What Happens if You Default on a Personal Loan?

Your car breaks down. Your furnace blows cold air. Your precious pup needs surgery — pronto.

Yep, life can be challenging when unexpected expenses pop up. When that happens, you may need to reassess how to spend the month’s budget, and you might be wondering what happens if you don’t make payments on a personal loan.

In this post, we’ll share the potential consequences of not paying back a personal loan.

What can happen if you miss one payment, of course, is quite different from what can happen if you miss several, so we’ll take you through possible ramifications along the spectrum.

What Does It Mean to Default on a Personal Loan?

Just as with a mortgage or student loans, defaulting on a personal loan means you’ve stopped making payments according to the loan’s terms. You might be just one payment behind, or you may have missed a few. The point at which delinquency becomes default with a personal loan — and the consequences — may vary depending on the type of loan you have, the lender, and the loan agreement you signed.

How Does Loan Default Work?

Even if you miss just one payment on a personal loan, you might be charged a late fee. Your loan agreement should have information about when this penalty fee kicks in — it might be just one day or a couple of weeks — and whether it will be a flat fee or a percentage of your monthly payment.

The agreement also should tell you when the lender will get more serious about collecting its money. Because the collections process can be costly for lenders, it might be a month or more before yours determines your loan is in default. But at some point, you can expect the lender to take action to recover what they’re owed.

What Are the Consequences of Defaulting on a Personal Loan?

Besides those nasty late fees, which can pile up fast, and the increasing stress of fretting about a debt, here are some other significant consequences to consider:

Damage to Your Credit

Lenders typically report missing payments to the credit bureaus when borrowers are more than 30 days late. Which means your delinquency will likely show up on your credit reports and could cause your credit scores to go down. Even if you catch up down the road, those late payments can stay on your credit reports for up to seven years.

If you actually default and the debt is sold to a collection agency, it could then show up as a separate account on your credit reports and do even more damage to your scores.

Though you may not feel the effects of a lower credit score immediately, it could become a problem the next time you apply for new credit — whether that’s for a credit card, car loan, or mortgage loan. It could even be an issue when you try to rent an apartment or need to open new accounts with your local utilities.

Sometimes, a lender may still approve a new loan for borrowers with substandard credit scores, but it might be at a higher interest rate. This means you’d pay back more interest over the life of the loan, which could set you back even further as you work toward financial wellness.

Dealing with Debt Collectors

If you have a secured personal loan, the lender may decide to seize the collateral you put up when you got the loan (your car, personal savings, or some other asset). If it’s an unsecured personal loan, the lender could come looking for payment, either by working through its in-house collection department or by turning your debt over to a third-party collection agency.

Even under the best conditions, dealing with a debt collector can be unpleasant, so it’s best to avoid getting to that stage if you can. But if you fall far enough behind to be contacted by a debt collector, you should be prepared for some aggressive behavior on the part of the collection agency. These agents may have monthly goals they must meet, and they could be hoping you’ll pay up just to make them go away.

There are consumer protections in place through the Fair Debt Collection Practices Act that clarify how far third-party debt collectors can go in trying to recover a debt. There are limits, for example, on when and how often a debt collector can call someone. And debt collectors aren’t allowed to use obscene or threatening language. If you feel a debt collector has gone too far, you can file a complaint with the Consumer Financial Protection Bureau.

You Could Be Sued

If at some point the lender or collection agency decides you simply aren’t going to repay the money you owe on a personal loan, you eventually could end up in court. And if the judgment goes against you, the consequences could be wage garnishment or, possibly, the court could place a lien on your property.

The thought of going to court may be intimidating, but failing to appear at a hearing can end up in an automatic judgment against you. It’s important to show up and to be prepared to state your case.

A Cosigner Could Be Affected

If you have a cosigner or co-applicant on your personal loan, they, too, could be affected if you default.

When someone cosigns on a loan with you, it means that person is equally responsible for paying back the amount you borrowed. So if a parent or grandparent cosigned on your personal loan to help you qualify, and the loan goes into default, the lender — and debt collectors — may contact both you and your loved one about making payments. And your cosigner’s credit score also could take a hit.

Is There a Way to Avoid Defaulting on a Loan?

If you’re worried about making payments and you think you’re getting close to defaulting — but you aren’t there yet — there may be some things you can do to try to avoid it.

Reassessing Your Budget

Could you maybe squeak by and meet all your monthly obligations if you temporarily eliminated some expenses? Perhaps you could put off buying a new car for a bit longer than planned. Or you might be able to cut down on some discretionary expenses, such as dining out and/or subscription services. This process may be a bit painful, but you can always revisit your budget when you get on track financially. And you may even find there are things you don’t miss at all.

Talking to Your Lender

If you’re open about your financial issues, your lender may be willing to work out a modified payment plan that could help you avoid default. Some lenders offer short-term deferment plans that allow borrowers to take a temporary break from monthly payments if they agree to a longer loan term.

You won’t be the first person who’s contacted them to say, “I can’t pay my personal loan.” The lender likely has a few options to consider — especially if you haven’t waited too long. The important thing here is to be clear on how the new payment plan might affect the big picture. Some questions to ask the lender might include: “Will this change increase the overall cost of the loan?” and “What will the change do to my credit scores?”

Getting a New Personal Loan

If your credit is still in good shape, you could decide to get proactive by looking into refinancing the old personal loan with a new personal loan that has terms that are more manageable with your current financial situation. Or you might consider consolidating the old loan and other debts into one loan with a more manageable payment.

This strategy would be part of an overall plan to get on firmer financial footing, of course. Otherwise, you could end up in trouble all over again.

But if your income is higher now and/or your credit scores are stronger than they were when you got the original personal loan, you could potentially improve your interest rate or other loan terms. (Requirements vary by lender.) Or you might be able to get a fresh start with a longer loan term that could potentially lower your payments.

If you decide a new personal loan is right for your needs, the next step is to choose the right lender for you. Some questions to ask lenders might include:

•   Can I borrow enough for what I need?

•   What is the best interest rate I can get?

•   Can I get a better rate if I sign up for automatic payments?

•   Do you charge any loan fees or penalties?

•   What happens if I can’t pay my personal loan because I lost my job? Do you offer unemployment protection?

Shopping for a personal loan online can be fast and convenient. With a SoFi Personal Loan, for example, you can find your interest rate in minutes without impacting your credit score.* And with SoFi, you’ll have access to live customer support seven days a week.

Is There a Way Out of Personal Loan Default?

Even if it’s too late to avoid default, there are steps you may be able to take to help yourself get back on track.

After carefully evaluating the situation, you may decide you want to propose a repayment plan or lump-sum settlement to the lender or collection agency. If so, the Consumer Financial Protection Bureau (CFPB) recommends being realistic about what you can afford, so you can stick to the plan.

If you need help figuring out how to make it work, the CFPB says, consulting with a credit counselor may help. But consumers should be cautious about companies that claim they can renegotiate, settle, or change the terms of your debt: the CFPB warns that some companies promise more than they can deliver.

Finally, as you make your way back to financial wellness, it can be a good idea to keep an eye on two things:

1. The Statute of Limitations

For most states, the statute of limitations — the period during which you can be sued to recover your debt — is about three to six years. If you haven’t made a payment for close to that amount of time — or longer — you may want to consult a debt attorney to determine your next steps. (Low-income borrowers may even be able to get free legal help .)

2. Your Credit Score

Tracking your credit reports — and seeing first-hand what helps or hurts your credit scores — could provide extra incentive to keep working toward a healthier financial future. You can use a credit monitoring service to stay up to date, or you could take a DIY approach and check your credit reports yourself. Every U.S. consumer is entitled to a once yearly free credit report available at annualcreditreport.com , which is a federally authorized source.

The Takeaway

If your debt seems daunting right now, and you’re struggling to make payments, some proactive planning could help you avoid falling so far behind that you default on your personal loan. That plan may include talking to your current lender about modified payment terms — or it might be time to consider a new personal loan to consolidate high-interest debt.

The good news is there’s help out there. And the sooner you act, the more options you may have to protect your credit and stay away from the serious consequences of defaulting.

Wondering if a personal loan is the right move for you? Learn more about how to apply for a SoFi personal loan.

*Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
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SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’swebsite .
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Source: sofi.com

Perfect Credit: How to Get an Excellent Credit Score

A perfect credit score is a bit of an elusive target, as it is challenging to figure out the formula for impeccable financial health. But is the maximum number really necessary? And if so, how frequently do people achieve it? Even though lenders generally assure that anything over 700 is a good score, many people strive for the ultimate goal: 850.

After all, a credit score this impressive has countless benefits—it’s a sure sign that you understand how to manage your money and can borrow and spend with confidence. However, reaching that brag-worthy 850 takes more than just financial wellness. You also need a complete understanding of how credit works and the math behind what affects your scores day to day. In this guide, we’ll be answering questions like “what’s considered an excellent credit score?” and “what’s a great credit score?” to help you better understand what’s needed to achieve perfection. Keep reading to learn how to get an excellent credit score or use the links to answer your questions right away.

What is Credit?

Credit is what allows you to borrow money from lenders. When you apply for a loan, lenders will either approve or deny your request by assessing factors like debt-to-income ratio, employment history, and the amount of the loan. There are several types of credit, including revolving credit, service credit, and installment credit. We’ll go over the three types of credit below.

Revolving Credit

Revolving credit is a line of credit that you can keep using even after you’ve paid off the balance in full. With this kind of credit, you’ll have a limit to the amount of money you can use. For example, if a financial institution approves your credit card for $3,000, you’ll only be able to charge that amount to your account. Like any type of credit, you’ll need to make a minimum payment each month. If you only pay a portion of the amount owed, you’ll continue to revolve your debt until it’s paid off completely.

Service Credit

Service Credit is established by those who provide a service, such as utility companies, phone and internet providers, and gyms. Essentially, it’s an agreement between you and the company offering the service. Let’s take a closer look at gyms as an example. When you apply for a membership, you’ll sign a document that’ll guarantee the use of the facility only if you pay for the service.

Installment Credit

Installment credit is a type of loan that’s used toward a specific purchase. For instance, mortgages, car loans, and student loans.

When thinking of opening a new line of credit, it’s important to take into consideration the type of credit you want to open.

Why is Credit Score Important?

So, why is credit so important? Well, maybe you want to buy a car in a couple of months. To do so, you need to apply for a car loan if you don’t have the cash in hand. Or you may be planning to purchase a house, which most people can’t afford to pay in full. When it comes to making these big purchases, you’re going to want to make sure your credit is in tip-top shape.

A credit score determines if a lender will approve or deny your loan, the interest you have to pay, and the amount due each month. The higher the credit score, the lower your interest and payments will be. The lower your credit score is, the higher your interest rate and monthly payments will be, meaning you’ll end up paying more for whatever you purchased in the long run.

But lenders aren’t the only ones interested in your credit score. Here are a few other people or organizations that take a look at your credit score before making their final decision.

  • Landlords may want to know your credit score to ensure your finances are in good standing and that you can afford to pay rent.
  • Insurance companies may use your credit score to determine the rate of your policy.
  • Utility companies can also look at your credit score to see whether you’re eligible to open an account.
  • Employers often run credit checks to make sure you’re going to be a trustworthy employee.

Your credit score is an essential factor for almost every aspect of your life, whether you realize it or not. A credit score allows you to make significant financial decisions without your wallet suffering the consequences. You’ll be able to spread the costs of big purchases over time, making it more manageable. But it isn’t enough to simply have a credit score. You need a good credit score to reap the benefits.

Credit Score Range

Credit scores range from 300 to 850. The number you see on your monthly credit report is generated by VantageScore or FICO. Each company has its own credit-scoring model to determine your credit score based on several factors, such as payment history, credit history, total debt, and more. Although the scores between the two may differ, they’ll generally follow the ranges below.

  • Anything below 630 is considered a poor or bad credit score
  • Credit scores between 630 and 689 is considered a fair credit score
  • Credit scores between 690 and 719 is considered a good credit score
  • Anything above 720 is considered an excellent credit score

So, what’s a perfect credit score? 850 is considered a perfect score. We’ll be discussing what is the highest credit score and how to reach it later on. Even though you may be content with having a good credit score, there’s always room to improve.

Excellent Credit Score

As mentioned, anything above 720 is considered an excellent credit score, but what exactly does that mean for you as a borrower? For starters, you’ll increase the likelihood of getting approved for the line of credit you want. You’ll also save money during the lifetime of your loan since your interest and monthly payments will be low.

An excellent credit score has numerous advantages for you as it increases your purchasing power and puts you in the best financial position possible. Once you reach this pinnacle of success, where do you go from there?

Perfect Credit Score

According to Nasdaq, roughly 1.2% of Americans had an 850 in 2020. The benefits of an 850 credit score may include lower interest rates, easier approval for home loans or rental applications, and even a greater chance of getting hired by your dream company. But is it essential to have a perfect credit score for these opportunities? Not necessarily. Anything from 790-719 is considered “good,” while 720 and above is an excellent score. However, there’s no harm in wanting to achieve perfection.

The path to reaching that rarely seen 850 score can seem a bit confusing. Even if you pay your bills on time, have a diverse collection of credit accounts, and maintain a clean financial record, many people plateau around the 750-800 mark. So how does one build enough credit to reach the ultimate score? Let’s go through some of the most common contributors to getting the highest credit score below.

What Affects Your Credit Score?

Before we explore how you can improve your credit score, you need to know what factors affect your credit score. If you’re set on achieving an 850 score, these determinants are important to take into consideration.

Multiple Hard Inquiries

Each time you apply for a new line of credit—whether it’s for a car, credit card, or home, for example—lenders perform what is known as a hard inquiry into your history. These are not to be confused with soft inquiries, which are made by prospective employers or lenders checking out your report for preapprovals. Multiple hard inquiries tell a story that may worry lenders.

If you choose to apply for a credit card, shop around to find the best one for you before a hard inquiry occurs.

Frequent Late Payments

On-time payments are essential to your credit score. You agreed upon a specific arrangement when you accepted a loan, and lenders would like to see that you can stick to it. However, some banks allow a pass for missing a payment by a few days once every one to two years; it’s crucial to stay on top of due dates the best you can.

History of Defaulting or Charge-Offs

When late or non-existent payments extend past six months, lenders may charge-off your credit account. This means that the bank no longer trusts you to pay the owed amount. These unfortunate notes can last between six and seven years on your credit report and may lead to lenders denying future applications for new lines of credit.

Closing Old Accounts

Remember that the length of your credit history accounts for a significant portion of your score. Just because you’ve paid off a tricky balance doesn’t mean you should close the card. If this were one of your earliest cards, your history’s length would shrink with the cancellation of your account.

Keeping it Simple

Even if you pay all your balances off each month, sometimes you may get stuck at a mediocre credit score. Reaching the highest credit score will likely require you to show off your credit knowledge. As you diversify your lines of credit, you’ll be able to prove your financial expertise. By only focusing on one line of credit—such as student loans or minimal credit cards— at a time, your credit score could plateau.

Achieving the perfect credit score is all about balance. It’s possible to get in your own way without realizing it. Check in with your finances if you’re falling into any of the common traps mentioned above that could keep your credit score stagnant. Not sure how to get your credit score for free? Mint makes it easy!

How to Raise Your Credit Score

If you’re only a few points away from reaching 850, it can get pretty frustrating seeing the number remain the same month after month. To help you reach your goal, here are five ways you can raise your credit score.

Make Timely Payments

There’s no question that making your credit payments on time each and every month is one of the most important factors for your credit score. This doesn’t necessarily mean that you can’t carry a balance on revolving credit accounts, but late minimum payments incur a fee and remain on your credit report. In the end, it all comes down to creating long-term trust with lenders.

Keep Your Utilization Rates Low

Some financial experts believe that carrying a balance above 30 percent of your credit limit can damage your credit score. Though this frequently quoted 30 percent is seen as the hard and fast rule for credit utilization, experts say it is actually a cap. Carrying a balance below this amount— preferably below 20%— is ideal for raising your credit score.

This is also a reminder that carrying a balance does not negate your chances of hitting that magical 850.

Only Open Necessary Accounts

Though account diversity can help perfect your credit score, opening accounts or cards you won’t use and that have burdensome fees and stipulations can hurt your credit. Only open lines of credit when you need them. However, if you’re tempted to accept your favorite retailer’s credit card offer, for example, be sure you can pay off each purchase in a timely manner.

At the same time, be mindful of closing accounts once they’re opened. Cutting up that credit card simply because you have a new account means lowering your overall credit limit and possibly increasing your utilization rate. A card with a long life also shows your dedication to maintaining the account.

Have a Long Credit History

It’s a little confusing to learn that you don’t begin your credit journey with a perfect score. Credit scores, however, are about building a credit reputation over time. It’s simply impossible to prove how you’ll respond to paying down debt until you do so over several years. If you’ve only just begun to build credit or have minimal accounts, your score will improve as you continue to follow your set payment schedule.

Cultivate Account Variety

Whenever you hear about someone achieving the perfect credit score, they often boast their wide range of credit accounts. Each line of credit opened speaks to a different type of spending. Things like student and car loans prove that you can pay off large sums over time, and revolving accounts, such as credit cards, verify that you’re able to manage your monthly budget with confidence.

Even different credit cards can offer a variety of perks. Some people may keep a credit card open for emergencies, while others could use it to accumulate travel points or store credit. When you see each line of credit as a unique tool, you’re more likely to approach credit spending with a healthy mindset. In turn, this shows up in your long-term credit report and helps your score grow.

Summary: How to Achieve Perfect Credit

The perfect credit score is achievable with a little strategy and plenty of patience. The ultimate number—a score of 850—is possible over time and with the proper financial knowledge. Most importantly, understand that credit scores can fluctuate as your life changes. Focus on your overall financial wellbeing and it may be within your reach sooner than you think.

Source: mint.intuit.com

How to get a debt consolidation loan with bad credit

A woman working on her finances.

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Managing multiple debts can get overwhelming quickly—you might be juggling credit card debt, medical bills, auto loans and student debt all at once. Coupled with a low credit score, it’s a stressful scenario that can leave you feeling hopeless. And unfortunately, your bad credit score can make it difficult to qualify for a lower interest loan, such as a debt consolidation loan, that may help you pay off your debt sooner. 

If you’re wondering how to get a debt consolidation loan with bad credit, it’s still possible to get approved. There are lenders who specialize specifically in providing debt consolidation loans for poor credit carriers—you’ll just need to do some research and shop around until you find the right solution for your situation. 

What is a debt consolidation loan? 

A debt consolidation loan is an unsecured personal loan designed to simplify the debt repayment process. By combining multiple balances into a single fixed-rate loan, it can potentially allow you to secure a lower interest rate on your debts and may enable you to pay them down faster. 

Debt consolidation loans combine multiple debts.

Benefits of debt consolidation loans

Debt consolidation means combining multiple debts into a single loan with one fixed monthly payment. This type of personal loan will ideally allow you to combine several high-interest debts into a new loan with a lower interest rate. If managed properly, it can yield significant money-saving benefits. 

Simplify your finances

One perk of a debt consolidation loan is that it allows you to streamline your finances and more easily manage your debt. Instead of keeping track of multiple debts—all with different monthly due dates and payment amounts—consolidating them means you only have to keep track of a single payment each month. 

Lower your interest rates

The main allure of a debt consolidation loan is the potential to secure a total lower interest rate on the debts you’re currently paying off. For example, if your current interest rate is between 17 and 20 percent and you can get a debt consolidation loan with a 14 or 15 percent interest rate, you’ll save money by consolidating. 

Improve your credit score

Depending on the terms of your debt consolidation loan, it could help you raise your credit score if it allows you to pay off your debt in a shorter amount of time. That’s because lowering the amount of debt you owe improves your credit utilization ratio, which accounts for 30 percent of your credit score.  

Debt consolidation could help raise your score.

Another factor that determines your credit score is your payment history. Lenders want to see that you have a history of consistently paying your balances on time every month, which can be tricky if you’re managing multiple debts. It’s easier to let things slip through the cracks when you’re juggling different due dates and payment totals. 

Since a debt consolidation loan streamlines your debt into a single monthly payment, it makes it easier to sustain a positive track record of paying your balance each month, which gives a boost to your overall credit score. 

What credit score do I need to qualify for a debt consolidation loan?

There are various credit-scoring models that each have different ranges for what’s considered a good credit score. The most widely used credit scoring model is the FICO score, and scores below 579 are typically considered poor. If your score is below 579, it will be more difficult to secure a debt consolidation loan. However, your credit score is just one of a few factors lenders consider when determining approval for a debt consolidation loan.

How to get a debt consolidation loan with bad credit

If you’re struggling with your debt and think a debt consolidation loan could help, it helps to approach the process with a plan. It’s important to do your research before applying in order to ensure you find the right loan for your situation and maximize your chances of approval. 

1. Check your credit score

In order to find a loan that best fits your needs, you need to know your credit score. This will help you narrow down your options to loans you know you can qualify for and identify ones to rule out if you don’t meet the credit score requirements. 

You’re entitled to one free credit report from each bureau (Equifax, Experian and TransUnion) per year, which you can obtain on the official AnnualCreditReport.com website. Request a copy and review it to see exactly where it stands before you apply for a debt consolidation loan. 

While you’re at it, you should also review your credit report for any mistakes that could be hurting your score without you realizing it. That could include accounts listed that don’t belong to you or that you never opened, incorrectly reported missed payments or any other misinformation that could be dragging down your score. 

If you do find any errors, take action to remedy them—it might result in a boost to your credit score, which will improve your chances of qualifying for a debt consolidation loan with better terms. 

2. Shop around and compare your options

You don’t want to jump on the first loan offer you see without weighing your other options. Every loan comes with different fees, interest rates and repayment amounts that you should consider carefully to ensure you’re getting the best possible deal. 

In order to determine whether different loan offerings are the right fit for you, you should first crunch your current numbers so you know what you’re working with. Calculate how much you’ll pay in total for all your debts without a consolidation loan, including monthly payments and total interest costs. Then you can compare different loan offerings to your current number. 

When examining different loan offerings, take a look at the total loan amount including the interest rate. Figure out how much you’ll owe in monthly interest payments and what you’ll end up paying for the entire lifetime of the loan. If it comes out lower than what you’re currently paying, it’s probably a safe bet. 

While there are many sources for obtaining a consolidation loan, a good starting point for comparison shopping could be online lenders—they usually allow you to view their rates with just a soft credit check (which won’t do damage to your credit score). Additional sources to look into include your current bank, smaller local banks and credit unions. 

3. Consider a cosigner

A cosigner is when someone else cosigns to be added to a borrowed loan. If you have a family or friend with good credit who’s willing to become a cosigner, it could boost your chances of being qualified for a debt consolidation loan with potentially better terms. Even if your credit score meets a lender’s minimum requirements to qualify for approval, adding a cosigner with a higher credit score could help you secure lower interest rates. 

Keep in mind that the cosigner shares equal responsibility for the loan, so both of your credit scores are impacted as you carry out the terms of the loan. 

Where to find debt consolidation loans for poor credit

There are many sources and lenders available for obtaining a loan, and it can be difficult to figure out where to start your search. Here are some guidelines you can start with to help you find the right debt consolidation loan offerings. 

Credit unions

Local credit unions or small banks are great places to start because they often offer more flexibility for those with poor credit. They also have loan officers available for you to speak with, which can be helpful in determining what you qualify for and learning the details of different loan rates and terms. 

Keep in mind that credit unions will still check your credit if you decide to apply for a loan, which can negatively impact your credit score. You’ll also need to become a member with them if you aren’t already in order to take advantage of their services. Here are some popular credit union lenders to consider: 

  • First Tech Federal Credit Union provides personal loans for debt consolidation between $500 and $50,000 with no minimum credit score and no origination fees. The Annual Percentage Rate (APR) is between 6.70 percent and 18 percent, making it a great low-rate option.  
  • Navy Federal Credit Union also provides debt consolidation loans of up to $50,000 with no minimum credit score and no origination fees. The APR is between 7.49 percent and 18 percent. 

Online lenders

Online lenders offer the benefit of convenience, since you can usually complete the entire process from start to finish online. They’re also a good place to look if you have bad credit because they’re often more likely to approve you for a debt consolidation loan than a traditional bank. 

Another key perk of going through online lenders is that you can usually compare loan rates and terms without impacting your credit score, unlike credit unions. However, the drawback is that debt consolidation loans for bad credit carriers usually come with high interest rates and premiums when provided through an online lender. You also have to be wary about extra fees, such as origination fees, that cover the cost of processing your loan. Here are some potential online lenders to consider: 

  • Upstart offers debt consolidation loans between $1,000 and $50,000 for borrowers with a minimum credit score of 580. APR varies by state, but the average APR range is between 7.98 percent and 35.99 percent. 
  • Avant offers debt consolidation loans between $2,000 and $35,000 for borrowers with a minimum credit score of 550—although it’s worth noting that most approved borrowers have credit scores between 600 and 700. The APR for loans financed through Avant falls between 9.95 percent and 35.99 percent. 
  • OneMain Financial doesn’t specify a required minimum credit score for borrowers, but the average credit score of those approved is between 600 and 650. They offer debt consolidation loans between $1,500 and $20,000 with an average APR between 18 percent and 35.99 percent—a notably higher APR than other online lender options. However, they’re very flexible when it comes to approving those with low credit scores. 

Alternatives to a debt consolidation loan 

A debt consolidation loan can be a great way to simplify your debt management, but if you can’t qualify for a loan with a lower interest rate than what you’re already paying, there’s nothing to gain by taking one out. After all, you don’t want to end up in more debt than you’re already in. If this is the case, look into some alternative options instead. 

Consider alternatives to debt consolidation

Debt management plan

A debt management plan (DMP) may help you pay off your debt sooner with lower interest rates through a fixed payment plan, and can be found through the National Foundation for Credit Counseling (NFCC)—a nonprofit organization that offers free credit counseling services. Even if you choose not to enter into a DMP, you can benefit from other services provided, such as free budgeting help, a review of your credit reports and general advice on how to best tackle your unique financial situation. You can reach out to an NFCC counselor by phone at 800-388-2227. 

Home equity loan

If you’re a homeowner and have equity in your home, you may be able to get a home equity loan as a means to consolidate your debt. The idea of taking out a home equity loan over a debt consolidation loan is that it might help you score a lower interest rate. However, approach this option with caution—while it could help you qualify for better financing terms and lower interest rates, it requires you to borrow against the value of your home and risk losing it if you can’t repay the loan. You should only pursue this option if you’re sure that you won’t have any trouble making all of your payments on time for the entire lifetime of the loan. 

Reach out to your current lenders

If you want to tackle your debt without involving any new loans or third parties, there’s always the option of contacting your lender or credit card company directly to see if they might be open to working something out. You can try negotiating different terms like reducing your monthly minimum payment, lowering your interest rate or settling on past late fees. While not all lenders will be open to negotiating with you, some certainly are if it means more assurance that you’ll pay back the money you owe. 

Debt settlement 

A debt settlement involves hiring out a company to negotiate with your creditor on your behalf in the hopes of arriving at a settlement that resolves your debt for less than what you currently owe. This option often requires a significant amount of money up front to deposit into your settlement account, and you might even end up owing more than when you started due to any associated fees. Generally, this isn’t the best path to consider unless you’re out of options aside from bankruptcy.


If you’re in over your head with debt that will take five years or more to repay (even after a consolidation loan), filing for bankruptcy protection might be your final option. Bankruptcy remains on your credit report for seven to 10 years, and you should expect your credit score to take a significant hit once you file. However, it does offer the chance to rebuild your finances and credit if you proceed with diligence and keep that goal front and center moving forward. Your credit will eventually recover. 

Dealing with your debt might seem intimidating, but it’s important to remember that there are resources available to help you stay on top of it. Whether that’s a debt consolidation loan, credit counseling services or simply a budget overhaul, what matters most is that you have a plan for becoming debt-free. 

Keep in mind that if you’re able to refinance your current debt and secure a lower interest rate than you’re currently paying, a debt consolidation loan could be a good option for you—even if you have bad credit. Be sure to explore your options and do your research to ensure you find the best possible rate for your situation. 

If you’re wondering where your credit score stands and need help determining whether your credit report contains errors that could be negatively impacting your score, the consultants at Lexington Law can work through the process with you. 

Reviewed by John Heath, Directing Attorney of Lexington Law Firm. Written by Lexington Law.

Born and raised in Salt Lake City, John Heath earned his BA from the University of Utah and his Juris Doctor from Ohio Northern University. John has been the Directing Attorney of Lexington Law Firm since 2004. The firm focuses primarily on consumer credit report repair, but also practices family law, criminal law, general consumer litigation and collection defense on behalf of consumer debtors. John is admitted to practice law in Utah, Colorado, Washington D. C., Georgia, Texas and New York.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

How is a credit score calculated? A survey of America’s credit knowledge

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

In the U.S., a credit score determines whether Americans can purchase a home, rent an apartment or even qualify for certain jobs. Despite the significance of credit scores, many consumers are unaware of how they are calculated and what factors can positively or negatively impact them.

According to a survey conducted by LendingTree, more than a third of respondents reported having no idea how their credit score was determined.

Given the significance that credit scores have, how much do American consumers know about their credit scores and the system responsible for them?

We surveyed 3,000 Americans to find out more about how much they know about the credit industry and accessing their information.

Key findings:

  • Nearly half of respondents said they had never checked a copy of their credit report.
  • A third of respondents disagreed with the statement “I know what information of mine the credit bureaus have access to.”

Half of Americans have never checked their credit reports

When asked to agree or disagree with the statement “I have checked a copy of my credit report,” 52 percent responded “no.”

Women were slightly more likely than men to have checked a copy of their credit report, with 54 percent of women reporting “yes” compared to 50 percent of men.

Credit reports are a record of a consumer’s financial history that inform how a credit score is calculated, with different scoring methods weighting various events, or items, differently (which is why a person’s FICO score will typically be slightly different from their VantageScore).

In many cases, a lender will not only look up an applicant’s credit score but will also request a copy of the applicant’s credit report, leading to someone being denied despite having an excellent score.

Additionally, just as there is more than one kind of credit score, each consumer has three separate credit reports maintained by the three credit reporting bureaus: Equifax, Experian and TransUnion. A debt does not have to be reported by a lender or creditor to all three bureaus, which can lead to discrepancies between the three reports.

Normally, consumers can view one free credit report per bureau per year. However, since the advent of the COVID-19 pandemic last year, consumers have been able to request a free copy of their credit report once a week from each of the three credit bureaus. (This benefit will be ending soon.)

If only half of respondents had ever reviewed a copy of their credit report, how many were knowledgeable about what information the credit bureaus had access to?

What do the credit bureaus know? A third of Americans are unsure

About 33 percent of respondents disagreed with the statement “I know what information of mine the credit bureaus have access to.”

Consumer confusion around credit reporting is well known: according to the same LendingTree survey mentioned above, most consumers knew that paying bills on time and credit utilization factored into the determination of their score, but fewer were aware that the length of credit history or applying for credit could affect scores as well.

Lack of awareness around the credit bureaus featured more prominently in younger respondents, with 50 percent of respondents between the ages of 18 to 24 indicating that they “strongly disagreed” with the statement.

Impact of credit knowledge

Having knowledge about the credit industry and how it functions, what information a lender can access regarding your financial history and how this information is reported has a direct bearing on the financial health of consumers.

Based on findings in an annual survey conducted by the CFA and VantageScore Solutions, LLC, low-income households were less aware of the credit industry than high-income households, and were more likely to lack the knowledge needed to raise and monitor their credit scores.

Your credit standing is determined by more than a single score, and it is possible to proactively monitor and improve your credit by tracking your credit reports and ensuring their accuracy.

Being knowledgeable about what can negatively or positively affect your credit, monitoring your credit reports regularly and disputing errors can help you prevent mistakes that may have long-term effects on your credit. If you’re wondering where to start, we can help with that.


This study was conducted for Lexington Law using Google Consumer Surveys and interpreted by Progrexion Marketing. The sample consisted of no less than 1,000 completed responses per question. Post-stratification weighting has been applied to ensure an accurate and reliable representation of the total population. This survey was conducted in February 2021.

Reviewed by Alexis Peacock, Supervising Attorney at Lexington Law Firm. Written by Lexington Law.

Alexis Peacock was born in Santa Cruz, California and raised in Scottsdale, Arizona. In 2013, she earned her Bachelor of Science in Criminal Justice and Criminology, graduating cum laude from Arizona State University. Ms. Peacock received her Juris Doctor from Arizona Summit Law School and graduated in 2016. Prior to joining Lexington Law Firm, Ms. Peacock worked in Criminal Defense as both a paralegal and practicing attorney. Ms. Peacock represented clients in criminal matters varying from minor traffic infractions to serious felony cases. Alexis is licensed to practice law in Arizona. She is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

Capital One QuickSilver Rewards for Students Credit Card Review

Advertiser Disclosure: This post includes references to offers from our partners. We receive compensation when you click on links to those products. However, the opinions expressed here are ours alone and at no time has the editorial content been provided, reviewed, or approved by any issuer.

Learn more about this card and find out how you can apply here.

The Capital One Quicksilver Rewards for Students card is a cash-back credit card designed specially for college students. An ideal spending aid for younger folks (and lifelong learners) with fair credit, it’s appropriate for anyone attending or planning to attend a four-year institution, community college, or other qualifying higher education institution.

Quicksilver Rewards for Students boasts a flat cash-back rate — unlimited 1.5% back on every purchase, every day — and no annual or foreign transaction fees. Capital One reports card utilization and payment activity to the three major credit reporting bureaus, giving Quicksilver Rewards for Students cardholders a golden opportunity to build credit over time with responsible use and timely payments.

Quicksilver Rewards for Students has much in common with the flagship Capital One Quicksilver Cash Rewards Credit Card, which has stricter credit standards. It also shares a brand with the Capital One QuicksilverOne Rewards Credit Card, which is marketed to general audiences (not just students) with fair or average credit.

Key Features

The Capital One Quicksilver Rewards for Students card has a straightforward cash back rewards program, relaxed underwriting requirements, and some other benefits worth writing home about.

Earning Cash-Back Rewards

The Capital One Quicksilver Rewards for Students card earns 1.5% cash back on all eligible purchases, every day. There’s no limit to how much you can earn over time.

Redeeming Cash-Back Rewards

You can redeem your accumulated cash-back rewards for:

  • A general statement credit to your account balance
  • A targeted statement credit applied to specific past purchases
  • A paper check mailed to your address on file
  • Credit for eligible purchases made with PayPal
  • Gift cards offered by participating partner merchants

You can redeem in any amount and at any time.

Additional Card Benefits and Perks

The Capital One Quicksilver Rewards for Students card has some additional benefits worth noting:

  • Extended warranties on eligible purchases with existing manufacturers’ warranties
  • Complimentary travel accident insurance, subject to policy limits and exclusions
  • A card lock feature that protects your account from fraud
  • Randomly generated virtual card numbers that ensure you don’t have to give your real card number to random online merchants
  • Complimentary access to Capital One Shopping, a browser plugin that can help you find a lower price when you shop online
  • 24/7 complimentary concierge service when you shop, dine, or travel
  • 24/7 travel assistance and emergency cash advance service if your card is lost or stolen
  • Periodic free credit report alerts (for events such as an increase or decrease in your credit score) on your Experian or TransUnion credit report

These benefits may be subject to terms and limitations and are subject to change at Capital One’s discretion.

Important Fees

Quicksilver Rewards for Students does not charge an annual fee. There’s no fee for foreign transactions, including transactions made at overseas points of sale and online purchases made with merchants located outside the United States. See terms and conditions for information about balance transfer fees and cash advance fees.

Credit Required

The Capital One Quicksilver Rewards for Students card is appropriate for students and soon-to-be students with fair credit or better. It’s not suitable for students with poor credit or limited credit, nor new-to-credit students who don’t have credit scores.

This card offers modest credit lines for applicants. You may be able to apply for a credit line increase after demonstrating a record of timely payment and responsible card utilization.


The Capital One Quicksilver Rewards for Students card has some key advantages over other student credit cards and entry-level cash-back cards. They include a straightforward and relatively generous rewards program, low card fees, and relaxed underwriting.

  1. Solid Rate of Return on All Eligible Purchases. The Capital One Quicksilver Rewards for Students card has a simple rewards scheme: a 1.5% cash-back rewards rate on all eligible purchases, every day, with no caps on earning potential or rotating bonus categories to worry about. This isn’t the most generous cash-back program around, but it’s above-average for a student credit card.
  2. No Foreign Transaction Fees or Annual Fee. Quicksilver Rewards for Students doesn’t charge an annual fee or foreignt transaction fees. These are key benefits for budget-conscious students who don’t want to pay to keep the card around and who plan to study abroad or shop with international merchants while in college.
  3. Open to Applicants With Less-Than-Perfect Credit. Quicksilver Rewards for Students is appropriate for applicants with fair credit scores. You don’t have to have perfect (or even good) credit to apply for this card.
  4. Nice Lineup of Fringe Benefits. Quicksilver Rewards for Students has some choice fringe benefits, including extended warranties on eligible purchases, basic protections for travelers, and fraud protection measures like a handy card lock feature. These might not be the deciding factor in your decision to apply for this card, they certainly don’t hurt.


Although it’s one of the best credit cards for students, the Capital One Quicksilver Rewards for Students card is not perfect. Its disadvantages include a missing early spend bonus, no 0% APR introductory promotion on purchases or balance transfers, and no bonus cash-back categories.

  1. No Early Spend Bonus (Sign-Up Bonus). Capital One Quicksilver Rewards for Students does not offer an early spend bonus (also known as a sign-up bonus) for new cardholders. There’s no way to earn rewards above the flat-rate baseline during your first months here.
  2. No Introductory APR Promotion. You won’t find an intro APR promotion from Quicksilver Rewards for Students either. This is a drawback relative to some other Capital One credit cards, and certainly to other student credit cards that waive interest on purchases or balance transfers for new cardholders.
  3. No Way to Earn Cash Back Above the 1.5% Rate. You can’t earn rewards any faster than this card’s flat-rate 1.5% baseline rewards rate allows. That’s not a bad baseline for an entry-level student credit card, to be sure, but it’s also not up to the standards of premium cash-back credit cards that offer 5% back or more on eligible purchases.
  4. Not Appropriate for New-to-Credit Applicants. Quicksilver Rewards for Students does not require excellent or even good credit, but it does require some credit history. This is a drawback for applicants who don’t have any credit history to point to, including those who haven’t been able to build credit without a credit card and international students seeking a U.S.-based payment solution for the first time.

Final Word

The Capital One Quicksilver Rewards for Students card is one of the better student credit cards on the market right now. With a flat cash-back rate that’s right where an entry-level card’s should be, no annual fee, and a relaxed underwriting process, it has the potential to be a real asset for many college students.

Is Quicksilver Rewards for Students perfect? Far from it. It’s not suitable for applicants with bad credit scores or no credit scores at all, which excludes many young people who haven’t had a chance to build credit as minors and most international students as well.

And its fringe benefits aren’t specially designed with students in mind, as is the case for some more innovative cards in this niche. You won’t find a free or discounted subscription to Amazon Prime Student or rewards on purchases of streaming services here, for example.

Before deciding to apply for Quicksilver Rewards for Students, make sure it’s the best fit for your needs. After all, this is a card you hope will carry you through the next four years — or however long remains on your student journey.

Source: moneycrashers.com

How to Protect Your Finances During Challenging Times

With the economic uncertainty due to Coronavirus (COVID-19), you’ll want to get a grip on handling your money. It’s hard to predict how things will shake out and how the economy will ultimately shift. Perhaps recent events have already had a profound impact on your finances. Maybe they have affected your income, and in turn, your ability to cover bills and pay off debt, depleting your emergency fund.

If you’re experiencing a tough money situation — a job loss, or are hit with a medical emergency or bill — and are wondering how you can safeguard your credit and finances. Here are a few tips on how to go about it:

Go Through Your Spending Plan

Methodically go through your spending plan to see what adjustments you can make. Not entirely sure where your money has been going? This takes a bit of investigating. There are a few easy ways to go about this. A good way to figure this out is by checking your bank statements, or by using a money management app. This could reveal the truth of your spending and saving habits, and not what you think you’re doing.

Once you see what you’ve been spending money on, you might want to cut back on a specific area — which we’ll get to in a bit — or make some shifts. Every cut you make should go toward covering your necessary expenses and bolstering your emergency fund.

Cut Back on Expenses

Take a close look at your spending plan and see where you can make cuts. This can be “big wins,” which could mean cutting back in one of the three major spending categories — housing, transportation and food. I’ll say this cheekily, but depending on your spending habits, this could well include a 4th category: online shopping.

You could also start on the “easy wins,” expenses that don’t take a lot of effort to cut back on but could result in significant savings over time. For instance, cutting back on your subscriptions or dropping them altogether. Another easy tactic? Call your cable, internet, or cell phone provider and see if they’re willing to lower your monthly payment. This usually takes about 20 minutes to do but could save you money over time. I once negotiated my internet bill down by $20 a bundle, which netted $240 a year in savings.

Get a Handle on Your Debt

Tempting as it might be to turn the other way, it’s essential to face your debt situation. First, jot down a list of all your debt; the amounts, the interest rate, and how long you have to pay each off.

You’ll also want to check to see where the debt is held. If you’re not sure whether a debt has gone to collections, you can dig up this information by reaching out to the original lender or by checking your credit report. You’re entitled to a free credit report every year from each of the three main bureaus — Equifax, Experian and TransUnion.

Due to the Coronavirus situation, the Coronavirus Aid, Relief, and Economic Security (CARES) Act will suspend federal student loan payments until September 30, 2020. You don’t have to reach out to your student loan servicer or take any action. Plus, your interest won’t accrue during this period.

As for private student loans, you’re still on the hook for making payments. While your payments won’t be put on hold, some options could make your payments more manageable. For instance, student loan refinancing, which could lower your monthly payments or bump down your interest rate. 

Call Your Creditors

If you’ve been walloped financially, you’ll want to reach out to your creditors as soon as you can. Yes, it can invoke a lot of anxiety, and you’d much rather put off the conversation for as long as possible. But informing your creditors and lenders about your situation goes a long way.

This shows that you care and are responsible about your debt. The other party won’t be as blindsided, and it gives them time to come up with a few different options. For instance, perhaps you could temporarily pause your payments, lower your minimum payments each cycle, or come up with an alternate payment plan.

Asking to skip payments or lower your monthly payments should only be a last resort, points out credit card expert John Ulzheimer, formerly of FICO and Equifax. Otherwise, you might be unnecessarily stretching out the payback period of your loan. To the extent, you can continue to make minimum payments without causing financial stress on you or your family, do so,” says Ulzheimer. “Don’t take this as an opportunity to skip payments that you can easily make. If you can help it, you’ll want to avoid extending loans by deferring payments to the back end.”

Keep Tabs on Your Credit Score

Checking your credit score on the regular is like tracking your BMI when you’re trying to get more fit. Turn credit monitoring into a habit and aim to check your credit score about once a week. If you sign up for a free credit monitoring service, you could gain insights on what is hurting and helping your score. You’ll want to aim to continue best practices for keeping a solid score — don’t rack up too high a debt on your cards, and make your payments on-time.

Lean on Your Community

During tough times, turn to your tribe and have real money talk with them about your financial situation. They could hook you up with side hustles to boost your cash flow, help with child care, or help you find resources to alleviate money stress. Your friends and family could also point toward useful information, offer guidance, or just provide an emotional pick-me-up through support and words of encouragement.

Protecting your credit and finances can feel like a tall order, especially during rocky economic times. However, having a plan, taking small, actionable steps, and sticking to your plan can help you do all you can to stay on top of your money situation. No matter what state your finances are in, you can get to a better place.

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Source: mint.intuit.com