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Credit Card Applications Drop—When to Apply for a New Card

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When consumers face economic hardship, opening a new credit card may be a helpful option to get by. But surprisingly, many Americans aren’t taking this approach during the global coronavirus pandemic.

New credit card applications were down 40% from the first week of March to the last week, according to a new report from the Consumer Financial Protection Bureau’s (CFPB) Consumer Credit Panel.

The report looked at hard inquiry data, or the number of times consumers’ credit was pulled for an application. Results revealed that the credit card industry is not the only one seeing a drop; auto loan inquiries have decreased by 52% and mortgage inquiries by 27%.

What’s a hard inquiry? Each time you apply for credit, the lender will perform a “hard inquiry” or “soft inquiry.” Hard inquiries are the most common and appear on your credit report after you submit an application, which may ding your credit score temporarily. Meanwhile, soft inquiries have no effect on your credit.

The CFPB cited that this sharp drop in new inquiries could be due to a lowered demand for credit (people are spending less), or a drop in credit supply that may indirectly or directly raise consumers’ expectation of being turned down for credit.

In other words — consumers expect it will be harder to qualify for credit or a loan, given the number of banks scaling back on lending during the market’s current conditions.

Why people with higher credit scores are applying for fewer cards

Suprisingly, card applications declined significantly more for consumers with super prime scores (above a 780 VantageScore) compared to consumers with deep subprime scores (below 500), at a rate of 59% and 34%, respectively.

The CFPB pointed out that while all types of inquiries declined notably, consumers with higher credit scores had the most substantial drop. This could indicate they have more flexibility in substituting new credit applications with other means of financial support, such as emergency savings or passive income.

Regardless if you have savings or not, you may still want to apply for a credit card. A new card can provide an extended credit limit, which is something you may need if you’ve recently been laid off or had your credit limit reduced without notice. It could also reward you with cash back for stocking up on groceries and streaming Netflix

But before you apply for a new credit card, we review some tips below.

When to apply for a new credit card

Credit cards can provide you with more flexibility when it comes to paying for purchases. That may include the ability to use your card online or over the phone, as well as pay purchases off over time with no interest. These are all benefits of using credit over cash while many of us shelter in place.

For example, if you want to order food delivery or household goods, you’ll have to use a digital payment, such as a credit card or debit card — not cash. While debit is an option, it provides fewer fraud protections and generally is more risky than paying with credit.

Here are some situations when it can be a good idea to apply for a credit card:

  • You have good or excellent credit: This allows you to qualify for the best credit cards, such as the Citi® Double Cash Card and American Express® Gold Card. It also raises your chances of getting promotional 0% financing, which can help you out during a layoff or furlough.
  • You have no credit card debt: This will ensure you don’t add more high-interest debt on top of what you’re already struggling to pay off.
  • You have an emergency fund: This acts as a safety net for unexpected expenses and increases your ability to pay off your credit card balance every month.

Here are some situations when it can be a bad idea to apply for a credit card:

  • You tend to spend outside of your means: A new card provides more credit, which can be risky if you chronically overspend.
  • You can’t pay off your current credit card debt: If you’re currently in credit card debt, be thoughtful about opening a new card. A balance transfer card may help you get out of debt with an introductory 0% APR period. One example is the Amex EveryDay® Credit Card, with its 15-month no-interest period (then 12.99% to 23.99% variable APR). For best results, learn how to make the most of your balance transfer.
  • You recently applied for credit products: Every new application typically results in a hard pull of your credit, which can hurt your qualification odds.
  • You lost your job: If you have a reduced income, this can reduce your chances of being approved since lenders see it as you have limited funds to repay debt.
  • You plan to apply for a mortgage or auto loan: You should limit hard inquiries prior to applying for major credit products so you increase your chances of getting the best rates.

If you decide to open a new credit card, make sure you check your credit score first. This can help you decide which type of card you may qualify for. (Check out our lists of best cards for bad credit, fair or average credit, good credit and excellent credit.)

Take action: Equifax, Experian and TransUnion announce free weekly credit reports for a year

For rates and fees of the Amex EveryDay® Credit Card, click here.

Information about the Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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Virginia Used Car Dealer Offers Local Drivers Reliable Pre-Owned Vehicles and Affordable Prices

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Used Cars Under $10,000 in Virginia

Karen Radley Volkswagen is offering local drivers a variety of used vehicles to choose from that are priced under $10,000, including capable SUV’s, versatile crossovers, fuel-efficient sedans and sporty coupes.

There are many ways for people to save money when shopping for the things they need and can’t live without. For many people, a vehicle that can offer them the reliability they need is incredibly important and something they require every day. Drivers in Virginia that are searching for affordable used cars under $10,000 now have a dealership they can turn to that will help them get behind the wheel of a reliable vehicle they can afford. Karen Radley Volkswagen is offering local drivers a variety of used vehicles to choose from that are priced under $10,000, including capable SUV’s, versatile crossovers, fuel-efficient sedans and sporty coupes.

With used car specials that offer affordable pricing and a large inventory of pre-owned vehicles that can be purchased for under $10,000, drivers will be able to find the vehicle they’ve always wanted to drive at a price that fits their budget. Karen Radley Volkswagen also helps make buying a reliable and budget-friendly used car easy by offering used car loans to drivers regardless of their credit score. Good or bad credit car loans are fast and easy to obtain and apply for when shopping at Karen Radley Volkswagen.

To learn more about how to get behind the wheel of an affordable used car in Virginia, or to view the current inventory of used cars under $10,000, drivers can visit the local dealership’s website by going to http://www.karenradleyvw.com. Questions can be directed towards the sales staff by calling 833-243-5895. Shoppers may also see all the used cars at Karen Radley Volkswagen by driving to 14700 Jefferson Davis Highway.

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Legislation to Combat Unfair Auto Insurance Rates Clears Committee

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Legislation to Combat Unfair Auto Insurance Rates Clears Committee

 

Trenton – In response to high automobile insurance assessments, the Senate Commerce Committee passed legislation sponsored by Senators Nia Gill, M. Teresa Ruiz, Nilsa Cruz-Perez, and Nellie Pou, which would prohibit the use of education, occupation, homeownership status, marital status, or credit score in certain automobile insurance determinations.

 

“The use of factors such as employment status and credit score in calculating insurance premiums carries a severe economic consequence for working-class families. A person’s income or education has no bearing on driver safety or risk and only serves to reinforce existing inequalities,” said Senator Gill (D-Essex/Passaic). “The pandemic has given new importance to how we determine eligibility. Millions of New Jerseyans are experiencing economic hardship; this will inevitably impact their credit scores, occupation, and employment status. This bill is critical to ensure people are not subject to increased premiums based on metrics that have nothing to do with driving, and it will ensure drivers are not subject to increased premiums based on unforeseeable consequences of the pandemic.”

 

The bill, S-111, would prohibit automobile insurers from assigning an insured or prospective insured person to a rating tier based on educational level, credit score, marital status, homeownership status, or employment, trade, business, occupation or profession.

 

“Newark has some of the highest car insurance rates in the country. Under our current laws car insurance companies are preying on New Jersey’s most vulnerable, charging low income customers significantly more regardless of their driving history. Every sponsor has done tremendous legwork to bring an end to this harmful practice. I am proud to have been a driving force in the final push to move this important legislation and to ensure it included prohibiting the use of credit scores,” said Senator Ruiz (D-Essex). “Insurers should be basing their rates on the likelihood that someone will be in an accident, not his or her ability to pay for those damages out of pocket.”

 

“It is absurd that someone with a bad credit score pays more for car insurance than someone who has been convicted of a DUI,” said Senator Cruz-Perez (D-Camden/Gloucester). “We cannot allow insurers to continue basing rates on credit history or socioeconomic status rather than someone’s driving record.”

 

“We must stop penalizing people for being poor,” said Senator Pou (D-Bergen/Passaic). “This legislation will hold insurance companies accountable and help to ensure that our most vulnerable citizens are given fair pricing for policies that are a requirement to drive.”

 

The bill would take effect 90 days after enactment.

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Reasons You Can Be Denied for a Bad Credit Auto Loan

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Everyone’s situation varies, but there are some circumstances that bad credit auto lenders simply don’t accept. To give you an idea of what to expect when you apply for a car loan, here’s what subprime lenders tend to require and what situations they don’t accept when determining your eligibility for auto financing.

Job Situations and Bad Credit Car Loans

First, it’s important to note that all lenders have different work, income, and even residency requirements. However, if you’re applying with a bad credit car lender, also known as a subprime lender, they tend to follow similar guidelines for who they’re willing to approve for auto financing.

When it comes to your work situation and what type of income you’re bringing in each month, there are some situations that subprime lenders simply don’t accept.

No Income at All

If you’re not bringing in any income from a job or any other type of assistance, expect to be turned down. Any car lender, bad credit or not, is going to need you to provide proof that you have a stable income.

Some subprime lenders can accept income such as alimony, permanent disability, pension, and even public assistance – if you can prove that you’re going to receive it for the entire duration of your auto loan term, that is.

To get into a car loan, you must have provable, consistent income that can support the auto loan the whole time you’re repaying it.

Sparse Work History

This requirement can vary, but borrowers who haven’t held down the same job for around six months to a year can often be turned down for a car loan. Auto lenders typically also require you to have consistent work history over the last three years.

Subprime lenders look for stability in your work history and employment. The longer you’ve held the same job in the same line of work, the higher your chances of getting approved for a car loan.

Brand-New Job

If you just started a job in a new field, then a subprime lender may be hesitant to approve you for financing. Subprime lenders prefer borrowers who’ve been at the same job for at least six months to a year.

However, if you recently switched employers but it’s in the same line of work, then they’re more likely to be understanding of that situation.

Living Situations and Bad Credit Auto Loans

Situations That Can Deny You a Bad Credit Car LoanAlong with having work and income requirements, subprime lenders also take a look at your residence history. While living situations can vary greatly, they are again looking for stability.

A stable borrower is one that is more likely to repay their auto loan. So, the longer you’ve been living in the same area, the higher your chances for an approval. However, just because you’ve lived in the same town for 20 years doesn’t always mean you meet the residency requirements.

Here are a few living situations that subprime lenders probably won’t accept:

You’re Not a Homeowner or a Renter

To meet residency requirements, most subprime lenders require that you’re a homeowner or a renter. If you’re a homeowner, you must prove your residency with a recent utility bill in your name, or maybe even a home title in your name if you don’t have any utilities in your name.

If you’re a renter, then your name must be on the lease. You should also expect to need a recent utility bill in your name to prove your residence. Some lenders may even require a copy of a lease agreement, a mortgage statement, or a copy of a house payment/rent check.

However, if you live with relatives or you live at an apartment where your name isn’t on the lease, then it could be more difficult to qualify for a car loan. Subprime lenders require that their borrowers have a permanent address, with documents that prove that you live there. If you don’t have any utilities in your name, or your name isn’t on a lease or mortgage statement, then you could run into trouble getting approved for auto financing.

You Don’t Have a Permanent Address

Some people live in RVs, or even hotels, to accommodate a nomadic lifestyle. While having the flexibility to move wherever you’d like at the drop of a hat suits many people, the sad news is that these unconventional ways of life aren’t likely to meet the requirements of a car lender. Since your address isn’t permanent, it can make a subprime lender hesitant to approve you for financing.

Other Requirements of Subprime Lenders

There could be many different reasons why a lender can deny you for an auto loan. To help you be best prepared, here’s a list of other common requirements of subprime lenders:

  • Must have a cell phone or landline phone in your name (no prepaid phones)
  • Have to make a down payment of at least $1,000 or 10% of the vehicle’s selling price
  • Bring a list of five to eight personal references with complete contact information
  • Must have a valid driver’s license with your current address

Subprime Lenders and Bad Credit Car Dealerships

If your credit is worse for wear, you’re likely to have a better chance of getting approved for a car loan if you apply with a subprime auto lender, since they consider more than just your poor credit score while they determine your eligibility for a car loan.

Where are subprime lenders? They’re signed up with special finance dealerships, and they are more prominent nowadays. Here at Auto Credit Express, we know what dealers are signed up with subprime lenders, and we can look for one in your area at no cost.

Fill out our free auto loan request form, and we’ll get right to work looking for a dealership near you with the bad credit lending resources you need.

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