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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.”

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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

Inside the Highly Profitable and Secretive World of Payday Lenders

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Illustration by Sarah Maxwell, Folio Art

When Bridget Davis got started in the family’s payday lending business in 1996, there was just one Check ’n Go store in Cincinnati. She says she did it all: customer service, banking duties, even painting walls.

The company had been established two years earlier by her husband, Jared Davis, and was growing rapidly. There were 100 Check ’n Go locations by 1997, when Jared and Bridget (née Byrne) married and traveled the country together looking for more locations to open storefront outlets. They launched another 400 stores in 1998, mostly in strip malls and abandoned gas stations in low-income minority neighborhoods where the payday lending target market abounds. Bridget drove the supply truck and helped select locations and design the store layouts.

But Jared soon fired his wife for committing what may be the ultimate sin in the payday lending business: She forgave a customer’s debt. “A young woman came to pay her $20 interest payment,” Bridget wrote in court documents last year during divorce proceedings from Jared. “I pulled her file, calculated that she had already paid $320 to date on a principle [sic] loan of $100. I told her she was paid in full. [Jared] fired me, stating, ‘We are here to make money, not help customers manage theirs. If you can’t do that, you can’t work here.’ ”

Photograph by Brittany Dexter

It’s a business philosophy that pays well, especially if you’re charging fees and interest rates of 400 percent that can more than triple the amount of the loan in just five months—the typical time most payday borrowers need to repay their debt, says the Pew Charitable Trusts, a nonprofit organization focused on public policy. Cincinnati-based Check ’n Go now operates more than 1,100 locations in 25 states as well as an internet lending service with 24/7 access from the comfort of your own home, according to its website. Since its founding, the company has conducted more than 50 million transactions.

What the website doesn’t say is that many, if not most, of those transactions were for small loans of $50 to $500 to working people trying to scrape by and pay their bills. In most states—including Ohio, until it reformed its payday lending laws in 2019—borrowers typically fork over more than one-third of their paycheck to meet the deadline for repayment, usually in two weeks. To help guarantee repayment, borrowers turn over access to their checking account or deposit a check with the lender. In states that don’t offer protection, customers go back again and again to borrow more money from the same payday lender, typically up to 10 times, driving themselves into a debt trap that can lead to bankruptcy.

Jared and Bridget Davis are embroiled in a nasty court battle related to his 2019 divorce filing in Hamilton County Domestic Relations Court. Thousands of pages of filings and 433 docket entries by April 26 offer the public a rare glimpse into the business operations of Check ’n Go, one of Cincinnati’s largest privately-owned companies, as well as personal lifestyles funded by payday lending.

The company cleared $77 million in profit in 2018, a figure that dipped the following year to $55 million, according to an audit by Deloitte. That drop in revenue may have something to do with the payday lending reform laws and interest rate caps passed recently in Ohio as well as a growing number of other states.


The day-to-day business transactions that provide such profit are a depressing window into how those who live on the edge of financial security are often stuck with few options for improving their situations. If a borrower doesn’t repay or refinance his or her original loan, a lender like Check ’n Go deposits the guarantee check and lets it bounce, causing the borrower to incur charges for the bounced check and eventually lose his or her checking account, says Nick DiNardo, an attorney for the Legal Aid Society of Greater Cincinnati. After two missed payments, payday lenders usually turn over the debt to a collection agency. If the collection agency fails to collect the full amount of the original loan as well as all fees and interest, it goes to court to garnish the borrower’s wages.

That devastating experience is all too familiar to Anthony Smith, a 60-year-old Wyoming resident who says he was laid off from several management positions over a 20-year period. He turned to payday lenders as his credit rating dropped and soon found himself caught in a debt trap that took him years to escape.

Two things happened in 2019, Smith says, that turned around his financial fortunes. First, he found a stable manufacturing job with the Formica Company locally, and then he took his mother’s advice and opened a credit union account. GE Credit Union not only gave him a reasonable loan to pay off his $2,500 debt but also issued him his first credit card in a decade. “I had been a member [of the credit union] for just two months, and I had a credit rating of 520. Can you imagine?” he says. Smith says he is now debt-free for the first time in 10 years.

Consumer advocates say Check ’n Go is one of the biggest payday lending operations in the nation. But knowing its exact ranking is difficult because most payday lending companies, including Check ’n Go and its parent company CNG Holdings, are privately held and reluctant to disclose their finances.

Brothers Jared and David Davis own the majority of the company’s privately held stock. David bought into the company in 1995, but CNG got its game-changing infusion of capital from the brothers’ father, Allen Davis, who retired as CEO of then-Provident Bank in 1998. Allen sold off $37 million in stock options and essentially became CNG’s bank and consultant.

By 2005, however, the sons were part of a public court battle against their father. Allen accused Jared and David of treating his millions in CNG stock as compensation instead of a transfer from his ex-wife (and the brothers’ mother), sticking him with a $13 million tax bill. In turn, the brothers accused Allen of putting his mistress and his yacht captain on the company payroll, taking $1.2 million in fees without board approval, and leading the company into ventures that lost Check ’n Go a lot of money. Several years of legal fighting later, the IRS was still demanding its $13 million. CNG officials did not respond to requests for comment for this story.

Jared and David split $22 million in profit from CNG in 2018 and, according to the Deloitte audit, CNG’s balance sheet showed another $42 million that could be split between the two brothers in 2019. Jared, however, elected not to receive his $21 million distribution “in order to create this artificial financial crisis and shelter millions of dollars from an equitable split between us,” according to Bridget’s divorce filing.

Worse, she claims, Jared said they would be responsible for paying taxes out of their personal accounts rather than from CNG’s company earnings, making her personally responsible for half of the $5.5 million in taxes for 2019. She believes it wasn’t happenstance that $5.5 million was wired to Jared’s private bank account in December of that same year. Bridget has refused to sign the joint tax return, and Jared filed a complaint with the court saying a late tax filing would cost them $1 million in penalties and missed tax opportunities.

“For the duration of our marriage and to the present, Jared has full and complete control of all money paid to us from various investments we have made in addition to our main source of income, CNG,” Bridget wrote in her motion. She suspects that Jared, without her knowledge or consent, plowed the money for their taxes and from other sources of income into Black Diamond Group, the fund that invests in the Agave & Rye restaurant chain. Beyond the original restaurant opened in Covington in 2018, “they have opened four other locations in one year,” she wrote, including Louisville and Lexington. (The ninth location opened in Hamilton this spring.) Agave & Rye’s website touts its Mexican fare as “a chef-inspired take on the standard taco, elevating this simple food into something epic!”

In his response, Jared wrote, “We have very limited regular sources of income.” He says he isn’t receiving any additional distributions from CNG, the couple’s primary source of income, “and this is not within my control. The company has declared that we would not make any further distributions in 2020 given economic circumstances. This decision is based on a formula and is not discretionary.” Agave & Rye helped produce $645,000 in income for Black Diamond in 2020 but has paid out $890,000 in loans, he says. Through August 31, 2020, he wrote, the couple’s “expenses have exceeded income from all sources.”


The divorce case filings start slinging mud when the couple accuses each other of breaking up their 22-year marriage and finding new partners. Jared claims Bridget began an affair during their marriage with Brian Duncan, a contractor she employed through her house flipping business. Bridget, he says, paid Duncan’s company $75,000 in 2018 as well as giving him a personal gift of $70,000 that same year. Jared says she also bought Duncan at least one car and purchased a house for him near hers on Shawnee Run Road for $289,000, then loaned money to Duncan. Jared says Duncan has been late in repaying the note.

While Bridget says Duncan has been drug-free for several years, he has a rap sheet with Hamilton County courts from 2000 to 2017 that runs five pages long. It lists a half-dozen counts of drug abuse and drug possession, including heroin and possession of illegal drug paraphernalia; assaulting a police officer; stealing a Taser from a police officer; criminal damaging while being treated at UC Health; more than a dozen speeding and traffic violations; a half-dozen counts of driving with a suspended license; receiving stolen property; twice fleeing and resisting arrest; three counts of theft; two counts of forgery; and one count for passing bad checks.

Bridget has fired back that Jared not only is hiding his money from her but spending it lavishly on vacations, resorts, and high-end restaurants with his new girlfriend, Susanne Warner. Bridget says Jared gifted Warner with $40,000 without Bridget’s knowledge, then declared it on their joint tax return as a “contribution.” Bridget’s court filings include photocopies of social media posts of Jared and Warner globetrotting from summer 2019 to summer 2020: vacation at Beaver Creek Village in Avon, Colorado; cocktails at High Cotton in Charleston, South Carolina, and dinner at Melvyn’s Restaurant and Lounge in Palm Springs, California; getaways at resorts in Nashville and at a lakefront rental on Norris Lake ($600 per night); in the Bahamas at a Musha Cay private residence ($57,000 per night), at South Beach in Miami, and at a private beach at Fisher Island; in Mexico at Cabo San Lucas; in the U.S. Virgin Islands at Magen’s Bay and on a private yacht ($4,500 per night); in California at Desert Hot Springs, the Ritz-Carlton in Rancho Mirage, and Montage at Laguna Beach; and in the Bahamas at South Cottage ($2,175 per night).

For her part, Bridget has gone through some of the top lawyers in town faster than President Trump during an impeachment—six in all, two of whom she’s sued for malpractice. She sent four binders of evidence to the Ohio Supreme Court, asking for the recusal of Hamilton County Judge Amy Searcy and claiming Searcy was biased because of campaign donations from Jared and his companies. Rather than deal with the list of questions sent to her by Chief Justice Maureen O’Connor, Searcy stepped down. Two other judges have since stepped into the fray, and in March Bridget filed for a change of venue outside of Hamilton County, arguing she can’t get a fair trial in her hometown. At press time, a trial date had been set for June 28 in Hamilton County.

The poor-mouthing in the divorce case has reached heights of comic absurdity. Jared claims he’s “illiquid” because he didn’t get his distribution from CNG in 2019. Bridget has received debt collection notices for the nearly $21,000 owed on her American Express card and a $735 bill from Jewish Hospital. There’s no sign yet that anyone is coming to repossess her Porsche, which according to her filings has a $5,000 monthly payment. Each party has received $25,000 a month in living expenses, an amount later reduced to $15,000 under a temporary legal agreement while the divorce case is being sorted out. Court filings show that Jared’s net worth is almost $206 million and Bridget’s is $22.5 million.


In the early 1990s, Allen Davis was raising eyebrows at Provident Bank (later bought by National City), and not only because of his very unbanker-like look of beard, ponytail, and casual golf wear. He was leading the company into questionable subprime home loans for people with bad credit and a frequent-shopper program for merchants, though the bank’s charter barred him from getting involved in full-blown predatory lending practices. With guidance and funding from his father, Jared, at age 26, launched Check ’n Go in 1994 and became a pioneer in the payday lending industry. Jared and his family saw there were millions of Americans who didn’t have checking or savings accounts (“unbanked”) or an adequate credit rating (“underbanked”) but still needed loans to meet their everyday expenses. What those potential customers did have was a steady paycheck.

Conventional banks share a big part of the blame for the nation’s army of unbanked borrowers by imposing checking account fees and onerous penalties for bounced checks. In 2019, the Federal Deposit Insurance Corporation estimated there were 7.1 million U.S. households without a checking or savings account.

The Davises launched Check ’n Go on the pretext that it would “fill the gap” for people who occasionally needed to borrow money in a hurry—a service for those who couldn’t get a loan any other way. But consumer advocates say the real business model for payday lending isn’t a service at all. The majority of the industry’s revenue comes from repeat business by customers trapped in debt, not from borrowers looking for a quick, one-time fix for their financial troubles.

Ohio’s payday lending lobbyists got a strong hold on the state legislature in the late 1990s, and by 2018 Democratic gubernatorial candidate Richard Cordray could rightfully claim in a campaign ad that “Ohio’s [payday lending] laws are now the worst in the nation. Things have gotten so bad that it is legal to charge 594 percent interest on loans.” His statement was based on a 2014 study by the Pew Charitable Trusts.

The frustration for consumer advocates was that Ohioans had been trying to reform those laws since 2008, when voters overwhelmingly approved a ballot initiative placing a 28 percent cap on the interest of payday loans. But—surprise!—lenders simply registered as mortgage brokers, which enabled them to charge unlimited fees.

The Davis family and five other payday lending companies controlled 90 percent of the market back then, an express gravy train ripping through the poorest communities in Ohio. The predatory feeding frenzy, especially in Ohio’s hard-hit Rust Belt communities, prompted a 2017 column at The Daily Beast titled, “America’s Worst Subprime Lender: Jared Davis vs. Allan Jones?” (Jones is founder and CEO of Tennessee-based Check Into Cash.) In 2016 and 2017, consumer advocates mustered their forces again, and this time they weren’t allowing for loopholes. The Pew Charitable Trusts joined efforts with bipartisan lawmakers and Ohioans for Payday Loan Reform, a statewide coalition of faith, business, local government, and nonprofit organizations. Consumer advocates found a legislative champion in State Rep. Kyle Koehler, a Republican from Springfield.

It no doubt helped reform efforts that former Ohio Speaker of the House Cliff Rosenberger resigned in spring 2018 amid an FBI investigation into his cozy relationship with payday lenders. Rosenberger had taken frequent overseas trips—to destinations including France, Italy, Israel, and China—in the company of payday lending lobbyists. In April 2019, Ohio’s new lending law took effect and, since then, has been called a national model for payday lending reform that balances protections for borrowers, profits for lenders, and access to credit for the poor, according to the Pew Charitable Trusts. New prices in Ohio are three to four times lower for payday loans than before the law. Borrowers now have up to three months to repay their loans with no more than 6 percent of their paycheck. Pew estimates that the cost of borrowing $400 for three months dropped from $450 to $109, saving Ohioans at least $75 million a year. And despite claims that the reforms would eliminate access to credit, lenders currently operate in communities across the state and online. “The bipartisan success shows that if you set fair rules and enforce them, lenders play by them and there’s widespread access to credit,” says Gabe Kravitz, a consumer finance officer at the Pew Charitable Trusts.

Other states like Virginia, Kansas, and Michigan are following Ohio’s lead, Kravitz says. Some states, such as Nebraska, have even capped annual interest on payday loans. As a result, Pew researchers have seen a reduction in the number of storefront lending op­erations across the country. Even better, Kravitz says, there’s no evidence that borrowers are turning instead to online payday lending operations.

Cincinnati is one of five cities chosen for a grant to replicate the success of Boston Builds Credit, an ambitious effort that city launched in 2017 to provide credit counseling in poor and minority communities by training specialists at existing social service agencies. The program also encourages consumer partnerships with credit unions, banks, and insurance companies to offer small, manageable loans that can help the unbanked and underbanked improve their credit ratings. “Right now, local organizations are all kind of working in silos on the problem in Cincinnati,” says Todd Moore of the nonprofit credit counseling agency Trinity Debt Relief. Moore, who applied for the Boston grant, says he’s looking for an agency like United Way or Strive Cincinnati to lead the effort here.

Anthony Smith is thankful that he’s escaped the downward spiral of his payday loans, especially during the pandemic’s economic turmoil. “I’m blessed for every day I can get paid and have a job during these difficult times, just to be able to pay my bills and meet my responsibilities,” he says. “I’ve always kept a job, but until now I’ve had crappy credit. That doesn’t mean I’m a bad guy.”

Can others worth millions of dollars say the same?

Inside the Highly Profitable and Secretive World of Payday Lenders Source link Inside the Highly Profitable and Secretive World of Payday Lenders



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What’s Questionable Credit and Can I Get a Car Loan With It?

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Questionable’s definition means that something’s quality is up for debate. If a lender says that your credit score is questionable, it’s likely that they mean it’s poor, or at the very least, they’re hesitant to approve you for vehicle financing. Here’s what most lenders consider questionable credit, and what auto loan options you may have.

Questionable Credit and Auto Lenders

Many auto lenders may consider questionable credit as a borrower with a credit score below 660. The credit score tiers as sorted by Experian the national credit bureau, are:

  • Super prime: 850 to 781
  • Prime: 780 to 661
  • Nonprime: 660 to 601
  • Subprime: 600 to 501
  • Deep subprime: 500 to 300

The nonprime credit tiers and below is when you start to get into bad credit territory and may struggle to meet the credit score requirements of traditional auto lenders.

This is because lenders are looking at your creditworthiness – your perceived ability to repay loans based on the information in your credit reports. Besides your actual credit score, there may be situations where the items in your credit reports are what’s making a lender question whether you’re a good candidate for an auto loan. These can include:

  • A past or active bankruptcy
  • A past or recent vehicle repossession
  • Recent missed/late payments
  • High credit card balances
  • No credit history

There are ways to get into an auto loan with questionable credit. Your options can change depending on what’s making your credit history questionable, though.

Questionable Credit Auto Loans

If your credit score is less than stellar, it may be time to look at these two lending options:

  • What Is Questionable Credit and Can I Get a Car Loan With It?Subprime financing – Done through special finance dealerships by third-party subprime lenders. These lenders can often assist with many unique credit situations, provided you can meet their requirements. A great option for new borrowers with thin files, situational bad credit, or consumers with older negative marks.
  • In-house financing – May not require a credit check, and is done through buy here pay here (BHPH) dealers. Typically, your income and down payment amount are the most important parts of eligibility. Auto loans without a credit check may not allow for credit repair and may come with a higher-than-average interest rate.

Both of these car loan options are typically available to borrowers with credit challenges. However, if you have more recent, serious delinquencies on your credit reports, a BHPH dealer may be for you. Most traditional and subprime lenders typically don’t approve financing for borrowers with a dismissed bankruptcy, a repossession less than a year old, or borrowers with multiple, recent missed/late payments.

Requirements of Bad Credit Car Loans

In many cases, your income and down payment size are the biggest factors in your overall eligibility for bad credit auto loans. Expect to need:

  • 30 days of recent computer-generated check stubs to prove you have around $1,500 to $2,500 of monthly gross income. Borrowers without W-2 income may need two to three years of professionally prepared tax returns.
  • A down payment of at least $1,000 or 10% of the vehicle’s selling price. BHPH dealers may require up to 20% of the car’s selling price.
  • Proof of residency in the form of a recent utility bill in your name.
  • Proof of a working phone (no prepaid phones), proven with a recent phone bill in your name.
  • A list of five to eight personal references with name, phone number, and address.
  • Valid driver’s license with the correct address, can’t be revoked, expired, or suspended.

Depending on your individual situation, you may need fewer or more items to apply for a bad credit auto loan. However, preparing these documents before you head to a dealership can speed up the process!

Ready to Get on the Road?

With questionable credit, finding a dealership that’s able to assist you with an auto loan is easier said than done. Here at Auto Credit Express, we want to get that done for you with our coast-to-coast network of special finance dealerships.

Complete our free auto loan request form and we’ll get right to work looking for a dealer in your local area that can assist with many tough credit situations.

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Entrepreneur Tae Lee Finds Her Fortune

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By Jasmine Shaw
For The Birmingham Times

Birmingham native Tae Lee had plans last year to visit the continent of Africa, the South American country of Columbia, and the U.S. state of Texas.

“I was going to stay in each place for like four to six weeks, and then COVID-19 happened,” she said. “So, I just was like, ‘You know what, I’m just gonna go to Mexico and stay for six months.’”

Once home from Playa Del Carmen, located on Mexico’s Yucatán Peninsula, the 33-year-old entrepreneur put the final touches on “Game of Fortune: Win in Wealth or Lose in Debt,” a financial literacy card game for ages 10 and up.

“We created ‘Game of Fortune’ because we realized there was a gap in learning the fundamentals of money,” said Lee. “We go through life not knowing anything about money and then—‘Bam!’—real life hits. Credit, debt, and bills come at us quick!”

Lee believes the game “gives players a glimpse of real life” by using everyday scenarios to teach them how to make wiser financial decisions without having to waste their own money.

“I feel like [financial literacy] can be learned in ways other than somebody standing up and preaching it to you over and over again,” she said. “You can learn it in ways that are considered fun, as well.”

Which is why “we want the schools to buy it, so we can give students a fun way to learn about financial literacy,” she added.

Lee, also called the “Money Maximizer,” is an international best-selling financial author, speaker, coach, and trainer who is known for her financial literacy books, including “Never Go Broke (NGB): An Entrepreneur’s Guide to Money and Freedom” and the “NGB Money Success Planner High School Edition.” The Birmingham-based financial guru focuses on creating diverse streams of income in the tax, real estate, insurance, and finance industries.

For Lee, it’s about building generational wealth, not debt.

Indispensable Lessons

Lee got her first glance at entrepreneurial life as a child watching her mother, Valeria Robinson, run her commercial cleaning company, V’s Cleaning. Robinson retired in 2019.

“My grandmother had a cleaning service, too,” said Lee. “So, even though I didn’t start out as an entrepreneur, watching my mom and grandma do it taught me a lot.”

Lee grew up in Birmingham and attended Riley Elementary School, Midfield Middle School, and Huffman High School. She then went on to Jacksonville State University, in Jacksonville, Alabama, where she earned bachelor’s degree in physical education. She struggled to find a career in her field and became overwhelmed by student loans.

“My credit and stuff didn’t get bad until after college,” she said. “I was going through school and taking money, but nobody told me, ‘Oh, you’re gonna have to pay all of this back.’”

Before embarking on her extensive career in money management, Lee had not learned the indispensable lessons that she now shares with clients.

“‘Don’t have bad credit.’ That’s all I learned,” she remembers. “Financial literacy just wasn’t taught much. I learned the majority of my lessons as I aged.”

In an effort to ward off collection calls and raise her credit score, Lee researched tactics to strategically eliminate her debt.

“I knew I had to pay bills on time, and I couldn’t be late with payments,” she said.

Lee eventually began helping friends revamp their finances and opened NGB Inc. in 2017 to share fun, educational methods to help her clients build solid financial foundations.

“People were always coming to me like, ‘How do I invest in this?’ and ‘How do I do that?’ So, I said to myself, ‘You know what, people should be paying to pick your brain.’”

Legacy Building

While Lee enjoyed watching her clients reach milestones, like buying a new car with cash or making their first stock market investment, she was also designing “Game of Fortune” to teach the value of legacy building.

“The game gives players the knowledge to build generational wealth, not generational debt,” she said. “It gives you a glimpse of life, money, and what can truly happen if you mismanage your coins.”

Using index cards to create her first “Game of Fortune” sample deck, Lee filled each card with pertinent terms related to debt elimination and credit and wealth building. She then called on a few friends to help her work through the kinks.

Three of her good friends—Barbara Bratton, Daña Brown, and Sha Cannon—were just a few of the people that gave feedback on the sample deck.

“From there I met with Brandon Brooks, [owner of the Birmingham-based Brooks Realty Investments LLC], and four other financial advisors to fine-tune the definitions and game logistics,” Lee said.

Though Lee was unable to land a job in physical education after graduating from college, she now sees her career with NGB Inc. as life’s unexpected opportunity to teach on her own terms.

“Bartending and waitressing taught me that working for someone else was not for me,” she replied. “In order to get the life I always wanted, I had to create my own business.”

In her entrepreneurial pursuits, Lee strives to be an open-minded leader who embraces the need for flexibility.

“COVID-19 has shown me that in entrepreneurship you have to maneuver,” she said. “When life changes, sometimes your business will, too. You may have to change the path, but your ending goal can be the same.”

“Game of Fortune: Win in Wealth or Lose in Debt” is available and sold only on the “Game of Fortune” website: gameoffortune.money. To learn more about Tae Lee and Never Go Broke Inc., visit taelee.money and nevergobroke.money or email tae@taelee.money; you also can follow her on Facebook (https://www.facebook.com/nevergobrokeinc) and Instagram (@nevergobrokeinc).

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