q4 2019	23.3 million
Q4 2020	21.2 million
Q4 2021	22.8 million
Q4 2022	27 million

The Most Common Reasons to Take Out a Personal Loan

LendingTree conducted a survey of their users in 2022 and found that the most common reason consumers took out personal loans was to pay down other debts. Over 58 percent of borrowers used these loans to pay down debt, and the other main reasons included credit card refinancing, home improvements and other major purchases.

Rank	Reason	Percentage of respondents
1	Debt consolidation	41%
2	Other	17.3%
3	Credit card refinance	17.3%
4	Home improvements	6.2%
5	Major purchase	4.1%
6	Medical expenses	3.0%
7	Moving/relocation	2.9%
8	Everyday bills	2.9%
9	Car financing	1.7%
10	Car repair	1.1%
11	Business	0.9%
12	Vacation	0.5%
13	Homebuying	0.4%
14	Wedding expenses	0.4%

Average Personal Loan Interest Rates

During the second quarter of 2022, the Federal Reserve Bank of St. Louis reported that interest rates reached an all-time low of 8.73 percent. By the end of the year, these rates were the highest they’ve been since 2011 at over 11.2 percent.

Personal Loan Debt Compared to Other Debts

Based on TransUnion data, personal loans account for less than four percent of the total number of accounts when compared to other types of loans, such as credit cards, home and auto loans.

Account type	Number of accounts	Percentage of accounts
Credit card	518.4 million	76.3%
Auto loan	81.2 million	11.9%
Mortgage loan	52.6 million	7.83%
Personal loan	27 million	3.97%

It’s also important to note that not all credit card accounts carry a balance.

Personal Loan Delinquency Rates

Delinquent accounts are accounts 60 days or more past due and can hurt your credit score. The Q4 TransUnion report shows that the delinquency rate dropped year over year between 2019 and 2020, but was up 53 percent as of 2022, with an overall delinquency rate of 4.14 percent.

Quarter	Delinquency rate
Q4 2019	3.48%
Q4 2020	2.7%
Q4 2021	3%
Q4 2022	4.14%

TransUnion’s 2022 Credit Snapshot shows that in the last month of the report, those with the lowest credit scores have the highest delinquency rate of 23.9 percent, while super prime borrowers are only at 12 percent.

Credit score range	Percentage of delinquent borrowers
Subprime (300 to 600)	23.9%
Near prime (601 to 660)	23.7%
Prime (661 to 720)	23.3%
Prime plus (721 to 780)	17%
Super prime (781 to 850)	12%

Personal Loan Statistics by State

TransUnion’s 2022 Credit Snapshot reports that New Jersey has the highest average new account balance at over $13,000, and Oklahoma has the lowest at $3,170. Although Oklahoma has the lowest new account balance, they have the highest delinquency rate at 7.73 percent.

State	Q4 2022 Average new account balance	Q4 2022 Delinquency rate
AK	$10,296	2.9%
AL	$4,362	6.59%
AR	$7,089	5.18%
AZ	$9,343	3.78%
CA	$10,454	3.47%
CO	$12,322	2.03%
CT	$11,712	2.57%
D.C.	$9,016	6.55%
DE	$9,146	4.04%
FL	$8,379	3.94%
GA	$8,621	5.18%
HI	$12,224	2.28%
IA	$7,443	2.94%
ID	$9,072	4.38%
IL	$9,236	3.46%
IN	$7,439	2.97%
KS	$8,349	3.05%
KY	$6,875	3.36%
LA	$6,797	5.07%
MA	$12,518	2.24%
MD	$10,956	2.77%
ME	$6,651	1.67%
MI	$7,052	3.21%
MN	$10,692	3.73%
MO	$6,522	6.69%
MS	$5,179	4.96%
MT	$9,326	2.53%
NC	$10,035	3.03%
ND	$8,051	1.89%
NE	$7,755	3.65%
NH	$11,719	2.31%
NJ	$13,494	3.49%
NM	$5,418	6.31%
NV	$8,839	3.74%
NY	$11,843	2.77%
OH	$7,595	3.75%
OK	$3,170	7.73%
OR	$10,523	2.93%
PA	$10,418	3.06%
RI	$8,744	2.14%
SC	$5,924	4.89%
SD	$9,945	2.06%
TN	$5,355	5.38%
TX	$4,952	6.33%
UT	$7,966	4.23%
VA	$9,875	3.37%
VT	$6,180	0.82%
WA	$9,570	2.94%
WI	$6,489	3.95%
WV	$10,864	1.96%
WY	$7,698	2.66%

Personal Loan Statistics by Type of Lender

More and more Americans are turning to financial technology companies, also known as FinTech, for their personal loans. These are online banking services that are done via a company’s website or mobile app, and 32.9 percent of all personal loans are done through these types of companies.

Lender type	Distribution of total balances
FinTech	32.9%
Banks	20.5%
Credit unions	19.7%
Other finance companies	26.9%

Can Personal Loan Debt Affect Your Credit Score?

If you’re one of the 27 million Americans with a personal loan, you don’t have to let your debt harm your credit score. As you’ve learned from these personal loan statistics, many Americans have turned to personal loans to pay off other debts, but many people are delinquent with their payments, which can hurt their scores.

Credit.com provides a variety of credit tools and tips to help you work to repair and improve your credit. You can learn more about our services, like ExtraCredit, or click here to get your free credit report card.

Source: credit.com

Apache is functioning normally

September 26, 2023 by Brett Tams

A hard credit inquiry is when a credit card issuer or another lender reviews a credit report as part of your credit application. Their request to review your credit will be shown as a hard inquiry on your credit report and will affect your credit score.

Let’s say you’re looking to apply for a new credit card. Whether you want to expand your available credit, create a credit mix, or simply apply for a credit card online with your desired rewards, you’ll often encounter a hard inquiry.

A hard credit inquiry—or a hard credit check—is a natural part of the credit card application process. It happens when the lender or bank associated with your credit card company checks your credit report to see if you are eligible for acceptance.

What Are Hard Inquiries?

Hard inquiries—or hard credit checks—occur whenever a lender or bank accesses your credit account. The credit bureaus log the activity, recording the date and the name of the company or entity that accesses it.

Hard inquiries refer to when a lender accesses your credit report to evaluate your merit as a borrower. In other words, hard inquiries happen when lenders look at the information in your report to decide whether to approve or deny your credit card application.

How Do Hard Inquiries Impact Your Credit?

Hard inquiries aren’t the most impactful thing that affects your credit score, but they are one of the five major factors that make up your credit score. That’s because having many hard inquiries on your account looks like you’re chasing credit. Lenders don’t want to see that behavior from potential borrowers as it reduces their credibility.

Here are the five factors that impact your credit score:

Payment history accounts for around 35% of your credit score. This factor is whether you pay your bills on time and as agreed upon.
Credit utilization accounts for around 30%. This reports how much of your available revolving credit limit you’re actively using.
Credit age accounts for around 15% of your score. This is how long you’ve had credit and the age of your oldest accounts.
Credit mix makes up around 10% of your credit score. Creditors want to see that you can manage different types of accounts, such as revolving and installment accounts.
Hard inquiries affect around 10% of your score. This is the number of recent hard inquiries on your report.

Hard Inquiries vs. Soft Inquiries

Not all inquiries that show up on your credit report impact your score. Only those that evaluate your financial creditworthiness do—these are hard credit checks.

Soft inquiries, which are purely informational, have little to do with credit and don’t have the same impact. They’re also not usually visible to lenders or banks—only you.

Hard inquiries	Soft Inquiries
Affect your credit score	Don’t affect your credit score
Count against your credit score for 1 year	Appear only to you on your credit report
Occur during the approval process	Occur during pre-approval processes
Happen when you’re actively searching for credit	Happen during noncredit screenings and background checks
Require your authorization	Do not require authorization

Examples of Hard Inquiries

Hard inquiries happen when you apply for a line of credit that will impact your financial health. Hard credit checks will affect your credit score and stay on your credit report for a year or two, so having too many of them in a short period may hurt you in the long run.

Credit card companies, car dealerships, banks, lenders, and others may perform a hard credit check only after your written approval—you will always know when a hard credit check will happen.

Examples of things that will require hard inquiries include:

Examples of Soft Inquiries

Soft inquiries typically happen for nonfinancial inquiries and don’t affect your credit score. Typically, only you can see the soft credit checks on your report. Soft credit checks also don’t need your permission to happen. Though employers will request permission for background checks, creditors can run a soft credit pull to prequalify you for marketing purposes. Note that you do have the opportunity to opt out of those soft checks, though.

Soft inquiries happen when:

Employers run background checks
Credit card companies do a pre-approval process
Utility companies screen you
You check your credit report

Disputing Hard Credit Inquiries

You should always review the hard inquiries on your credit report to ensure that you authorized them. If you see something on your credit report that you didn’t authorize or approve, you can dispute your hard inquiry by following these steps:

Reach out to your current lenders and confirm that they didn’t create a hard credit inquiry for your credit.
Research the creditor that authorized the hard inquiry. Sometimes, they will remove the inquiry from your report.
Open a formal dispute with the credit bureaus. You will normally do this by filing a dispute on an online platform.

You will generally need to wait around 30 days (give or take) before receiving a reply about your hard inquiry dispute. When the credit bureaus reach a conclusion, they will remove the hard inquiry from your credit report.

Frequently Asked Questions

How Long Do Hard Inquiries Last?

According to Experian®, hard inquiries remain on your credit report for 25 months. However, they only tend to impact your credit score in the first 12 months.

How much a hard inquiry affects your credit depends on various factors, including what your credit score was to begin with. Experian notes that a hard inquiry can bring your score down 5-10 points on average. The drop might be even less if you have excellent credit and no other issues.

How Many Hard Credit Inquiries Is Too Many?

There’s no set number of inquiries that are too many. If you suddenly have a lot of inquiries, it can look bad to potential creditors. And if you’re losing up to 10 points for each one, you could drop from excellent or good credit to fair or poor credit with just five or more inquiries.

Spacing out the inquiries and ensuring that your credit report doesn’t take a hit can help minimize these issues. It also gives your score time to recover before another inquiry.

Are Hard Inquiries Bad?

Not necessarily. They’re simply an aspect of how credit reporting works—it’s actually good that this information gets recorded. Knowing who accessed your personal credit information and why can help keep you informed on your credit application history.

That said, hard inquiries aren’t neutral. They can impact your credit, so you want to keep them to a minimal number when possible.

What Triggers a Hard Inquiry?

Any time you apply for credit-related accounts with a lender, you will trigger a hard inquiry that will appear on your credit report. It’s important to remember that you will always authorize hard credit checks, so be mindful of how you space them out and what loans you need at what times.

Minimize Your Hard Inquiries

So, how do you reduce the impact of hard inquiries on your credit score? Nowadays, it can be challenging to go through life without ever applying for credit. But you can follow the steps below to reduce how hard inquiries impact your score:

Don’t spread out loan shopping: Credit scoring models know that you’ll want to shop around for the best rates. Because of that, multiple applications for credit during short periods can appear as a single inquiry on your credit report.
Don’t apply without confidence: Understand your credit score and what type of credit you are likely to qualify for, and only apply when you need the credit. Otherwise, you’ll rack up hard inquiries for no reason.
Manage other aspects of your score responsibly: Make payments on time, keep your credit utilization low, and manage multiple types of accounts well. These all have more impact on your credit score than hard inquiries.
Keep tabs on your credit report: The last step in minimizing hard inquiries is tracking your report and score. Check your credit regularly to see where you stand and whether potential mistakes could bring down your score.

You can check your Vantage 3.0 score with Credit.com’s free Credit Report Card or get many versions of your FICO® Score with ExtraCredit®. Neither of these options constitutes a hard inquiry, so using them won’t hurt your credit.

Source: credit.com

Apache is functioning normally

September 25, 2023 by Brett Tams

This article originally appeared on Radical FIRE and has been republished here with permission.

When you’re planning on moving in with your partner, there are important money conversations you need to have before moving in with your partner.

I’m planning to move in with my partner after we complete our four-month mini-retirement, where we travel to Central America together. I assume that after we’ve spent so much time together abroad, we should be fine with moving in together. Just one thing that should be discussed is our finances.

Money Conversations with Partner

Moving in with someone requires some financial logistics to be arranged. You need to discuss who is paying which bills, who is responsible for what, and more.

You know I love having money conversations, with my friends or with my family. I love to talk about money, that’s why I write on the blog. When no one wants to hear me talk about money for the gazillionth time, I’m just writing a blog post about my money thoughts.

Now onto the money conversations that you need to have before moving in with your partner. I’ve had all these conversations over the past weekend just to know we’re on the same page. I recommend you also have them when you’re planning to move in with your partner!

I mean, is everything that was once mine now ours? Is everything that was once yours now ours? It’s about the tangible things that are in the house, not including money. This is something to think about before moving in together.

If you have things that your partner also has, should you bring it? Or can you use one and get rid of the other one? If there are things that you don’t have yet but you know you need? Will you buy it together or will one of you buy it?

In relation to that, we get to the next point.

Money Conversation #2: What Will We Do If … ?

You don’t go living together with your partner unless things are serious between you. You need to consider the possibility of the relationship ending sometime very far in the future (OMG!). Breakups and divorces are a possibility that needs to be considered.

If you’re sharing things, what will happen after you stop being together? This is important for things like furniture and electronics, following the previous point. Will you share everything together, yes or no?

Related read: 10 Ways Divorce can Affect your Credit

Money Conversation #3: Is The Money Going to Be Ours, Too?

It’s important to think about if you’re going to join finances or not. It’s a very personal thing to think about and it will differ for everyone depending on their situation. If your partner makes a lot less, you can decide to pay more towards the fixed monthly payments. Or vice versa.

Just keep in mind that you should do something that makes you comfortable!

For me and my partner, we will not join finances. We’re having separate financial goals at the moment. I’m working towards my goal of financial independence and keeping a savings rate of over 80% consistently until we go on our travels. Meaning we’re not on the same page concerning money goals.

That’s okay for now. He will look for a job after we return and we will decide how we will go from there.

For our expenses, we will be splitting everything equally. I currently make more than my partner. The rent will be low enough for him to comfortably be covering half. If in any given month he cannot pay his portion of the rent or there are any other difficulties that won’t allow him to pay half of the rent, I will of course help him.

Related read: How Renting Can Impact Your Credit

Money Conversation #4: How Will You Deal with Changes?

What if I lose my job? Or my partner can’t find a job after graduation? What if we need to move for work or someone can get a promotion abroad? All scenarios can happen. It’s extremely difficult to think about what you want to do when you’re not yet in the situation. It’s a good thing to discuss these matters a little in advance.

If you don’t know now how you will deal with these kinds of changes, think about how you’re both dealing with changes until now? When you’re both quite relaxed under changes, it’s unlikely that those changes will put stress on your relationship. If you’re both sensitive to changes, it might lead to stressful situations and it might be good to address those things at this moment.

Money Conversation #5: What Do You Value Spending Your Money On?

Before you’re moving in with your partner, it’s important to talk about what you value spending money on? It can significantly differ among people. One person loves to go on big holidays, the other likes to drive their dream car, wants to have a big space to live in, or likes to have the latest tech gadgets. It’s good to know what they value.

Before you’re moving in together, it’s important to understand what they value and what is important to them. The habits they have around the things they value may have an impact on your joint life together.

My partner loves playing games and spends a great deal of time playing games both online and offline. He used to spend a good amount of money on getting new games, getting new consoles, or updating his computer. Currently, he doesn’t spend too much money on those types of things, but it’s still something to keep in mind when you’re going to live together.

I used to buy a lot of clothes, but since getting on my clothing ban I haven’t bought any clothes. On the contrary, I’ve sold a lot of stuff around the house when I decided decluttering was the way I wanted to go. I won’t say I’m exactly a minimalist, but I’ve gotten rid of certain habits and I’m starting with a clean slate when I’m moving in with my partner.

When we’ve talked about this point, he also asked me to give away/throw out all of the stuff I don’t use anymore. That way, we can start fresh when we’re moving in together, instead of just moving all my stuff simply from one place to another.

It’s good to know what are the things that you might want to spend more money on, that you want to treat yourself on. For me and my partner that’s both the same thing: traveling. It’s important to know when money gets saved towards that goal and how much money will go towards that specific goal.

Money Conversation #6: Where Do You Want to Go?

It’s important to discuss where you want to go in life? I would like to know how temporary our living situation will be. Are you or your partner already planning for a different job, relocation, or promotion? Do you want to have a family? Do you want to live in your city apartment with one bedroom, or do you want a big house in the countryside with a huge garden and two dogs?

You can address many questions in order to address where you both want to go.

When we started dating, I told him I would go to the USA for five months shortly after. I am a dreamer, I love to think about what I want to do in my life and imagine where my life might be going. I already have some of my dreams about starting my own business, traveling, working abroad, and financial independence / early retirement. When I noticed our goals are compatible, even a few years down the line, that gives a huge boost to your relationship up until that point.

Relationships require a serious amount of honesty, openness, and communication. You’re a team that will figure everything out that will be thrown at you, you’re in this together.

Source: credit.com

Apache is functioning normally

September 25, 2023 by Brett Tams

Are you struggling to meet your monthly mortgage payments? If so, you’re not alone. Between the impact of COVID-19 and fluctuating inflation concerns, many homeowners are struggling to meet their financial obligations. In fact, records show a 115% increase in the number of home foreclosures in the United States from 2021 to 2022. Unfortunately, many homeowners don’t realize there are various programs available to help them avoid losing their homes. This article covers the home affordability programs offered that may be able to help you avoid foreclosure or lower your monthly mortgage payments.

In This Piece

Finding Mortgage Relief Options

During the pandemic, the government created numerous home loan programs. These programs can help individuals and families overcome financial hardships. Each program has different eligibility requirements, but the home must be your primary residence. Many of these programs are also for homeowners with federally backed mortgages, such as VA, USDA, or FHA loans.

Most of these programs are for people who already have a home and have concerns about paying their mortgage. Those looking to buy their first home may wonder, “How do I know if I can afford a home?” The first step is to conduct a free credit check to find out what your credit score is.

How Can I Save My Home From Foreclosure?

The government has several foreclosure assistance programs to help you avoid losing your home. These government programs may be able to pay a portion of your overdue mortgage payments or pause these payments until you’re back on your feet.

It’s important to explore all your options to determine how these programs can help. You can start by contacting your lender to see what options they have available.

Homeowner Assistance Fund (HAF) Program

As part of the American Rescue Plan Act of 2021, the Homeowner Assistance Fund (HAF) Program helps eligible homeowners impacted by COVID-19 avoid foreclosure. This program can give homeowners money to make past-due mortgage payments and other related costs, such as property taxes, homeowners insurance, home repairs and utility bills. The goal is to ensure homeowners financially impacted by the global pandemic don’t lose their homes.

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While the distribution of these funds began in 2021, many states still have funds available. To be eligible for the HAF Program, homeowners must earn less than 100% of the median income of the United States or less than 150% of the median income for their specific area (whichever is higher).

You can check your income eligibility with the U.S. Department of Housing and Urban Development. In most cases, homeowners aren’t expected to repay these funds. However, you are expected to continue making on-time payments.

This program is only for those who already own a home. If you’re considering purchasing a home, you want to make sure you have enough money in savings. How much money you need to buy a house depends on various factors, such as your down payment and closing costs.

CARES Act

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted to provide economic assistance to individuals and families affected by the pandemic. For eligible homeowners, this act gives them the ability to request forbearance from their mortgage servicer or lender. A forbearance enables homeowners impacted by COVID-19 to pause or reduce their regular mortgage payments for a set period of time.

With the CARES Act, you can request an initial forbearance of up to 180 days. If necessary, you can also request an extension of up to 180 days. The maximum forbearance amount is 360 days.

You’ll need to make up these missed payments—but not in one lump sum. Most lenders allow borrowers to pay this back in installments or to defer these payments to the end of the loan. However, it’s important to understand your obligations prior to entering into a forbearance agreement.

Under the CARES Act, only homeowners with federally backed loans, such as Fannie Mae, Freddie Mac, USDA, VA and USDA loans, are eligible for guaranteed forbearance. Homeowners with private loans should check with their mortgage servicer or lender to see if forbearance is available.

The CARES Act program is ideal for homeowners who are struggling to make their monthly mortgage payments. To be eligible for this program, the global pandemic must have financially impacted you. However, no documentation is required to prove this impact.

To see if you qualify, reach out to your specific mortgage servicer or lender. You should find this contact information on your latest mortgage statement.

Refinance with Your Lender

Refinancing is another option homeowners should consider. Depending on the specifics of your current home mortgage, you may be able to obtain lower monthly payments. Fortunately, the recent housing boom has significantly increased home values for many people. This means homeowners may qualify for refinancing after just a few years of homeownership.

Homeowners with an FHA, a VA, a USDA or another federally backed loan may qualify for a Streamline Refinance process. With this process, eligible homeowners can refinance their home mortgage without a credit check or proof of employment. In fact, with a Streamline Refinance, you may not even need to go through the appraisal process. This means you may be able to refinance your home even if you have little or no equity.

Even if you have a private loan, you may be able to refinance your home loan to lower your monthly payments. If you’re not able to refinance your current home loan, you may be able to request a loan modification. For example, you may be able to change the terms, interest rates or structure of your current mortgage.

When seeking a new home mortgage, it’s important to understand how credit works when buying a house. Before you start the process, you should request a free credit score.

What Other Options Do I Have?

If you’re struggling to make your monthly mortgage payments or looking for a way to lower your monthly payments, compare your home affordability options. Be sure to talk to your mortgage servicer or lender to see what options are available.If you’re considering refinancing your current mortgage, be sure to compare various lenders. Compare current mortgage rates now.

Source: credit.com

Apache is functioning normally

September 25, 2023 by Brett Tams

Sure, your child needs to be 15 before becoming an authorized user on a credit card account, 18 before signing a binding loan agreement, and 21 before applying for a credit card without a cosigner or some income to pay the bills. But long before that, they are “eligible” to have their identity stolen. In fact, according to a Child Identity Fraud Survey conducted by Javelin Strategy & Research, 1 in 40 households with children under age 18 had at least one child with personal information compromised by identity fraud in 2012.

Fortunately, there are ways to protect your kid from becoming a victim of child identity theft. For starters, parents can request credit reports for children under 14; children 14 and over can request a copy of their own credit reports. There are also credit monitoring services they can employ if they’re worried their kin’s personal information fell into the wrong hands. Here’s how to use credit monitoring to protect your child’s identity.

Why Is Your Child at Risk of Identity Theft?

Identity thieves are targeting children 18 and younger, swiping their Social Security numbers and applying for credit accounts in their names and piling up charges. Why? Because children aren’t in the habit of checking their credit. In fact, they often won’t even have a legitimate credit report unless something’s amiss. Remember, credit reports are a detailed account of your credit history, so until your child becomes an authorized user on your credit card account or gets a student loan, for example, they won’t leave a paper trail. In the meantime, thieves can wreak havoc by opening up bank accounts, credit lines, service contracts like a cellphone plan or more if they get their hands on a kid’s Social Security number.

A stranger who accesses a child’s Social Security Number, a dishonest family member or a friend of the family with access to a child’s personal records may commit this crime. Foster care children are particularly vulnerable to child identity theft because of the number of people who have access to their Social Security numbers.

How Can I Monitor My Kid’s Credit?

To protect your child, get in the habit of monitoring his or her credit reports. Reach out to each of the three major credit reporting agencies — Equifax, Experian and TransUnion — and request copies of your child’s credit records.

You will need to provide each credit reporting agency with your child’s name, address, date of birth, plus copies of your child’s birth certificate and Social Security card. You will also need to provide a copy of your driver’s license or other government-issued identification card and a utility bill showing you live at your current address.

Remember, children generally won’t have credit file unless you’ve added them to a credit card account in your name, so the mere fact that a bureau can generate a credit report for your child could be a sign that something’s amiss. Other signs that your child’s identity may have been stolen include:

Pre-approved credit card mail solicitations in your child’s name
Calls from a debt collector asking to speak to your child
An unexpected denial when you go to open up a bank account for your child
The arrival of cell phone or utility bills in your child’s name

If you discover your child is a victim of identity theft, be sure to report the fraud to the local authorities and the Federal Trade Commission.

What Is Credit Monitoring?

A credit monitoring service keeps tabs on your (or your child’s) credit report and notifies you of any changes that may occur. The major credit bureaus offer their own credit monitoring services, along with many of the major financial institutions and credit card issuers. Some services are even specifically designed to monitor a child’s identity.

Of course, prices for credit monitoring can vary, so it’s a good idea to shop around and compare and contrast them carefully. It’s also a good idea to thoroughly vet any company you’re considering. You can check out their record with online review sites, the Better Business Bureau, the Consumer Financial Protection Bureau or even your state Attorney General’s office.

How Can I Monitor My Own Credit for Identity Theft?

If you’re worried about your own identity being compromised, you should monitor your financial accounts regularly — daily if possible. The earlier you can spot unauthorized charges, the faster you can alert your financial institution and fix the problem.

Monitoring your credit regularly is also important. You should pull the free copies of your credit reports you can get once a year from each of the major credit reporting agencies at AnnualCreditReport.com. Signs of identity theft include mysterious addresses, unfamiliar credit inquiries and a major drop in your credit scores. To keep a closer eye on your credit, you can monitor two of your credit scores for free on Credit.com.

Jeanine Skowronski contributed to the reporting of this article.

This article has been updated. It was originally published August 21, 2014.

Source: credit.com

Apache is functioning normally

September 24, 2023 by Brett Tams

This correlation between the average cost of living and credit card limit continues when we look at the 10 states with the lowest average credit card limit. In the chart below, the states marked with an asterisk are also on the list of states with the lowest cost of living.

State	Average Credit Card Limit	Average Credit Score
Mississippi*	$21,676	667
Arkansas	$24,570	683
West Virginia*	$24,684	687
Alabama*	$25,621	680
Louisiana	$25,781	677
Kentucky	$25,962	692
Oklahoma*	$26,041	682
Indiana*	$26,676	699
Idaho	$26,871	711
Iowa*	$27,052	720

Source: Experian, Wisevoter

How Are Credit Card Limits Determined?

Credit card companies use several factors to determine your limit, which they review periodically over time. Some factors count more than others, varying by the credit card issuer.

Your Credit Score

A higher credit score indicates you are more likely to pay your debts, which tells credit card issuers you are lower-risk. As a result, people with higher credit scores often have higher credit card limits.

According to FICO®, a variety of factors determine credit scores, including:

Payment history: Your payment history determines 35% of your credit score, which shows how likely you are to pay your debts on time.
Credit utilization rate: Your credit utilization rate is the ratio of the debt you owe to the total amount of credit available to you. You can factor your credit utilization rate by dividing your current balance by your total credit limit and multiplying the result by 100. A healthy credit utilization rate is considered anything below 30% —any higher and potential lenders may consider you overextended.
Length of credit history: The longer your credit history, the better picture a lender has of your risk level. A short history isn’t necessarily bad unless it contains a poor payment history and high utilization rate.
Recent hard inquiries: A hard inquiry is a record of a lender checking your credit. Too many hard inquiries in a short period can lower your credit score temporarily, so experts recommend six months between hard inquiries.

Credit card companies also use your credit score to determine your interest rate, so keeping an eye on your score with free credit reports is important.

Monthly Income

Credit card issuers want to know if you have monthly income to ensure you can pay your debts. The higher your monthly income, the more likely you are to get approved for a higher credit limit.

Monthly Expenses

Credit card companies look at your total monthly expenses, especially compared to your monthly income. Generally, they’ll look at your monthly housing costs (mortgage or rent), although they may also ask for information about other regular expenses such as utilities. Your monthly expenses are then compared to your monthly income to determine your credit card limit.

High monthly expenses won’t hurt your credit card limit as long as your monthly income is high enough to cover them.

Debt-to-Income Ratio

Credit card issuers also examine your debt-to-income ratio when determining your credit card limit. Experts consider anything under 36% to be a good debt-to-income ratio for a credit card.

To calculate your DTI ratio, divide your total recurring monthly debt (mortgage, auto loan, student loans, existing credit card debt, etc.) by your gross monthly income (how much you make before taxes) and multiply the answer by 100.

Your History with the Issuer

If you already have a positive credit history with the company issuing the credit card, they may be more likely to give you a higher credit limit. However, if they feel you have too many cards or a rocky credit history with them, they may issue a lower credit limit.

The Issuer’s Credit Approval Policies

Every credit card company wants to avoid risk and crafts a specific set of policies to determine how much credit to extend to a cardholder. Its policies may consider elements not listed here or weigh factors differently than another company, which is why credit card limits are not standard across companies.

Current Economic Outlook

When the economy is healthy, credit card companies may be more open to taking risks and offer higher credit card limits. However, when the economy is uncertain, such as during the pandemic, issuers are less likely to take risks, offering lower credit card limits for new cardholders.

How to Get a Higher Credit Limit

A low credit card limit isn’t necessarily bad, but it can make getting approval for additional loans or credit challenging if your credit utilization rate is too high. It can also put large purchases, such as an appliance or unexpected car repair, out of reach.

To get a higher credit card limit:

Call your credit card issuer and ask for an increase. Call the customer service number on the back of your card and ask the representative for a higher credit card limit. Only consider this if you are trying to lower your credit utilization rate to raise your credit score. They look for six months of on-time payments and will ask for updates on your annual income, employment status, and monthly expenses before deciding.
Increase your income. Since monthly income is a factor in your credit limit, increasing your monthly income can boost your credit card limit. Ask for a raise at work, get a second job, or start a side hustle. When your credit card issuer sees you have more income, they may offer you a higher credit limit. You can update this information with them anytime by contacting them directly, or you can wait until they discover it in a periodic review of your status.
Build your credit. Pay your bills on time and pay down debt to increase your credit score. Over time, your credit score should increase, which can lead your credit card issuer to raise your credit limit.
Transfer the balance from one card to another. Some credit cards allow you to transfer debt from one account to another in a credit transfer. If you have multiple credit cards and one allows credit transfers, transfer the debt from one card to another. This won’t increase your credit card limit overall, but it can increase the amount of credit available on a specific card.
Increase your deposit on a secure credit card. If your card is a secured credit card, your credit card limit directly correlates to your security deposit. Add more to your security deposit, and you’ll have a higher credit card limit.
Open another credit card. This won’t increase the credit card limit on your current card, but it will expand how much credit is available to you. Avoid temporarily dinging your credit score by waiting six months between credit card applications.
Wait. Most credit card companies annually review your account, and as long as you pay your bills on time, they can likely naturally increase your credit card limit.

You can also always pay off purchases immediately rather than waiting until the end of your payment period to gain access to more credit without increasing your credit limit.

Credit scores strongly indicate what your potential credit card limit will be, so learn more about yours today. Before applying for a new credit card, get a sense of where you stand with a credit report card. Then use the tools and features in ExtraCredit to see where you need to work toward your credit goals to qualify for a higher credit card limit.

FAQ

Here are some answers to common questions regarding credit card limits.

What Happens if I Go Over My Credit Limit?

If you try to make a purchase over your credit limit, most credit card companies will deny the transaction. Some may allow the purchase but charge a fee, although most companies have abandoned this practice.

If I Request an Increase to My Credit Limit, Will That Impact My Credit Score?

When you request an increase to your credit card limit, your credit score may drop if your credit card issuer places a hard inquiry on your credit score. This can temporarily lower your credit score, and not all credit card companies do so.

Source: credit.com

Apache is functioning normally

September 24, 2023 by Brett Tams

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A score of 850 is the highest credit score possible, and to achieve it you need a great credit payment history, low credit utilization rate, and credit lines that have been open for many years.

Many people are curious to know how to get the highest credit score possible, and while it’s an ambitious goal, do you actually need this high of a credit score? Although having the highest possible credit score is great, you don’t need the highest score to live a financially healthy life.

In this article, you’ll learn how to get the highest credit score as well as how credit score ranges work and the benefits of a high credit score.

Key Takeaways:

The highest credit score possible is 850 using the FICO® scoring model.
FICO’s credit scoring model ranges from 300 to 850, and anything over 740 is considered very good.
To achieve a perfect credit score, you need to make your payments on time, have both revolving and installment credit lines, and keep a low credit utilization rate.
The credit scoring factor that takes the most time is credit age, which means you need lines of credit that have been open for many years.

How Do You Get the Highest Credit Score?

If you’re trying to get the highest credit score of 850, you need to make all your payments on time and have a good mix of credit, a low utilization rate, and very old lines of credit. As mentioned earlier, this is an ambitious goal that not many people achieve. In fact, an Experian® report shows only 1.31% of people had perfect FICO credit scores as of Q3 2021.

A perfect credit score is also a moving target. Periodically, there are changes to what contributes to your credit score. For example, in 2017 there were major changes like how medical bills and public records are reported to the credit bureaus. Fortunately, these changes were in favor of the consumer, but there may be future changes that could lower your score.

FICO, the primary scoring model used by lenders, also regularly updates how it scores. Although it uses the same five factors, the latest FICO Score 10 has an updated predictive method it uses to provide consumers with a credit score.

The Credit Profile of People with a Perfect Credit Score

Should you decide to work toward a perfect credit score, it’s helpful to know what separates the average credit score from the perfect credit score. Obviously, those who manage to get a perfect credit score are doing something different than the average person. Experian regularly publishes credit and other financial data, and they analyzed data from the third quarter of 2021 to see what differentiates good credit scores from perfect credit scores.

	Consumer Averages	Average for People With an 850 FICO Score
FICO® Score	714	850
FICO® Score	3.9	5.9
Credit card balance	$5,221	$2,558
Number of retail credit cards	3	4.2
Retail credit card balance	$1,046	$182
Auto loan balance	$20,987	$17,074
Personal loan balance	$17,064	$32,872
Mortgage balance	$220,380	$205,057
Non-mortgage balance	$21,539	$16,482
Total tradelines ever delinquent	1.8	0

As you can see, there’s quite a bit to learn from those with perfect credit scores. They have more credit cards than the average person, but they keep their credit card balance much lower. They also have lower balances on their auto loans and have no delinquencies on their credit report.

What Factors Affect Your Credit Score?

The information on your credit report is used to calculate your credit score, and there are different factors credit scoring companies consider when generating your score. Below are the five primary factors used by FICO. They’re weighted, which means some factors contribute more to your score than others:

Payment history (35%): how often you pay your bills on time
Credit utilization (30%): how much you owe vs. your available balance
Credit age (15%): how old your lines of credit are
Credit mix (10%): how many different types of lines of credit you have
New credit (10%): how often you apply for new lines of credit

Payment history and credit utilization account for 65% of your score, so you’ll want to focus on these areas by paying all your bills on time and keeping your utilization rate under 30%. Ideally, you’ll also want the longest credit history possible, which is why it’s good to open up lines of credit when you’re younger and keep the accounts open.

Your credit mix is a blend between revolving credit and installment credit. Revolving credit lines include credit cards and personal lines of credit, whereas installment credit includes auto loans and home loans.

What’s the Credit Score Range?

Credit scores range from 300 to 850. Within the overall range, different scores are considered poor, fair, good, very good, or excellent. Some lenders or services require a minimum credit score for applicants, so it’s helpful to know where you stand.

FICO Score Range

According to FICO is the primary scoring model lenders look at to determine your potential level of risk. Rather than looking at your entire credit report, this score gives lenders a rough idea of how well you pay your bills on time and how much experience you have managing lines of credit. Below is the FICO score range, but FICO also offers industry-specific scores for auto loans and other industries.

Poor: 300-579
Fair: 580-669
Good: 670-739
Very good: 740-799
Excellent: 800-850

VantageScore Range

VantageScore isn’t used as often as FICO, but some lenders will take this score into consideration. This scoring model was created by the three major credit bureaus in 2006 as an alternative to FICO. Not only is the VantageScore range different from FICO, but it also uses a slightly different scoring model.

Very poor: 300-499
Poor: 500-600
Fair: 601-660
Good: 661-780
Excellent: 781-850

What Are the Benefits of a High Credit Score?

Although you may not be able to reach a perfect credit score for a while, there are many benefits to simply having a high credit score. Remember that a good credit score may be in the 600s, but you’ll receive more benefits as your score gets higher.

Some of the main benefits of having a high credit score include:

Lower interest rates: Loans and lines of credit come with interest charges that are a percentage of the overall cost. When you have a high credit score, these rates are much lower.
Lower deposit fees: When you sign up for certain services, like a new cell phone provider, they may check your credit score for a deposit. A higher score often means little to no deposit fee.
Access to more money: Should you need a loan, a higher credit score can get you approved for a larger amount assuming you have the income.
More housing choices: Whether you’re renting or buying, a good credit score gives you better options.
Better job opportunities: Some jobs check your credit as part of the application process, and a bad score may prevent you from getting hired.

Perfect Credit Score FAQ

Next, we answer some of the most commonly asked questions about achieving the perfect credit score.

Can You Get a 900 Credit Score?

No. The highest credit score possible is 850.

Is 770 a Good Credit Score?

A 770 credit score is good, but it’s technically considered a “very good” score in the FICO credit score range. A good score in that range is between 670 and 739.

Can You Have a Credit Score of 100?

No. The lowest credit score you can get is 300, but any score below 579 is considered “poor” in the FICO credit score range.

How Credit Monitoring and Additional Reporting Can Help Your Credit Score

If you’re looking to improve your credit score or even reach the perfect credit score of 850, a great place to start is with credit monitoring. When you have credit monitoring, you’re able to regularly check your credit score and be alerted when anything triggers a change to your score from your credit report.

For credit monitoring and a variety of other features, sign up for Credit.com’s ExtraCredit® program. You can also get a free credit report card to see where your current credit health stands and where you can improve.

Source: credit.com

What Is a Personal Loan?

Why Would I Need a Personal Loan?

Personal Loans vs. Lines of Credit vs. Payday Loans

Types of Personal Loans

How Do Personal Loans Work?

How to Apply for a Personal Loan

How to Qualify for a Personal Loan

Personal Loan Alternatives

FAQs

Will a Personal Loan Affect Your Credit Score?

Do You Need a Down Payment for a Personal Loan?

Can You Use a Personal Loan for Whatever You Want?

How Big of a Loan Can I Get With a 700 Credit Score?

How Often Can You Apply for a Personal Loan?

In This Piece

What Is an Authorized User?

Authorized Users Versus Joint Accounts

How Do Authorized Users Work?

Can I Build Credit as an Authorized User?

Can Adding Authorized Users Hurt Your Credit?

What if an Authorized User Misuses Their Card?

Does Removing an Authorized User Hurt Their Credit?

Does Being an Authorized User Affect Your Credit?

How Long Does It Take an Authorized User to Show Up on Credit Report?

What to Consider About Authorized Users

Four Tips to Bear in Mind

Simply Adding Authorized Users Won’t Hurt Your Credit—but Be Careful

1. Collect All Your Paperwork in One Place

2. Create a Budget and Determine What You Can Pay Every Month

3. Manage Your Debts in Collections

4. Consider Your Options

5. Try to Reduce Your Interest Rates

Upgrade Triple Cash Rewards Visa®

Do Your Best to Pay More Than the Minimum

Consider More Options for Getting Out of Debt

How to Avoid Getting into Debt

In This Piece

Must-know Personal Loan Statistic Findings

Average Personal Loan Debt in America

How Many Americans Have Personal Loans?

The Most Common Reasons to Take Out a Personal Loan

Average Personal Loan Interest Rates

Personal Loan Debt Compared to Other Debts

Personal Loan Delinquency Rates

Personal Loan Statistics by State

Personal Loan Statistics by Type of Lender

Can Personal Loan Debt Affect Your Credit Score?

What Are Hard Inquiries?

How Do Hard Inquiries Impact Your Credit?

Hard Inquiries vs. Soft Inquiries

Examples of Hard Inquiries

Examples of Soft Inquiries

Disputing Hard Credit Inquiries

Frequently Asked Questions

How Long Do Hard Inquiries Last?

How Many Hard Credit Inquiries Is Too Many?

Are Hard Inquiries Bad?

What Triggers a Hard Inquiry?

Minimize Your Hard Inquiries

Money Conversation #1: Do We Share Our Stuff?

Money Conversation #2: What Will We Do If … ?

Money Conversation #3: Is The Money Going to Be Ours, Too?

Money Conversation #4: How Will You Deal with Changes?

Money Conversation #5: What Do You Value Spending Your Money On?

Money Conversation #6: Where Do You Want to Go?

In This Piece

Finding Mortgage Relief Options

How Can I Save My Home From Foreclosure?

Homeowner Assistance Fund (HAF) Program

CARES Act

Refinance with Your Lender

What Other Options Do I Have?

Why Is Your Child at Risk of Identity Theft?

How Can I Monitor My Kid’s Credit?

What Is Credit Monitoring?

How Can I Monitor My Own Credit for Identity Theft?

How Are Credit Card Limits Determined?

Your Credit Score

Monthly Income

Monthly Expenses