Connect with us

Bad Credit

Expert Tips To Fix Your Credit on a Limited Income

Published

on

xavierarnau / Getty Images

xavierarnau / Getty Images

If you’re struggling to get by, you likely feel the pinch in your monthly budget. However, there’s something else that could be taking a hit: your credit.

See: 10 Things To Do Now If You Have a 500 Credit Score

This component of your finances might not be at the forefront of your mind if you’re trying to make ends meet. But bad credit could affect your ability to improve your financial situation. A low credit score can force you to pay higher interest rates — making it more expensive for you to borrow. Or it might prevent you from getting credit at all. And some employers check credit reports, which could affect your ability to land a job.

There are numerous ways to improve your credit score, but some of the most common strategies can prove difficult if there’s little spare cash in your budget to aggressively tackle debt. Here are some expert tips for how to fix your credit on a limited income.

Last updated: March 29, 2021

Credit cards heaped up background with copy space.

Credit cards heaped up background with copy space.

Get a Secured Credit Card To Build Credit

You have to have credit to build credit — which can be hard if your income is low or you’re unemployed and lenders aren’t willing to take a chance on you. If you’re in this situation, you should get a secured credit card to build credit, said Becky House, education and communications director at American Financial Solutions, a credit counseling agency.

Banks and credit unions offer secured credit cards, which act like traditional credit cards but require a deposit that acts as your line of credit, House said.

“For someone with limited income, this is a very good option,” she said. “If they can save for the deposit for a few months and then open the card, in as little as nine months, they can establish a credit score or add enough positive information to increase their score.”

She recommended using the card to pay for things already in your budget, such as transportation costs or utilities. “That way, you know you have the cash to pay the card off in full each month,” House said.

House said that she had a low-income credit counseling client who applied to buy a home and was turned down due to his credit score. To achieve credit repair, he opened a secured credit card at a local credit union, used it for four months and then reapplied for the mortgage.

“He qualified,” House said. “It really does work if you use the card responsibly.”

Learn: 30 Things You Do That Can Mess Up Your Credit Score

Multiracial colleagues indian and caucasian young women having coffee break sitting together at desk in office.

Multiracial colleagues indian and caucasian young women having coffee break sitting together at desk in office.

Become an Authorized User on Someone’s Account

Another way to build credit history and improve your credit score is to become an authorized user on someone’s credit card, House said. The key is to find someone with good credit who is willing to help you out in this way. They don’t have to give you the card — just add your name as an authorized user. The activity on the card will be added to your credit report, which will generate a positive credit history for you as long as the card user is responsible, House said.

“Of course, there is the chance that the person who authorizes you on the card might fall behind or use more than 25% to 30% of their available credit limit,” House said. “In that situation, being an authorized user could cause damage to your credit. You have to pay attention.”

Check Out: 30 Ways To Dig Yourself Out of Debt

man counting cash money

man counting cash money

Get Creative About Coming Up With Cash for Debt Payments

One of the best ways to improve your credit score is to pay down your debt because 30% of your score is based on the amount you owe, according to myFICO, the consumer division of credit-scoring agency FICO. However, if you can barely make minimum monthly debt payments, you might be wondering how to improve your credit score with this tactic. There are plenty of opportunities to earn extra income with side jobs so you have more cash for debt repayment. But this option isn’t for everyone.

“You can’t keep adding work hours if you have a family,” said Bruce McClary, vice president of public relations at the National Foundation for Credit Counseling. You might have to look at creative ways to reduce your monthly spending instead.

“Everybody can look at their budget and find one thing they can live without,” he said. “It gets harder the leaner your budget is.” You don’t want to have to cut necessities, so he recommends taking advantage of community resources that can help you. For example, your utility provider might offer income-based programs or be able to connect you with programs that will help you receive services at a more affordable level, McClary said. That could help free up cash to pay down your debt. Also, check with your local United Way for help meeting basic needs.

A young woman is at home in her apartment making a phone call.

A young woman is at home in her apartment making a phone call.

Reach Out to Your Lenders If You’ve Fallen Behind

Your payment history is one of the biggest factors affecting your credit score, and there are a number of strategies to help you stay on top of payments. But if your score has taken a hit because you have fallen behind on payments, reach out to your lenders to find out what your options are, House said. For example, student loan providers typically have programs to make payments more affordable and bring your account back to good standing, she said.

It’s important not to wait until you’re so far behind on payments that your debt is turned over to a collection agency. Let your creditors know about your circumstances as soon as you have trouble making payments. And show your willingness to work with the creditor to get your account in good standing.

“Be very open about your situation,” McClary said.

Top view on a student with bunch of overdue bills.

Top view on a student with bunch of overdue bills.

Don’t Avoid Debt Collectors

When you have debt in collections, it can have a big impact on your credit report and score. “Just a single missed payment can cause a 100- to 300-point drop in score,” McClary said. “If you have several missed payments, (the debt) goes to a collection agency. At that point, you’re dealing with twisted metal and burnt rubble. You’re not dealing with a situation that can be fixed with a Band-Aid.”

The worst thing you can do in that situation, though, is avoid debt collectors. If you do, they’re likely to assume the worst, said McClary, who was a debt collector.

“They might be less likely to be cooperative if they think you’ve been avoiding them,” he said. “It’s never good to play hide-and-seek with a debt collector. The further along you let things go, the fewer solutions there are.”

Respond to calls or letters immediately to explore your payment options, as debt collectors are more willing to be flexible if you respond quickly. Then you can get on the path to repairing your credit.

Read More: How Many Credit Cards Should You Have?

Happy black bank manager with face mask using touchpad while talking to her clients on a meeting in the office.

Happy black bank manager with face mask using touchpad while talking to her clients on a meeting in the office.

Get Help From a Nonprofit Credit Counselor

You might need the help of a professional to fix your credit. Fortunately, you can get free or low-cost help from a National Foundation for Credit Counseling-certified counselor, which you can find on the NFCC’s website.

A nonprofit credit counselor will walk you through your budget and help you figure out your options to tackle debt and improve your credit, McClary said. Counselors also work with creditors to help get interest and fees reduced on your debt. They can even help if you have debt in collections.

“There’s a lot that can be accomplished by sitting down and talking to a nonprofit credit counselor,” he said.

For example, McClary said he’s seen people who’ve paid off $10,000 or more in debt in four years or less with the help of credit counselors. On their own, it would’ve taken much longer, he said.

Couple going through financial problems.

Couple going through financial problems.

Avoid Debt Repair Options That Promise Quick Results

No matter how dire your situation might seem, you shouldn’t rush to accept an option that promises quick results.

“To think you can call up somebody, fill out a form and the next day your credit will be back to normal… you’re setting yourself up for disappointment,” McClary said.

Debt settlement companies might offer to help you settle your debt for less than you owe. However, these programs often ask you to stop making payments to creditors and deposit money into an escrow account each month until there’s enough to pay the settlement amount, according to the Federal Trade Commission. This tactic is more likely to hurt than help your credit, because your bills aren’t being paid and late fees are accruing.

Other options, such as payday loans, aren’t any better. “Going into debt to get out of debt is not a good idea,” McClary said. “If you can’t afford to repay the debt you have in front of you, what makes you think you can afford to repay the debt you’re taking on?”

Taking advantage of an offer that promises fast results will likely have a long-term negative effect on your credit. And filing for bankruptcy to deal with your debt will have a long-lasting impact on your credit. A bankruptcy will remain on your credit report for seven to 10 years, depending on the type you declare.

“The reality is it takes time to restore your credit,” McClary said.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Expert Tips To Fix Your Credit on a Limited Income

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Bad Credit

Early Termination of a Car Lease

Published

on

If you’re leasing a vehicle in order to save money, but are thinking of terminating your lease contract early, you may want to think twice. Leases aren’t always as easy or as affordable to get out of as auto loans.

Can You Terminate Your Car Lease Early?

In most cases, you can get out of an auto lease early, but you may not be able to do it cheaply.

Leasing typically comes with fees both at the beginning and end of your term. However, if you need to get out of your lease early, there may be early termination fees (ETF), making the cost more than you bargained for.

Additionally, lessors often require you to pay all your remaining lease payments in one lump sum before releasing the contract early. Costs involved with getting out of your car lease early may also include:Early Termination of an Auto Lease

  • Excess mileage charges
  • Wear and tear fees
  • Any taxes not yet collected
  • Any negative equity
  • Storage and transport fees
  • Pay the cost of sale preparation

Check your lease contract to see if your lessor has any charges for terminating your lease early, or if there are stipulations that prevent you from getting out of the contract before a certain time. Even if there are extra fees imposed on you for returning your leased vehicle early, it might be easier to terminate a lease nowadays than it’s been in the past.

Since the pandemic, many dealerships and lenders have pushed into the digital realm to get business done. This includes video conferences to meet with dealers that typically needed to be done in person in the past. Of course, your vehicle still needs to be turned into a franchised dealership to be inspected and processed before a leasing company allows you to terminate your lease contract early.

Is it Worth it to Terminate Your Lease?

The first step is to look at your leasing contract and see if you even can get out of your lease early, and how much it’s going to cost you in ETFs. Then, you need to gather the following information:

  • Your monthly lease payment amount
  • How many payments you have left on your contract
  • The residual value of the vehicle

To figure out a good ballpark figure for getting out of your leased vehicle early, add together the cost of your remaining lease payments and any ETFs. To see if it’s worth it, compare this figure with the buyout price at the end of your lease, and find out what the current market value of the car is by checking sites like Kelley Blue Book and NADAguides.

Depending on how close you are to the end of your lease term, if the buyout price on the vehicle is significantly lower than the early termination price, it may be a good idea to wait it out. Then, once you buy out your lease, you can trade in the car for something else.

If you decide not to wait, how you handle getting out of your leased vehicle early could depend on the difference between the current market value of the car and the residual value of the vehicle as predetermined in your leasing contract. If the car has more value than the lessor predicted, you may be able to sell it for enough to pay your way out of your lease early.

Three Options for Terminating Your Lease Early

If you’re looking to get out of your lease early, for whatever reason, you typically have three options:

  1. Sell your leased car to a dealer – Selling your leased car to a dealer is similar to doing a trade-in, except they pay off your lease contract, including the early termination fees. It’s typically a pretty easy process, especially since used vehicles are in high demand since the pandemic. You may be able to get a little more for a car that’s coming off a lease since the turnaround time on a sale is likely to be shorter, depending on demand. If this is the case, you may even be able to walk away with some cash in hand depending on if the dealer’s willing to pay more than the lessors estimated residual value on the vehicle.
  2. Have someone else take over your lease – Lease assumption isn’t always something you can do, but in many cases, you can transfer your lease to someone else, as long as they meet all the lessor qualifications and there’s equity in the vehicle.
  3. Lease buyout – With the demand for used vehicles at affordable prices up right now, you may be able to buy out your lease then sell the car privately as long as you get enough money to make it worth your while. If you can’t come close to selling it yourself for the amount you need to pay off your lease, including ETFs, it may not be worth it to try and get out of the vehicle early. Most leasing companies allow for some form of early lease buyout, but again, it may cost you those extra fees.

If Leasing Isn’t for You

Now that you’ve figured out whether it’s worth it or not to get out of your lease early, it’s time to decide what to do next when it comes to getting a vehicle.

If you didn’t mind leasing but the car just wasn’t for you, you likely have the option to swap into another lease on a different vehicle with the same company. Many lessors contact lessees toward the end of their contracts to see if they’d be willing to get into another car lease early.

However, leasing isn’t for everyone. If you found that the restrictions that come with it such as the mileage limitations, or cost of maintenance and repairs are too much for you to handle, it may be time to consider an auto loan for your next go-round. If this is the case, Auto Credit Express wants to get you started on the path toward your next vehicle.

We’ve gathered a nationwide network of special finance dealerships that are signed up with lenders to help people with credit challenges. Whether you’re just not sure where to start or you need a little help due to bad credit, start here. By filling out our fast, free, no-obligation auto loan request form, you’re taking the first step toward finding your next car loan without all the hassle of searching. Get started right now!

(function(d, s, id){ var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) {return;} js = d.createElement(s); js.id = id; js.src = "http://connect.facebook.net/en_US/sdk/debug.js"; fjs.parentNode.insertBefore(js, fjs); }(document, 'script', 'facebook-jssdk'));

Source link

Continue Reading

Bad Credit

GSB focuses on social responsibility

Published

on

State-owned Government Savings Bank (GSB) has focused on providing loans to people without a record in the National Credit Bureau system or with bad credit over the last year to help those impacted by the pandemic deal with unprecedented economic hardship.

GSB president and chief executive Vitai Ratanakorn said the bank has extended loans to people with no credit history who have never borrowed from commercial banks or non-bank institutions.

He said the bank had already provided 1.5 million loans to members of this group of people.

The bank has also provided loans to 200,000 people with bad credit records.

Mr Vitai said the lending was aimed at drawing those outside the credit bureau system into the system and enabled them to get access to the loans, which was one of the main roles of state-run banks. This lending has been supported by the government.

He said this lending was not aimed at seeking profit as GSB charged a low monthly interest rate of 0.1-0.3%. For example, if the bank provided a 10,000 baht loan to a person under this scheme, it would only gain interest income of around 120 baht per year.

In addition to its objective of becoming the country’s genuine social bank, GSB’s other goal this year is to prevent loans from becoming bad debts, he said. The bank will rush to help customers in danger of accumulating bad debt to restructure before it reaches that stage.

Mr Vitai said GSB will not focus on growing its loan portfolio during the first six months of the year, but on serving the state’s policy of helping people and business operators cope with the impacts from Covid-19. Grassroots people and small and medium-sized enterprises are suffering the most from the pandemic, he said.

Source link

Continue Reading

Bad Credit

How to Start Over When You’ve Lost Everything

Published

on

Upset women laying on the wood floor of her living room and petting her dog.

Image source: Getty Images

When you’re down to nothing, you have everything to gain.

People start over for many reasons, including job loss, divorce, illness, and business failure. Whatever the reason, if you’re starting anew, here are some steps to take in rebuilding.

Acknowledge the twist

Remember that you’re not starting from scratch. The fact that you’ve lost assets means that you had assets to lose. Whether that’s a retirement account, home, or business doesn’t matter. You know what it’s like to work for — and achieve — something. You did it once; you can do it again.

Establish credit in your name

If you don’t have much credit in your name, establish your own healthy credit file by taking out small amounts of credit and paying them off like clockwork each month. If your credit score has taken a hit, apply for a credit card for people with bad credit, use it to make small purchases, and pay it off each month before the bill comes due. Or you might ask someone you’re close to to add you as a user on their credit card. Your credit score gets a boost each time they make a payment, even if you never touch the card yourself.

Invest right away

The sooner you begin, the faster you can recoup losses. Maybe you can’t invest as much as you once did. That’s okay. Something is better than nothing, and you can add to your investment pot over time. The more time compound interest works its magic, the better. Every dollar helps, whether you plan to retire in 10 years or 30.

If you’re employed by a company that matches a percentage of 401(k) contributions, do whatever you can to contribute at least that much. The matching funds are basically free money.

Let’s say you earn $60,000 annually, plan to work 15 more years, and your employer matches up to 5% of your contributions. Here’s how much you’ll have put away with just your 5% on its own:

Annual Income

Percent Contributed

Amount Contributed

Average Annual Rate of Return

Time Until Retirement

Value At Retirement

$60,000

5%

$250/month, before taxes

7%

15 years

$75,387

Since your employer also matches that 5% of your income, you’ll have $150,774 instead.

If you were to raise your pre-tax contributions to 10%, here’s how it would look instead:

Annual Income

Percent Contributed

Amount Contributed

Average Annual Rate of Return

Time Until Retirement

Value At Retirement

$60,000

10%

$500/month, before taxes

7%

15 years

$150,774

Including the additional 5% contributed by your employer, you would have $226,161 at 15 years. It’s not a fortune, but could be very helpful. By the way, if you don’t touch it for 20 years, that nest egg would be worth nearly $369,000. If you don’t plan to retire for 30 years, it will be worth more than $850,000.

If you’re not with a company that matches contributions, find a brokerage firm that supplies the level of education and direction you’re looking for and get started.

Get professional help

After financial trauma of any sort, it’s tempting to invest aggressively. While in some circumstances it could be an effective way to make up for losses, it may not be the best move if you’re closing in on retirement. Consider working with a financial advisor, even if it’s on an hourly basis and you pay only for their time helping you come up with a smart investment strategy.

Postpone Social Security

One thing my husband and I (and many of our friends) have done is raise the age at which we expect to retire. We don’t see it as a sad thing. I never want to stop working, and now that my husband is in a job that tickles him, he’s not in a hurry either. The minimum age to retire is 62, but if you can wait until you’re 70, you max out your monthly Social Security payments.

Find support

Millions of people have made money, lost money, and started over. Chances are you already know a few people who’ve redesigned their lives from the bottom up. Talk to them. Ask them what they learned from the experience. If they had it to do over again, is there anything they would change?

People who experience hardship often have the best stories to tell and are often an excellent source of inspiration. It may not be easy now, but with luck, you can look back one day and say, “Hey, I did okay — despite the unexpected setbacks.”

Top credit card wipes out interest until late 2022

If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest for a whopping 18 months! That’s one reason our experts rate this card as a top pick to help get control of your debt. It’ll allow you to pay 0% interest on both balance transfers and new purchases until late 2022, and you’ll pay no annual fee. Read The Ascent’s full review for free and apply in just 2 minutes.

Source link

Continue Reading

Trending