Connect with us

Bad Credit

Why Biden Wants to Replace the Credit Bureaus



Your credit score impacts many aspects of your life. Here’s why Biden wants to change the system.

Credit scores are important — good credit helps you qualify for better loan terms, get approved for the best credit cards, and snag lower interest rates on a mortgage.

On the other hand, bad credit can keep you from getting hired for a job, cause you to pay more for insurance, and even interfere with getting an apartment.

And a growing number of people, including President Joe Biden, are concerned.

What’s the problem with credit scores?

Your credit score is a three-digit number that reflects how you handle — and have handled — credit. It’s based on your credit report, which is put together by the three credit bureaus, Equifax, Experian, and TransUnion. That information is fed into a scoring algorithm lenders use to get an idea of how risky it is to lend you money.

But credit scores are not perfect.

For starters, almost 20% of Americans are credit invisible or unscorable. According to a 2015 report from the Consumer Financial Protection Bureau (CFPB), 45 million Americans can’t get a credit score. Either they have no credit history, or their credit report is too thin or isn’t current enough to generate a score.

Low earners are disproportionately affected. Around 45% of unscored Americans live in low-income neighborhoods. In addition, Black and Hispanic consumers are more likely to be credit invisible.

This is part of the reason Biden’s campaign highlighted the racial disparities in credit reporting. Credit scores are based on credit histories, which means past inequalities get “baked in.”

Biden’s manifesto adopts a policy document by democracy think tank Demos. Both flag the issue that credit reports can contain errors that impact a person’s ability to borrow. Indeed, credit report error reports have reached an all-time high.

Demos is also concerned the credit bureaus exist to serve lenders rather than consumers. It argues Americans haven’t given their permission for the bureaus to store their information, and that the algorithms used to determine our scores should not be kept secret, as they are now.

It also flags the 2017 Equifax data breach, which affected almost 150 million Americans, as an example of why credit bureaus should not be responsible for people’s data.

What has Biden proposed?

Biden has called for the creation of a new public credit reporting agency. It would move credit reports out of the hands of the three bureaus and into the hands of the CFPB.

The new government option would accept non-traditional payment histories such as rent and utility bill payments. Now, some scoring models, such as UltraFICO™, are already doing this. But it’s early days, and a lot depends on whether lenders fully adopt the alternative models.

Biden also wants to create non-discriminatory algorithms. However, it’s not clear how those new algorithms would work.

Biden’s main motivation in replacing the credit bureaus is to make home ownership more accessible. As such, Biden proposes that federal housing programs — such as the FHA — would have to use the new scoring model.

Biden hasn’t taken up all the ideas in the Demos document. For example, Demos also wants to ban predatory lending entirely. These lenders prey on borrowers with low (or no) credit scores, offering loans with high interest rates and hidden fees. And it suggests non-lenders — such as employers and landlords — should not be allowed to use credit scores at all.

Is this the end of credit bureaus?

Unlikely. The new public body is more likely to sit alongside the existing bureaus than to replace them entirely.

The plan to create a new public credit bureau has its fair share of critics. Some point out that it’s lenders, not the government, who decide which scoring model to use. Others say the CFPB has only a fraction of the staff it will need. And the Consumer Data Industry Association labels it a “damaging” idea that will “hurt, not help, consumers.”

While the new agency was part of Biden’s campaign platform, he has a number of other priorities in his first 100 days — including passing a third stimulus package. Even if he follows through, it would take years. Demos suggests a seven-year transition period would be necessary.

In the meantime, if your credit score is low, there are steps you can take to improve your credit. Here are just a few:

  • Pay all your bills on time. Payment history accounts for 35% of your credit score and late payments can stay on your record for years.
  • Build up a payment history. One of the frustrating aspects of building your credit score is that it’s difficult to show you can handle credit responsibly if nobody will give you credit. If you can’t open a regular credit card, consider a secured credit card. You pay a deposit up front, and you normally get a credit limit equal to your deposit. Make small charges each month and pay your balance off in full. In time, you’ll build a payment history and be able to graduate to a normal card.
  • Check your report for errors. Errors on your report can drag down your score. You’re entitled to a free copy of your report from each credit bureau each year. In fact, until April 20, you can get free weekly credit reports. Check for accounts you didn’t open or any other inaccuracies. If you find any mistakes, report them to the bureau in question.

Source link

Continue Reading
Click to comment

Leave a Reply

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

Bad Credit

How Do I Sell My Vehicle With Joint Ownership?



A joint auto loan is when two borrowers have rights and responsibility to the same vehicle and loan. If you have a cosigner, then you, the primary borrower, have all the rights to the vehicle. Here’s what you need to know when you need to sell your car with two people responsible for the loan.

Selling a Joint-Owned Vehicle

Joint owners are typically spouses or life partners who combine their income to meet income requirements or get a larger loan amount. Both co-borrowers are responsible for paying the car loan and have 50/50 rights to the vehicle, so both their names are listed on the title.

Since your co-borrower has the same rights and obligations to the vehicle as you, you must get their permission to sell the car. In most cases, they also need to be present for the sale to sign the title. This may not always be the case, though, so it’s important to know how to read your car’s title.

If you have it, take a look at your vehicle’s title for the names listed on the back where you sign to transfer ownership. For example: let’s say your name is Jane and your co-borrower’s name is Joe. You’re likely to see either:

  • “Jane and Joe”
  • “Jane or Joe”
  • “Jane and/or Joe”

If you see “and/or” or the connector “or”, this typically means only one person needs to be present for the sale of the car. But if you see “and” this means both of you need to be present to transfer ownership – this is usually the case with joint ownership.

In all three cases, you still need the permission of the co-borrower to sell the vehicle even if they don’t have to be physically present to sign the title. If you sell it without the co-borrowers consent, it may be considered a crime because it’s their property, too. Moving forward, discuss the sale with your co-borrower to avoid potential legal trouble.

Selling a Car With a Cosigner

How Do I Sell My Car With Joint Ownership?If you have a cosigner on your car loan, then things become easier. A cosigner doesn’t have any rights to the vehicle and their name isn’t on the title. Their purpose is to help you get approved for the auto loan with their credit score, and by promising the lender to repay the loan if you’re unable to. A cosigner can’t take your vehicle, sell it, or stop you from selling it yourself.

However, it’s nice to let them know if you do decide to sell the car because the auto loan is listed on their credit reports. If you can, reach out to them about your plans to sell the vehicle. The car loan’s status impacts them and could affect their ability to take on new credit when it’s active.

If you sell the vehicle and the lien is successfully removed from the title, then you’re both in the clear.

Removing the Lien From a Vehicle’s Title

If you still have a loan on your car, then your number one priority is paying off your lender. Your lender is the lienholder, and you can’t sell a vehicle without removing them from the title – they own the car until you complete the loan. This typically means paying off the loan balance until naturally during the loan term, or getting enough cash to pay it all off at once from a sale.

When you’re selling a car with a loan, you want to get an offer for your vehicle that’s large enough to cover your loan balance and to remove the lien. If you don’t get a large enough offer, then you need to pay that difference out of pocket before you can sell the vehicle. Or, you may be able to roll over the remaining loan balance onto your next car loan if you’re trading it in for something else.

Looking to Upgrade Your Ride?

Many borrowers ask for help to get the car they need. If you need more income on your loan application to meet requirements, asking a spouse or life partner to chip in can do the trick. If you have a lower credit score, then a cosigner with good credit could help you meet credit score requirements.

But what if you want to go it alone on your next auto loan and your credit isn’t great? A subprime lender could be the answer. Here at Auto Credit Express, we’ve been connecting credit-challenged consumers to dealerships with bad credit resources for over two decades, and we want to help you too.

Fill out our free auto loan request form and we’ll look for a dealer in your local area that’s signed up with subprime lenders. These lenders assist borrowers with many unique credit circumstances to help them get the vehicle they need. Get started today!

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

Source link

Continue Reading

Bad Credit

Fixed-rate student loan refinancing rates sink to new record low for the second straight week



Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.

The latest trends in interest rates for student loan refinancing from the Credible marketplace, updated weekly. (iStock)

Rates for well-qualified borrowers using the Credible marketplace to refinance student loans into 10-year fixed-rate loans hit another new record low during the week of May 3, 2021.

For borrowers with credit scores of 720 or higher who used the Credible marketplace to select a lender, during the week of May 3:

  • Rates on 10-year fixed-rate loans averaged 3.60%, down from 3.69% the week before and 4.32% a year ago. This marks another record low for 10-year fixed rate loans, besting the previous record of 3.69%, set last week.
  • Rates on 5-year variable-rate loans averaged 3.19%, down from 3.23% the week before and up from 3.04% a year ago. Variable-rate loans recorded a record low of 2.63% during the week of June 29, 2020.

Student loan refinancing weekly rate trends

If you’re curious about what kind of student loan refinance rates you may qualify for, you can use an online tool like Credible to compare options from different private lenders. Checking your rates won’t affect your credit score.

Current student loan refinancing rates by FICO score

To provide relief from the economic impacts of the COVID-19 pandemic, interest and payments on federal student loans have been suspended through at least Sept. 30, 2021. As long as that relief is in place, there’s little incentive to refinance federal student loans. But many borrowers with private student loans are taking advantage of the low interest rate environment to refinance their education debt at lower rates.

If you qualify to refinance your student loans, the interest rate you may be offered can depend on factors like your FICO score, the type of loan you’re seeking (fixed or variable rate), and the loan repayment term. 

The chart above shows that good credit can help you get a lower rate, and that rates tend to be higher on loans with fixed interest rates and longer repayment terms. Because each lender has its own method of evaluating borrowers, it’s a good idea to request rates from multiple lenders so you can compare your options. A student loan refinancing calculator can help you estimate how much you might save. 

If you want to refinance with bad credit, you may need to apply with a cosigner. Or, you can work on improving your credit before applying. Many lenders will allow children to refinance parent PLUS loans in their own name after graduation.

You can use Credible to compare rates from multiple private lenders at once without affecting your credit score.

How rates for student loan refinancing are determined

The rates private lenders charge to refinance student loans depend in part on the economy and interest rate environment, but also the loan term, the type of loan (fixed- or variable-rate), the borrower’s credit worthiness, and the lender’s operating costs and profit margin. 

About Credible

Credible is a multi-lender marketplace that empowers consumers to discover financial products that are the best fit for their unique circumstances. Credible’s integrations with leading lenders and credit bureaus allow consumers to quickly compare accurate, personalized loan options ― without putting their personal information at risk or affecting their credit score. The Credible marketplace provides an unrivaled customer experience, as reflected by over 4,300 positive Trustpilot reviews and a TrustScore of 4.7/5.

Source link

Continue Reading

Bad Credit

Provident Financial calls time on doorstep lending business



Provident Financial has confirmed plans to shut its 141-year-old doorstep lending arm, as its full-year results highlighted the strain the coronavirus pandemic and growing customer complaints have put on subprime lenders.

The Bradford-based company reported a pre-tax loss of £113.5m for 2020, compared with a £119m profit the previous year. The biggest drag was a £75m loss in its consumer credit division, which includes home credit.

Malcolm Le May, Provident chief executive, said: “In light of the changing industry and regulatory dynamics in the home credit sector, as well as shifting customer preferences, it is with deepest regret that we have decided to withdraw from the home credit market.”

Jason Wassell, chief executive of the Consumer Credit Trade Association, which represents alternative and high-cost lenders, said the decision showed that “the current regulatory framework does not work for the market, or its customers”.

“The result in this case is that access to credit will be reduced for hundreds of thousands of people.”

Provident built its name as a provider of home credit, or doorstep lending, which involves a team of local agents who regularly visit borrowers to collect repayments and discuss their products.

Proponents believed agents’ local expertise and personal relationships with borrowers allowed them to achieve better results than traditional bank lending to people with bad credit scores, but the approach has increasingly been superseded by digital models in recent years.

Provident’s business has also been affected by a series of self-inflicted and external difficulties. Its consumer credit division has been lossmaking since a botched effort to modernise the unit in 2017, which led to a pair of profit warnings and an emergency rights issue. More recently, its recovery has been hampered by an increase in customer complaints that prompted an investigation by the Financial Conduct Authority.

The complaints rise has been driven by professional claims management companies, echoing a broader trend across the subprime lending industry which has also affected companies such as Amigo, the guarantor lender. Executives also accuse the Financial Ombudsman Service, which adjudicates on customer complaints, of overstepping its mandate and encouraging huge volumes of complaints.

Provident said it would wind down or sell the consumer credit division, with either option expected to cost it about £100m. 

The move will see Provident exit the most controversial areas of high-cost credit to focus on what it describes as “mid-cost” lending through its Vanquis credit card business and Moneybarn vehicle finance arm. Vanquis and Moneybarn both remained profitable during 2020, despite more than a quarter of Moneybarn customers requesting payment holidays at the height of the pandemic.

The results were slightly better than average analyst forecasts, and the company said Vanquis and Moneybarn had both reported “improving trends” during the first quarter of 2021. Shares in Provident nonetheless dropped more than 10 per cent in early trading.

Source link

Continue Reading