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If Your Child is an Authorized User on Your Credit Card, Do They Automatically Start Out with an 800 Credit Score?

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“If you have a credit card and a kid, add your kid on as an authorized user and pay the bill on time. By the time that kid hits 18, boom 800+ credit score for them to succeed in this world.”

Reporting

On February 18 2020, the Facebook page “Real Badass Moms” shared a screenshot of the following tweet, which advised people “with a credit card and a kid” to add their child as an authorized user on that card — an act that would purportedly grant the child a credit score of 800 when they turned 18 (provided that payments were timely):

It read in full:

If you have a credit card and a kid. Add your kid on as an authorized user and pay the bill on time. By the time that kid hits 18. Boom 800+ credit score for them to succeed in this world. Schools ain’t teaching this. It’s up to us.

The post on “Real Badass Moms” was shared more than 75,000 times in just over a week; @mama_thickmadam’s tweet was liked nearly 200,000 times and shared nearly 50,000 times.

Clearly, readers liked what sounded like a good idea on paper, particularly parents of children entering into a difficult financial climate in 2020. But some of the top response tweets disputed the tweet’s advice. Some users posited that should the parent themselves encounter financial difficulties (many of which, such as car accidents or medical expenses) are unexpected, the child might be worse off in general or turn 18 with a “tanked” credit score:

“Imagine something terrible happens and your child is 18 with a pre-tanked credit score because their parents thought they’d help. Be rich or dont do this. Schools do teach stuff like this, your school just didn’t. Mandatory personal finance class in my high school in nowhere[.]”

“And also don’t have any expensive emergencies, don’t become disabled and unable to work, etc etc. People get bad credit lots of ways, unforeseeable ways. I can see maybe putting your kid on your credit card for a few months before they turn 18 but that’s enough.”

Others Twitter users claimed they were either beneficiaries of the advice or familiar with it, but that with no credit history otherwise, a 750 score alone was unhelpful:

“It doesn’t help as well as you think. I had 780 coming out of college and was denied for credit cards because of “no credit history”. It’s a high score but it’s basically a fake score according to credit agencies.”

“It’s a good place to start but the score alone isn’t enough to have good credit. I’ve worked in a financial institution for some time and have seen plenty of people with authorized user trades on the credit file with a good score get declined. It doesn’t show experience at all.”

“It can help. But as an underwriter I wouldn’t lend an 18 year old any funds even if the credit score was 800. Bc there is no true payment history. Got to have more than a good score. But yes. Parents need to teach these things early ❤️❤️”

If that claim was accurate, the ratio of risk (that a parent’s score could drop through no fault of their own, affecting the child) seemed possibly higher than the reward (a child starting adult life with a 780 or 800 credit score).  Others said that they did add a child as an authorized user (or were added by parents), and consequently obtained or transferred a high credit score:

“this is how my credit was built and i didn’t know it until i checked it one day for no reason and i had a 750 lol i don’t even use my credit, but it’s nice knowing it’s there”

“my mommy did this for me and i’m not finna brag but i have an amex, venture card, perf credit score (u still gotta pull ur own weight tho bc even if u have an 800 u might not get approved for stuff bc of ur age), and hella flyer miles to go anywhere”

Finally, at least one commenter claimed that being added as an authorized user on another person’s card was a factor in boosting their score from 550 to 796 in under a year:

I fucked up my own credit long ago. Jus fixed all my negative remarks about a year ago. Had my OG add me on to her card. Went from a 550 fico to a 796 fico in about 8 months.

If comments on the tweet were to be believed, the advice was of mixed veracity. Some reported obtaining high scores after parents added them as authorized users, but others said those scores were not as effective as scores obtained by building credit personally — the latter echoed by people claiming to work with lending institutions. And though the tweet indicated the advice worked if the card was paid off “on time,” others cautioned that many people with high credit scores could encounter financial trouble, which would adversely affect authorized users.

In discourse about the advice, “FICO scores” came up quite a bit. FICO (formerly Fair and Issac Co.) is a data analysis firm known for providing credit scores. FICO scores are used by three major credit bureaus (also known as credit reporting agencies, or CRAs) — Equifax, Experian, and TransUnion. According to FICO, their scoring is used by “top lending institutions” in the United States, and it “rank-orders consumers by how likely they are to pay their credit obligations as agreed.”

FICO scores were not always a major factor in loans and extensions of credit. What we currently call a FICO score came into play about three decades ago:

[Bill Fair and Earl Isaac, two statisticians] made a number of correlations between which behaviors made a person a good credit risk and which made them a bad credit risk. And for the most part, their predictions were accurate. But it wasn’t really until the 1970s that credit scores became as important in lending as they are now. The modern iteration of the FICO score, based on credit files from the three credit bureaus — Equifax, Experian and TransUnion — was introduced in 1989.

Before credit scores, people still had credit reports. But these reports weren’t distilled down into three-digit numbers. “Credit scores took a lot of randomness out of lending,” says Ken Lin, CEO of CreditKarma. “Scores were developed in the ’50s, but became much more prevalent in the ’70s, ’80s and ’90s.”

In the thread, users claimed having high scores and no credit history was not very helpful; Lin estimates that a person’s credit score is “only 20% to 40% of the final decision, with the rest being hidden deeper inside the overall credit report and its extenuating circumstances.”

A lot of credit card and finance blogs offered advice posts on adding children as authorized users. Unfortunately, it nearly always mentioned the risks to parents, neglecting to mention the risk this practice might pose to their children as well. Parents turning to those resources received a partial picture, neglecting some of the major pitfalls of that decision.

Many people replying expressed general, profound frustration about the effects of FICO scores and credit reporting agencies — particularly when something like illness or job loss lay outside their control while heavily driving down their supposed creditworthiness. After one of those three agencies — Equifax — had a massive data breach in 2017, The Verge published an editorial about these generalized grievances and a “broken” system:

Even worse, all this information [on your credit reports] is generally being shared without your consent. The three big credit bureaus — Equifax, TransUnion, and Experian — see their customers as the businesses checking people out, not the people themselves. They’re worried about keeping banks and car dealers happy, but the targets themselves are an afterthought. As a result, even basic inaccuracies can persist for years, bouncing between the three major bureaus. (Convincing credit bureaus that you’re not dead, for instance, is much harder than you think.) There have been a few regulations aimed at fixing that — most notably the Fair Credit Reporting Act — but it’s still an extremely clunky system, and the average consumer has little awareness or control over their own profile.

Yet another element likely driving interest in the Twitter thread about kids as authorized users and credit scores of 800 was that by their nature, FICO and the three credit reporting agencies (Equifax, Experian, and TransUnion) remain highly secretive about their calculations of creditworthiness. Credit card blogger The Points Guy explained:

Credit scores consist of a three-digit number, usually between 300 and 850, designed to represent the likelihood that you’ll repay a loan on time. They’re also a little mysterious and that’s not an accident. The major credit-scoring companies, FICO and VantageScore, keep their formulas secret, so only a handful of people know the exact recipe that’s used to turn your credit history into a credit score.

In fact, it was only in fairly recent years that people had any access whatsoever to their own FICO scores. A 2001 article about FICO scores becoming accessible to borrowers reported that people were finally getting to see their scores — because FICO was selling their own information back to them:

When it comes to getting a mortgage, credit card or insurance policy, most consumers have no clue about the most important number affecting their application: their FICO scores, behind-the-scenes calculations drawn from credit reports.

Designed to predict future consumer behavior, FICO scores regularly make the difference between approval and rejection. And even after a loan or insurance policy is issued, FICO scores sway prices and credit lines, with the lowest rates going to consumers with the highest scores … After 35 years, Fair Isaac is finally emerging from the shadows, trying to leverage its influence on household finances to become more of a household name through an online service that sells people their FICO scores at $12.95 per peek.

On Twitter and in the excerpted articles, it was demonstrated that FICO and the three credit reporting agencies typically did little to enable people to manage their own credit scores — except in cases where they hoped to extract money from them for access to their own personal information.

That also ought to make “advice” from said companies slightly suspect. Lenders are FICO, Equifax, Experian, and TransUnion’s primary customer base. Borrowers are a middling secondary market, and consumer financial woes remained an area of massive profit for those agencies. Encouraging risky behavior or unfettered borrowing did, after all, serve to boost the bottom line of all involved.

Bearing that in mind, credit rating agencies did offer tips on adding children as authorized users to build their credit scores. TransUnion’s blog had an Q&A entry about that very topic:

Q: One tip I’ve heard is that a parent can put a child on their credit card as an authorized user and that can sometimes (with some cards) contribute to a child’s credit history. Is that true? What kind of cards should we be looking for?

A: Adding your child as an authorized user is one way to help them begin building a credit score if you yourself have a good credit. With some credit cards, the entire account history can show up on the authorized user’s credit report, so you’ll want to select a card where you have a good credit history. While there are many different credit scoring models available, the most commonly used scores — FICO 8 and VantageScore 3.0 — factor in authorized user accounts when calculating a score. Determining if an authorized user account is right for you is a personal decision — as the card holder you are responsible for any charges on the card, so be sure that you set some guidelines in advance.

TransUnion cautiously advised the practice “if you yourself have good credit,” stopping short of explaining what they meant by “good credit.” (Is that a 650 credit score? 600? 750?) Their answer also vaguely noted that “some” credit cards allow for “the entire account history” to appear on an authorized user’s own individual credit report, suggesting that activity that took place even before the user was added could be factored into their credit profile. That alone made the advice seem risky for anyone who had ever at any point made a late payment on any card.

Equifax also had a blog, a Q&A about children as authorized users, and advice on its effects on a child’s future credit score:

Even though an authorized user isn’t responsible for the financial obligations on the account, they can be impacted by whether or not the account is paid on time. Since they are considered account holders, any activity on the account that is reported by the creditor to any of the major credit bureaus will appear on the authorized user’s credit reports. If the primary account holder pays as agreed, it can help an authorized user establish or build a positive credit history. If they don’t, however, it can have a negative impact. Depending on the credit scoring model, credit scores may also be impacted.

[…]

Being an authorized user can be one way to establish responsible credit habits. Some parents will add their children as authorized users to help them establish and build a credit history. Some couples will also add each other as authorized users on an account.

But “you are going to inherit the credit of that cardholder” – for better or worse, said Jennifer Cox, Equifax chief client officer, who has worked in the credit card industry for decades. If you are considering becoming an authorized user on someone else’s account, it’s a good idea to discuss their credit situation with them.

As Equifax described here, a level of risk accompanied any reward, and CRAs seemed to consistently frame those risk as related to “responsibility” or “reliability.” But as we pointed out, damage to credit isn’t always related to responsibility (as we also noted on our page about medical bankruptcy rates). By linking chosen traits or behaviors (like responsibility) to the advice, parents were tacitly advised that their best intentions were good enough to protect their child — but unforeseen circumstances never appeared to be mentioned by credit bureaus encouraging the behavior.

Experian too had a Q&A blog post about adding children as authorized users to help the child eventually build credit. It also used words like “responsible” and “reliable,” advising putative authorized users to “ask the primary account holder” about factors like late payments and even suggesting that those same authorized users ask to see a credit report:

Just as joining a responsible credit user’s account can help you, linking yourself with a less reliable cardholder can hurt you. If the cardholder misses a payment or maxes out their card, your credit could be negatively affected. Some credit reporting agencies, including Experian, do not include negative payment history in an authorized user’s credit report. But others may.

Before becoming an authorized user, ask the primary account holder about past late payments, how long they’ve had the account, and how often they use more than 30% of their credit limit. Experts say those with good credit scores use less than that on a regular basis (and those with the best scores stay around 10% or less). To be extra sure you’re making the right call, consider asking if the account holder will let you see their credit report.

Discover’s Credit Resource Center reiterated the same advice in a Q&A format; Discover does, of course, profit more from borrowers using their subprime products, thanks to higher interest rates:

By Becoming an Authorized User, am I Inheriting the Primary Account Holder’s Credit Habits?
Before you consider becoming an authorized user, the first, and most important, thing to look for is whether the primary account holder pays their bills on time. If they do not make timely payments, that gets documented on the credit reports of authorized users. And credit card issuers report late payments to credit bureaus.

So it doesn’t take much to begin to negatively impact your credit score. What’s more, late payments, as bad as they are, are not the only thing that can hurt you. If the account in question has a high utilization rate, that too can weigh heavily on your credit score.

So before signing on to be an authorized user, it’s best to do your own due diligence by evaluating the credit habits of the primary account holder. Otherwise, instead of working to build a positive credit history, you may find yourself achieving the opposite.

Caveats about debt-to-income ratio accompanied tips about not paying bills late when lenders and CRAs gave advice. But as of 2018, the average American household held $38,000 in personal debt, against a median household income of $63,000 the same year. On top of that, only 41 percent of Americans had the ability to pull together $1,000 in case of an emergency as of January 2020, leaving 59 percent lacking sufficient savings to cover that proposed unexpected expense.

In the larger scheme of things, credit reporting agencies and lenders offered a few broad caveats about transference of negative credit history as well as positive, sometimes advising prospective authorized users to credit check their parents. Overwhelmingly, that advice was couched in such a way users would identify themselves as a responsible borrower, and see less risk than they perhaps should in adding a child as an authorized user.

Now let’s go back to the crux of the advice –in which the child wasn’t consulted, and likely couldn’t assess the risk anyway:

Add your kid on as an authorized user and pay the bill on time. By the time that kid hits 18. Boom 800+ credit score for them to succeed in this world.

Although Equifax, Experian, and TransUnion made it look like a safe bet if you considered yourself responsible (as most people do), no one ever mentioned negative credit history acquired due to a car accident, an illness, job loss, or other catastrophe. One of the advice posts mentioned the authorized user in question doing “due diligence” before piggybacking on a card, but the post referenced children under the age of 18 added unwittingly to parents’ credit cards.

As the first commenter observed above, the advice, like nearly all financial advice, works best for those who are already rich. Credit pitfalls were typically related as much to circumstance as responsibility, and only the wealthy maintained the resources to apply the advice to optimal effect. The rest of the population is typically just one unexpected development away from a score drop.

The massively viral piece of well-intentioned advice posits that adding a child to piggyback on a credit card would grant that same child a FICO score of 800 once they were old enough to apply for a credit line of their own (provided the parent paid their bills on time.) Of the little information given out by FICO and CRAs, an absence of credit history would make that score less useful than it might be for a borrower with their own credit score. But more importantly, many timely bill payers could follow the advice before falling on hard times — even a few months of delayed payments could impart a negative rather than positive history to the child, which would help them not at all.



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Bad Credit

What is a Credit Builder Loan and Where Do I Get One?

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Your credit score plays an important role in your financial life. If you have good credit you can qualify for loans and borrow money at lower interest rates. If you don’t have a credit score or have poor credit, it can be hard to get loans and you’ll be forced to pay higher rates when you do qualify.

Building credit can be like a chicken and egg problem. If you have no credit or bad credit, you’ll have trouble getting a loan. At the same time, you need to get a loan so you have an opportunity to build credit.

 

What Is a Credit Builder Loan?

A credit builder loan is a special type of loan designed to help people who have poor or no credit improve their credit score.

In many ways, credit builder loans are less like loans and more like forced savings plans. When you get a credit builder loan, the lender places the money in a bank account that you can’t access. You then start receiving a monthly bill for the loan. As you make those payments, the lender reports that information to the credit bureaus, helping you build up a payment history. This improves your credit score.

Once you finish the payment plan, the lender will release the bank account to you and stop sending bills.

In the end, you’ll wind up with slightly less money than you paid overall, due to fees and interest charges. For example, let’s say you get a credit builder loan for $1,000, the lender may make you make a monthly payment of $90 each month for a year. After the year ends, you’ll get the $1,000 from the lender, but may pay $1,080 overall.

Why Get a Credit Builder Loan?

The main reason to get a credit builder loan is right in the name: They help you build your credit. If you don’t have any credit history or if you’ve damaged your credit by missing payments, it’s much easier to qualify for a credit builder loan than a traditional loan from a lender.

The companies offering credit builder loans take on almost no risk because they don’t give you the money until you’ve finished paying the loan, so they’re willing to approve people who have severely damaged credit.

Credit builder loans will help you build your credit history if you make your monthly payments, but you do have to pay fees and interest to do so. There are other ways to build credit that don’t require paying any money. For example, if you get a fee-free credit card and pay your balance in full each month, you’ll build credit without paying any interest or fees.

This makes credit builder loans best for people who have tried and failed to qualify for other loans and credit cards.

There is also some value in the forced savings provided by credit builder loans, but the interest and fees eat away at that savings. If saving is your goal, it’s best to use a different strategy to help you save, but if you want to save and build credit at the same time, a credit builder loan might be worth using.

Where to Find Credit Builder Loans?

There are many companies that offer credit builder loans. Each lender offers different loan terms, fees, and interest rates.

One of the top credit builder loan providers is Self. The company offers credit builder loans with payment plans as low as $25 per month, making it easy for almost anyone to afford a credit builder loan.

With Self, you can also qualify for a Visa credit card after you’ve made at least 3 payments on your credit builder loan and made $100 of progress toward paying off the loan. You can set your own credit limit, up toward the total amount of progress you’ve made on the loan.

The card doesn’t have any additional upfront costs and can help you gain experience with using a credit card. It can also help you build your credit by giving you another account to make payments on, providing you with more opportunities to build a good payment history.

Visit Self or read the full Self Review

What to Look for?

When you’re looking for credit builder loans, there are a few factors to consider.

The first thing to think about is the monthly payment. The point of a credit builder loan is to show the credit bureaus that you can make regular payments on your debts, which will help build your credit score. If a lender’s minimum payment is more than you can afford each month, you won’t be able to build your credit with that lender’s credit builder loan.

It’s also important to think about the cost of the loan. Credit builder loans often come with stiff fees and you also have to pay interest on the money you’ve borrowed, even if you don’t get access to it until you pay the loan off.

The fewer fees and the less interest you have to pay, the better. You should look very carefully at each lender’s fee structure to choose the best deal.

Finally, take some time to see how easy it is to qualify. While credit builder loans are targeted at people with bad credit, some lenders will still check your credit history and might deny your application.

If you have very bad credit, you might want to look for a lender that advertises credit builder loans with no credit check.

Alternatives to a Credit Builder Loan

Credit builder loans can be a good way to build credit for some people, but they come with interest charges and fees. There are other ways you can build credit worth considering. Some of them won’t cost any money, which may make them a better choice than a credit builder loan.

Secured Credit Cards

A secured credit card is a special type of credit card that is much easier to qualify for than a typical card.

With a secured card, you have to provide a security deposit when you open the account. The credit limit of your card will usually be equal to the deposit you provide. For example, if you want a $200 credit limit, you’ll have to give the card issuer $200 as collateral.

Because you give the lender cash to secure the card, it’s much easier to qualify for a secured credit card. The lender assumes almost no risk. Once you get the card, it works like any other credit card. You can use it to spend up to your credit limit and you’ll get a bill each month. If you pay the bill on time, you can build credit.

Many secured cards charge high interest rates and have hefty fees, but there are some fee-free options available. One great secured card is the Discover it Secured Credit Card, which has no annual fee and offers cash back rewards.

Become an Authorized User

Most credit card issuers let cardholders add other people as authorized users on their accounts. Authorized users get their own cards and can use them to spend money just like the main cardholder.

Some issuers will report account information to the credit reports of both the main cardholder and any authorized users. If you know someone that is willing to make you an authorized user on their credit card account, this may help you build your credit so you can qualify for a card of your own.

Not every issuer will report information to authorized users’ credit reports. It’s also worth keeping in mind that if you become an authorized user on a card and the cardholder stops making payments or racks up a huge balance, that will show up on your report as well, damaging your credit further. That can make this strategy risky.

Personal Loans with a Cosigner

Personal loans are highly flexible loans that you can use for almost any reason. If you need to borrow money, you can try to find someone who is willing to cosign on the loan. Having a cosigner can make it easier to qualify, even if you have poor credit, giving you a chance to build your credit score.

When someone cosigns on a loan, they’re promising to take responsibility for your debt if you stop making payments. Lenders will look at both your credit and your cosigner’s credit when you apply, so having a cosigner with strong credit can help you get the loan or reduce the interest rate of the loan.

Keep in mind that your cosigner is putting themselves at risk by cosigning on a loan. It’s even more important that you make your payments every month. If you don’t, your cosigner will have to pick up the slack.

Personal Loans without a Cosigner

Even if you have poor credit, you may be able to qualify for a personal loan designed for people that don’t have strong credit. Just keep in mind that you’ll have to pay higher fees and interest rates to compensate for your poor credit score.

If you’re looking for a personal loan and have poor credit, shopping around for the best deal becomes even more important. You can use a loan comparison site, like Fiona, to get quotes from multiple lenders so you can find the cheapest loan.

Related: Best Emergency Loans for Bad Credit

What Is the Difference Between a Credit-Builder Loan and a Personal Loan?

A personal loan is a type of loan that you can get for almost any reason, such as consolidating debts, starting a home improvement project, paying an unexpected bill, or even going on vacation. They’re offered by many lenders and banks.

A credit builder loan is less a loan and more a forced saving plan. When you get a credit builder loan, the lender doesn’t actually give you any money. Instead, it places the amount you’re borrowing in an account you can’t access. Once you finish paying the loan, the lender releases the money in that account to you.

Credit builder loans tend to be much easier to qualify for than personal loans because the lender doesn’t have to take on much risk. They’re mostly used by people who want to build or rebuild their credit score.

On the other hand, personal loans are less popular for building credit and more useful for providing funding when borrowers need cash to cover an expense.

Related: Best Prepaid Credit Cards That Build Credit

Pros and Cons of a Credit Builder Loan

Before applying for a credit builder loan, consider these pros and cons.

Pros

  • Easy to qualify for
  • Helps you build savings
  • Payments are usually small
  • Helps you build payment history

Cons

  • Not really a loan
  • Fees and interest rates can be high
  • There are cheaper alternatives to build credit

FAQs

These are some of the most frequently asked questions about credit builder loans.

Like most loans, it is possible to repay a credit builder loan ahead of schedule, but there are a few downsides to consider. One is that many lenders add an early repayment fee to their loans, so you’ll have to pay that fee if you want to get out of the credit builder loan. The other is that repaying the loan early somewhat defeats the purpose. Each monthly payment you make toward the loan helps you build your credit. If you pay the loan off early, you’ll make fewer monthly payments, which means less improvement in your credit.

Missing a payment on a credit builder loan is like missing a payment on any loan. You’ll likely owe a late fee and it will damage your credit. This is one of the reasons it’s important to make sure you can afford the monthly payment before signing up for a credit builder loan. If you can’t make your payments, the loan will wind up damaging your credit instead of helping it.

Final Thoughts

Credit builder loans can be a good way to build or rebuild your credit, but they’re not your only option. They often involve paying fees and interest, so you should search around for the best deal or look for cheaper (or free) alternatives, such as secured credit cards.



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How to lower your credit card interest rate and save money

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Why pay high interest on your credit cards when you can simply bargain a lower rate? These tips can help you save big money on your bill.

CHARLOTTE, N.C. — A lot of people have struggled to pay their bills during the COVID-19 pandemic and many have turned to credit cards so they can kick the can down the road. Now the time has come to pay it down and some of the bills are eye-popping. 

Did you know you can bargain that interest rate down and save quite a bit of money?

You could ask for a lower rate, but according to a new study, you can bargain down 10 percentage points. So, if your interest rate is 24%, it could mean paying 14% instead. That’s still high but it’s a lot better than 24% interest. 

These numbers are staggering and can be a bit overwhelming. Americans have an average credit card balance of $5,300, totaling $807 billion across 506 million credit card accounts. Why are these numbers important? Because they want to keep you spending, which means you have leverage to bargain.

“It is absolutely possible to negotiate your rate down. In fact, your chances of doing so are better than you think they are. Close to 80% surveyed said they did just that,” Matt Schultz, an industry expert with LendingTree, said. “You can save serious money, especially if your balance is bigger.”

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You have to try, and you have to keep trying, even if the lender says no. Take it higher to a manager and keep pushing. Drops of 10% are possible and that could save you hundreds, or maybe even thousands, of dollars. 

RELATED: VERIFY: Can your stimulus check be seized by banks or private debt collectors?

“So, a lot of people have bad credit, some are thankful to have it at all. Is it possible for them too? Yes, absolutely it’s possible,” Schultz said. “Credit card companies are willing to talk with you because they want to keep your business. It benefits them to lower your rate to keep their card in your wallet.”

Paying down debt is liberating. Less debt is more buying power but you must advocate for yourself. If you don’t, the card companies are just as happy to take your money at the higher rate. 


LendingTree offers these suggestions if you plan to ask for a lower rate: 

How to ask for a lower APR

Before you make the call, come armed with ammunition in the form of other offers you’ve seen at a site like LendingTree.com or that you may have received in your snail mail. Take that offer and use it to frame the conversation: 

“I’ve been a good customer of yours for a long time and I like my card. However, the APR is 25% and I’ve just been offered one with a 19% APR. Would you be able to match it?” 

As survey data shows, they’ll likely be willing to work with you, at least to some degree.

RELATED: ‘ I was very grateful’ | WCNC Charlotte breaks through red tape to help woman get money she was owed

How to ask for a waived annual fee

Before you make the call, think about what you will accept. If you ask for a fee to be waived altogether and they only offer to reduce it, is that good enough? What if they offer you extra rewards points or miles or make some other counteroffer instead of a reduced fee? And perhaps most important, what if they say no? 

As with many negotiations, you have more leverage if you’re willing to walk away, so that could be an option. However, you shouldn’t make that threat unless you’re willing to follow through with it, and you shouldn’t follow through with it unless you’ve thought about what that would mean for your credit.

How to ask for a waived late fee

Just pick up the phone and be polite. If you’re a long-time customer with good credit and this is your first offense, the odds are in your favor. In fact, some card issuers will even waive a first late fee as a matter of policy. If you’ve been late multiple times in the recent past, however, your chances probably aren’t as good. Even so, it never hurts to ask.

How to ask for a higher credit limit

Start with a number in mind based on your current limit. The average increase reported in our survey was about $1,500, but your situation will vary. If your current limit is $500, a $1,500 bump might be asking too much. However, if your current limit is $5,000, that request might be just fine. 

Think about why you’re asking for the increase — for some extra spending power or to help your credit score — and then decide what to ask for. Just remember that it’s always better to start a negotiation by asking for a little too much. That way, when you negotiate, you can give a little bit and still get what you want.


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Can A Moving Loan Help Your Relocation? Find Out Here – Forbes Advisor

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Editorial Note: Forbes may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations.

Whether you’re relocating to another city or state, moving can be expensive. You might need money to pay for a moving van or movers, new furniture or your security deposit. If you don’t have money on hand to cover those expenses, a moving loan can help you fill in the gap.

Before you take out a relocation loan, learn what they are and how to compare your options to understand if it’s a good choice for your situation.

What Is a Moving Loan?

A moving loan—also referred to as a relocation loan—is an unsecured personal loan you can use to help cover your moving expenses. Unsecured loans don’t require you to use a personal asset to secure the loan. Because the loan is unsecured, lenders base your eligibility on factors like your credit score, income and debt-to-income (DTI) ratio. Like with other types of personal loans, you’ll have to repay your loan through fixed monthly installments.

When Should You Get a Moving Loan?

Although the answer varies based on your financial circumstances, it may make sense to get a moving loan if you can secure a good interest rate and can afford to repay the loan as promised. However, if you believe it might be hard for you to repay the loan, then it’s probably a good idea to avoid taking one out. Falling behind on payments can damage your credit score, making it harder for you to qualify for future loans.

How to Get a Moving Loan

  1. Search for lenders: To find lenders that offer relocation loans, search for the best personal loans online. A good place to start might be a lender comparison website. While there, carefully review the terms, minimum credit score requirements, fees and annual percentage range (APR) range of each lender. In addition, you can check with your local bank or credit union to see if it offers personal loans for moving.
  2. Prequalify with multiple lenders: Once you narrow down your list of the best lenders, prequalify with each one of them (if available). This allows you to see what terms and APR you might receive if approved. Make sure the lender does a soft credit check to protect your credit score from any pitfalls.
  3. Determine the amount you need to borrow: Estimate your moving or relocation expenses to see how large of a loan you need to take out. Different lenders have different minimum loan amounts. Also, some states have rules about the minimum amount you can borrow, which may affect the size of your loan.
  4. Apply for your moving loan: After you select the lender that matches your needs, complete the application process. Prepare to provide the lender with personal information, such as your income, date of birth and Social Security number (SSN). Some lenders will require you to provide W2’s, pay stubs or bank statements to confirm your income.
  5. Wait for the lender to make a loan decision: After you apply, wait for the lender to review your application. Some lenders might approve you within seconds, while others may take longer. If a lender denies your loan, ask them for an explanation. Applying with a co-borrower or co-signer, improving your credit score, reviewing your credit report for errors or requesting a smaller amount may improve your chances of approval.
  6. Sign the loan agreement and receive funds: Once approved, the lender will send you a loan agreement to sign. After you sign the agreement, the lender will most likely deposit your funds directly into your account. The time of funding varies for different lenders—some lenders can issue the funds the same day while others may take a week or longer.
  7. Repay your loan: Finally, repay your loan as promised. Making late payments or defaulting on the loan can damage your credit score. Setting up autopay is one way to ensure you’ll never miss a payment.

Pros of Moving Loans

  • Quick access to funds: If your loan application is approved, some lenders may deposit your funds into your bank account the same day or within a week.
  • Flexible loan terms: Some lenders allow you to take out personal loans for moving with loan terms as short as 12 months and as long as 84 months. A long-term loan may have a lower minimum monthly payment, which might better suit your budget. However, the downside is that you’ll pay more in interest over the life of the loan.
  • Lower interest rates than credit cards: The average interest rates for personal loans are usually lower than those for credit cards. If you have a good credit score (at least 670) and a stable income, you may be able to secure a good interest rate—an interest rate that’s lower than the national average.
  • No collateral required: Since loans for moving typically require no collateral—an asset that secures the loan—you won’t have to worry about a lender taking your asset (at least without a court’s permission).

Cons of Moving Loans

  • Fees: Some lenders charge origination fees between 1% and 8%—these fees can be a huge drawback since the lender usually subtracts them from your loan amount. Other common personal loan fees include application fees, returned check fees, late payment fees and prepayment fees.
  • Potentially high interest rates: If you have less-than-stellar credit or minimal credit history, your lender may charge you high interest rates. Some lenders have APRs above 30%.
  • Missed payments can damage your credit score: If you miss a payment or default on the loan, it can damage your credit score. This will make it more difficult for you to qualify for future loans.

Moving Loan Alternatives

If you want to avoid the potential cons of a relocation loan, consider these alternative options to help cover your moving expenses or rent.

0% APR Credit Card

Borrowers with good to excellent credit scores (at least 670) can avoid paying interest and high fees with a 0% APR credit card. These cards come with interest-free promotion periods, which can last for up to 21 months. If you pay off your balance before the promotion period expires, you won’t have to worry about paying interest. However, providers will charge interest on unpaid balances once the introductory period ends.

Family Loan

Family loans are another way to avoid paying interest or to pay minimal interest when it comes to your relocation expenses. With this option, you can also avoid the formal loan application process. The loan agreement between you and the family member should spell out the terms and conditions of the loan. Repay the loan as promised to avoid causing damage to your relationship.

Payday Alternative Loan

If you can’t qualify for a relocation loan or have trouble finding moving loans for bad credit, consider using a payday alternative loan. Some federal credit unions offer these loans, which are designed to help you avoid the high-interest charges of payday loans. You can borrow up to $2,000; loan terms range from one to 12 months and the maximum interest rate is 28%. To use this option, you must be a member of a federal credit union or be eligible for membership.

Savings

Instead of using a personal loan for moving, it might be better to use your savings, if possible. If you know how much it will cost, then create an automatic savings plan to cover most or all of your relocation expenses.

Relocation Package

If you’re moving for a new job, ask your new employer if it will cover some of your relocation expenses. Some employers offer this to employees as an incentive to accept the job offer. Even if the employer doesn’t offer this, you can ask for a relocation bonus or try negotiating a higher salary.

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