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Repairing Your Credit Score as a Freelancer

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It can be tough for a “non-traditional” earner to repair a credit score since most lenders prefer W-2 income. As a freelancer, getting approved for new credit so that you can improve your credit score can be a hassle – but we’ve got some tips any earner can use.

Breaking Down Your Credit Score to Rebuild it

The pandemic pushed many people to freelance work and the gig economy to cover bills as traditional employment options lessened thanks to shutdowns. Being a freelancer can offer the freedom to work on your own terms, but many traditional lenders can be skeptical about approving you for a loan because your income may not be perceived as steady as a W-2 income source – work provided by an employer.

Repairing your credit score is possible when you work for yourself. Here are a few different tactics you can use as a freelancer to repair your credit score:

Do you already have bills that you pay every month? Do you have a good repayment history with those accounts? Then it may benefit you to use a credit reporting service to get those accounts on your credit reports.

Things like video and music streaming services, your electric bill, car insurance, and your phone bill could be the ticket to improving your credit without having to take on new credit. Experian Boost is one of these services, and it looks at your current bills and attempts to get them on your credit reports so your timely payments contribute to your credit score. And many are free, too! Visit our resource center for more information on services like this.

  • Consider a Secured Credit Card

A secured credit card is secured by a deposit that you pay when you open the account. If you’re unable to repay the balance on the card, your deposit covers it so the lender doesn’t lose out on money. Because you start the account with a deposit, backing the card up with your own money, borrowers with less than perfect credit have a higher chance of getting approved for a secured credit card over an unsecured credit card – which isn’t backed up by anything.

It’s recommended that borrowers try a credit union for a secured credit card for a better chance of approval, and it helps if you’re a member and have been for a while. Getting approved for a secured credit card is usually easier than an unsecured credit card, and it could be the way you boost payment history and mix up your credit report with a revolving credit account.

  • Look for a Cosigner or Co-Borrower for New Credit

If lenders are giving you grief about your income type and you’re trying to take on an auto loan to repair your credit, then a cosigner or co-borrower could help increase your approval odds.

A cosigner’s someone who lends you their good credit score to help you meet credit score requirements. If you have a non-traditional income type coupled with a poor credit score, it may be tough to land an approval alone. A cosigner could help you get approved for a loan and the on-time payments enhance your credit history.

A co-borrower is someone that adds their own income to yours on the loan application. Co-borrowers are typically spouses or life partners, and they combine incomes to get approved for larger vehicle loan amounts. If your freelance income is making it hard to meet income requirements, then a co-borrower may be able to help out. With a co-borrower, both of you are responsible for the loan, and you both get it reported to your credit reports.

  • Consider Special Financing

Special financing is another term for a bad credit auto loan, and subprime lenders are included in this category of vehicle financing. These lenders are signed up with dealerships, and they’re able to assist bad credit borrowers. They typically require that their borrowers have a gross (pre-tax) minimum monthly income of around $1,500 to $2,500.

Not every subprime lender can approve a loan for borrowers with 1099 income, but many do. To prove your freelance income is enough to afford a car loan, expect to need around two to three years of tax returns and possibly bank statements.

Subprime car loans are reported by the credit bureaus. Your timely payments and the auto loan can help build a positive repayment history, add to your credit mix, and prove to the credit-scoring models that you’re willing and able to repay your loans.

Understanding Leads to Smarter Actions!

Repairing Your Credit Score as a FreelancerNo matter how you get your money, through an employer or freelance work, understanding what your credit score is made up of is a vital step to repairing it.

There are a few credit score scoring models, but the most commonly-referenced one by lenders is the FICO credit scoring model. It’s a three-digit number between 300 to 850 based on the information recorded on your credit reports. The higher your credit score, the better off you tend to be as a borrower.

Here’s what the FICO credit score is made of:

  • Payment history – 35%
  • Amounts owed – 30%
  • Length of credit history – 15%
  • Credit mix – 10%
  • New credit – 10%

Payment history is the most important part of your creditworthiness. This is because lenders are usually most concerned with your ability to repay loans on time, consistently. For this reason, the number of on-time payments you have reported on your credit reports holds the most weight in determining your credit score. However, your missed and late payments hold a lot of weight, too – sometimes more than on-time payments.

One of the better ways to improve your credit score is to pay all your bills on time, avoid missed and late payments, and have those accounts listed on your credit reports to add meat to the other categories.

We Want to Help You Find Your Next Car Loan

Many new borrowers and bad credit borrowers look to vehicle financing as a way to jumpstart their credit history and improve their credit score. If you’re in need of a car and need to repair your credit, then look to us at Auto Credit Express!

We’ve put together a nationwide network of special finance dealerships to help borrowers find the resources they need for vehicle financing. To get started, fill out our free auto loan request form and we’ll get right to work looking for a dealer in your local area that’s signed up with subprime lenders.

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Bad Credit

Do Personal Loans Have Penalty APRs?

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We may receive a commission when you click on links for products from our affiliate partners.

When you make your credit card payment late, you’re often subject to late fees and a penalty APR, which is a temporary spike in your interest rate.

The Blue Cash Preferred® Card from American Express, for instance, has a 13.99% to 23.99% variable APR, but the penalty APR is a variable 29.99% (see rates and fees). Penalty APRs usually last for at least six months, but card issuers often reserve the right to extend them — especially when you continue making late payments. A look at the terms for the Citi® Double Cash Card show us that the “penalty APR may apply indefinitely.”

Penalty APRs are certainly not a trap you want to fall into, but it’s not something you usually have to worry about if you have a personal loan. Personal loan lenders can, however, charge late fees upwards of $39 per late payment. Whether your loan charges late fees all depends on how good of a loan you qualify for, and that comes down to your credit score, borrowing history and ability to make your payments.

Personal loans also tend to charge lower interest rates than credit cards, too. The average personal loan interest rate for two-year loans is currently 9.46% according to Q1 2021 data from the Federal Reserve, compared to 15.91% for credit cards.

Typically, interest rates for personal loans range between roughly 2.49% and 24%, but personal loans for applicants with bad credit can come with even higher APR — so do your research before applying.

Other common personal loan fees include:

  1. Interest: The monthly charge you pay to borrow money
  2. Origination fee: A one-time upfront charge that your lender subtracts from your loan to pay for administration and processing costs
  3. Late fee: A one-time fee charged for each payment that you fail to make by the due date or within your grace period
  4. Early payoff penalty: A fee incurred when you pay off your balance faster than planned (because the lender misses out on months of expected interest payments)

As you can see, personal loans can be costly, even without a penalty APR. It’s obviously best to avoid paying extra fees whenever possible. That’s easier to do when you have a good to excellent credit score, since you’ll qualify for better loan options.

Select has a free tool to help match you with personal loan offers without damaging your credit score.

None of the loans on our best personal loan list charge origination fees or early payoff penalties, but some may charge late fees.

Our top picks for best personal loans

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

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Early Termination of a Car Lease

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

Can You Terminate Your Car Lease Early?

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

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

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

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

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

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

Is it Worth it to Terminate Your Lease?

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

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

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

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

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

Three Options for Terminating Your Lease Early

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

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

If Leasing Isn’t for You

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

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

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

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

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GSB focuses on social responsibility

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

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

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

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

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

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

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

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

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