Pay for Delete Letters: Do They Work?

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Are you looking to clean up your credit report? Have you recently discovered a delinquent account on your report that you were unaware of until now? Then you might be considering using a pay for delete letter to get this negative mark off your credit report.

There are a few important things you need to know about pay for delete letters – namely, what they are, how (and if) they work, whether or not they’re ethical, and what other credit restoring options are available to you.

What is a Pay for Delete Letter?

Say you have a delinquent account or two on your credit report, and these accounts are bringing your credit score down. You can send a pay for delete letter to the collection agency that purchased your debt. This letter requests that the account be deleted from your credit report upon being paid either in full, or for a settled amount.

It’s essentially as the name describes – debtors pay the collection agency to get the negative mark to disappear from their credit report. Once the mark is lifted, their credit score will likely rise.

Why is this a tactic some people choose to use? Even if you pay the balance in full, the negative mark still stays on your credit report until seven years from the date of delinquency have passed. Those who don’t wish to wait that long turn to pay for delete as a quicker solution.

Keep in mind that pay for delete letters generally have a much higher chance of success if you’re dealing with the collection agency – not the original creditor. So if your credit card with Chase is past due, and your balance has not been charged off yet, a pay for delete letter may not work. Generally, the lower the balance, the easier it might be to obtain a pay for delete. We offer a few alternative solutions below that might work as well.

Note that a pay for delete letter doesn’t delete your debt. You’re only asking for the account to be deleted from your credit report. Most people use pay for delete letters when they know they owe the debt, but due to unusual circumstances, were unable to pay at the time.

A good example of when to request a pay for delete is if you moved and you never received a bill due to changing addresses. You legitimately owed the balance, but you were never aware of it. This doesn’t exactly make you an irresponsible consumer, it just means there was an error along the way and an account ended up delinquent.

The same goes for owing medical debt when you thought your insurance was covering the bill because you never received a request for payment.

In both situations, you technically owe the money, but through no fault of your own, you were never notified of the debt, so you didn’t pay. Debt collectors are more likely to be understanding in such a situation. Just make sure to have proof (such as a change of address) that might help your case.

However, if your credit card balance was charged off and you simply never paid it because you didn’t have the means to, you may be less likely to get a pay for delete approved.

To see an actual example of an effective pay for delete letter, take a look at the myFICO forums. The Credit Karma forums have a slightly different example that may help you craft your own. Note that some pay for delete letters may outright deny the debt is yours; this is not something we recommend as you shouldn’t be lying to collection agencies if you truly owe the debt.

Can a Pay for Delete Letter Help You?

A pay for delete letter won’t necessarily hurt you, but it’s not guaranteed to help you, either.

That’s because collection agencies don’t have to respond to your letter if the debt is accurate. Furthermore, if you write a pay for delete letter and only obtain a verbal agreement from the collection agency, and you pay, they may not honor your request. The negative mark could remain on your credit report. Even worse, the debt could be sold again, and a new collection agency may ask you for payment.

Unless you get a response from the collection agency in writing, you’re out of luck if the agency doesn’t make good on removing the information from your credit report. They’re not obligated in any way to agree to a pay for delete.

Before you even write a pay for delete letter, send a debt validation letter to the collection agency to ensure the information it has on file is accurate. It may not legally be allowed to collect on the debt, so it’s important to start here before offering to pay, otherwise, you risk paying the wrong company.

If the debt is proven to be valid, and you agree that you owe the balance and want to pay it off to get it deleted from your report, you may actually have more luck calling than writing a letter.

Keep in mind that if it comes to that, you should never agree to pay anything over the phone. Always get things in writing when dealing with a debt collector. In most cases, offering to pay in full will typically result in a pay for delete agreement much more often than offering to pay less than the original amount owed.

Are Pay for Delete Letters Ethical?

Pay for delete letters have been labeled as a shady practice, and for good reason: it requires that collection agencies misrepresent the accuracy of their reporting to credit reporting agencies. That means collection agencies are in violation of the service agreement they have with credit reporting agencies if they accept a pay for delete.

Overall, pay for delete is detrimental to the fundamental purpose of the credit reporting system. If someone was unable to pay their balance and their account was sent to collections, paying after the fact and getting the account erased isn’t an accurate representation of his or her credit history. If a lender looks at said person’s credit report, it might deem him worthy to lend to when he’s been irresponsible with credit in the past.

To be clear, pay for delete letters are not illegal. However, remember that collection agencies aren’t required to acknowledge your request; they’re under no obligation to agree to a pay for delete.

Some will because they would rather get paid, and others might agree to settle on a lower amount because they don’t want the hassle. Don’t get your hopes up, though.

In general, we recommend being honest and not trying to game the system. Pay the debts you owe fair and square. If you find any information on your credit report that isn’t accurate, then use the steps outlined in this Credit Repair eBook to help you restore your credit to good standing.

Recommended Credit Boosting Alternatives

A goodwill letter is a good alternative to start with. It’s different from a pay for delete letter in that you’re admitting you were in the wrong, and are asking for forgiveness. A goodwill letter typically works well if you made a late payment, or if an honest mistake occurred and you’re trying to get it corrected. If you’ve had an account in collections for years, the chances of this alternative working aren’t as a great, but it doesn’t hurt to try.

If the collection agency is unwilling to do a pay for delete, they may be willing to settle for the amount owed. What this means is the negative mark will stay on your credit report (until seven years from the date of delinquency have passed), but it will show as “paid in full” or “settled,” depending on the arrangement agreed upon. This might not be as ideal as having the entire account knocked off your report, but it’s a minor improvement over having an unpaid debt on there.

Depending on the FICO scoring model being used, paid collections can improve your score and your chances of getting approved for a loan. FICO 9 won’t penalize you for paid collections accounts, but you will get dinged for unpaid collections (the exception is medical debt). FICO 8 doesn’t take unpaid collections under $100 into account.

Remember that information on your credit report will fall off after seven years. If you just found out about an unpaid debt because you checked your report, and the debt is several years old, you might be better off waiting it out as long as you’re not in the market for a loan anytime soon. The older a collection is, the less of an impact it has on your credit score, too.

Of course, you should also continue to do what you can to repair your credit. You might need to wait out the seven years it takes for black marks to fall off your credit report, but in the meantime, you should take action to maintain a good score for the future. Pay on time, don’t max out your credit lines, and borrow responsibly.

Conclusion

You can’t bribe your way to a perfect credit report. If the information on your credit report is accurate, then you should bear the consequences. Pay for delete letters aren’t guaranteed to work, and it can be difficult to try and get a collection agency to agree to it. Keep proving that you’re a responsible consumer using the methods outlined in this article, and hopefully your actions will show lenders that you’re a reformed consumer.

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The 5 Credit Card Mistakes You’ll Make Your First Summer Out of College

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Congratulations, you’ve graduated from college and you are about to begin your first summer in “the real world.” Once your cap and gown are stored, your diploma framed, and you’re looking forward to your first day on the job, it’s time to turn your attention to your personal finances. And with that comes a lot of responsibility, especially when it comes to using credit cards.

Here are five credit card mistakes that you might make during your first summer after graduation, and what you can do to avoid them.

1. Not Prioritizing Your Debt

Ideally, college students would graduate with little, if any credit card debt. But unfortunately, many still begin their careers owing a significant amount because of credit card charges, on top of what they owe for student loans. And while student loans have lower interest rates and the interest can be tax deductible, credit cards, especially student credit cards, have very high interest rates that are never tax deductible.

Nevertheless, many graduates start a new job and begin to splurge. The sudden steady income goes to things like buying a new car, furnishing a new apartment or even paying down student loans. Yet the smartest move is likely to pay off credit card debt as quickly as possible in order to avoid spending more on those high interest charges. You can use this tool to figure out how long it may take you to pay off any credit card debt you might have.

2. Incurring More Credit Card Debt

It can be easy to get carried away with your credit cards and assume that you’ll be able to pay them off quickly thanks to the money you’re getting from your new job. Sadly, this is how many recent college graduates find themselves trapped in a cycle of debt. Instead, consider seizing this opportunity to begin a lifetime habit of never charging anything you can’t afford to pay for. By paying each month’s statement balance in full, you’ll avoid interest charges and problems with credit card debt.

3. Failing to Make Payments On Time

When you graduate from college, you are likely to move, start a new job, and be faced with many new responsibilities, all at once. But accidentally missing credit card payments in the midst of all the new experiences you’re having is a huge mistake, as an important factor in your credit score is a record of on-time payments. To avoid this problem, make sure to update your address with your credit card issuers, and keep close tabs on your accounts by viewing them online from wherever you are. Better yet, consider enabling automatic payments to help ensure you are never late on any payments. You can view your free credit report card, updated each month, on Credit.com to find out how your credit card or student loans payments are affecting your credit score.

4. Not Updating Your Credit Card

As a college student with a limited income and little credit history, you likely got the student credit card you were eligible for, or one designed for customers with average credit scores. But once you graduated and find your first job, you’ll likely start to have a stronger credit history and more income to report on your application, which means that you increase the odds you qualify for a new credit card with more competitive terms. Therefore, you might consider applying for a card with a lower interest rate, travel benefits or rewards for spending. (You can read about some of the best cash rewards credit cards in America here.)

5. Avoiding Credit Cards Altogether

While it’s very important to use credit cards responsibly, fear of misusing them causes some college graduates to avoid credit altogether. The problem with this strategy is that you reduce your chances of building the credit history necessary to get the best rates on other loans, such as a car loan or a home mortgage. If you are worried about your use of credit cards, you can figure out when and where you’ll use them to best benefit your credit history. Keeping your accounts open and in good standing can really be a long term benefit to you.

More on Credit Cards:

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iTunes Gift Card Scams Are Flourishing

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iTunes gift cards have become a common tool for online scammers to wring money out of victims, according to new warnings from Apple and U.S. federal authorities.

One agency received a deluge of complaints during a recent weekend, including word from one victim who lost $31,000 in a recent iTunes payment scam, according to the Federal Trade Commission.

The agency said the problem has grown so bad that Apple recently posted a notice on its gift card page:

“iTunes Gift Cards are solely for the purchase of goods and services on the iTunes Store and App Store. Should you receive a request for payment using iTunes Gift Cards outside of iTunes and the App Store please report it at ftc.gov/complaint.”

Apple did not immediately return a request for comment.

Criminals convince victims to buy iTunes gift cards, either online or in a store, and then email the secret code so the value can be drained — or traded.

“As soon as you put money on a card and share the code with (scammers), the money’s gone for good,” the FTC warned in a blog post.

Karen S. Hobbs, an attorney with Federal Trade Commission’s Bureau of Consumer Protection, said scammers like iTunes gift cards because they are “cash-like” in a few critical ways. It’s pretty hard to reverse an iTunes payment — unlike a credit card payment — and movement of iTunes dollars can be virtually untraceable. (See more reasons consumers fall for scams here.)

With any fraud scheme — from sweetheart scams to fake IRS tax bill scams — a criminal’s biggest challenge is getting paid. Wire service payments are their preferring method, because wire payments are generally impossible to reverse. But apparently consumers are slowly heeding warnings about wire services, leading criminals to turn to other payment methods.

iTunes gift cards aren’t the only alternate money system scammers have adopted. The FTC warns that they are using Amazon gift cards, PayPal, reloadable cards like MoneyPak, Reloadit and Vanilla, too.

Of course, criminals aren’t using the iTunes gift cards to feed their voracious appetite for music. They sell the cards on thriving gift card black markets, where iTunes cards — all cards, really – can sell for pennies on the dollar. Still, that gives criminals a great way to receive funds from victims and quickly cash them out.

“I think most people are surprised about the black market for iTunes cards,” Hobbs said.

It seems a bit far-fetched that consumers would believe the IRS, or any government agency, would ask for payment via iTunes “bucks.” But clearly, people are falling for the tactic.

“In some cases, (criminals) stay on the phone (with victims) while they go to the store and buy the gift cards, talk them through it,” Hobbs said.

The trend is international, too. Here’s a story about a similar tactic working in the United Kingdom: a criminal tricks a victim into believing she has a big tax bill that must be paid immediately.

“One victim is revealed to have purchased over 15 iTunes gift cards from Argos – each one valued at £100 – and handing over the codes to scammers on the phone. Another victim shelled out an incredible £15,000 on iTunes gift cards after receiving a cold call, the codes for which went straight to criminals,” TrustedReviews.com wrote on Friday.

One reason these scams might be working: Apple and iTunes are both recognizable brands, and criminals may be borrowing a bit of their “halo effect” to gain credibility.

So the big message the agency is trying to deliver is simple: “If you’re not shopping at the iTunes store, you shouldn’t be paying with an iTunes gift card,” the FTC says.

More Money-Saving Reads:

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25% of College Students Spend Most of Their Money on Alcohol & Drugs, Survey Says

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A quarter of U.S. college students who responded to a recent LendEDU survey say their biggest monthly expense is alcohol and/or drugs.

“Quite surprising, but not that crazy,” Nate Matherson, CEO of LendEDU, said in an email. “This was perhaps the most fun response.”

LendEDU, an Iowa-based student loan and refinancing marketplace, surveyed 455 undergraduate and graduate students at three East Coast schools in early 2016. Not only did the survey find that these college kids are using their money for fun, it turns out many haven’t been taught about finances and may face a real wake-up call after graduation.

“College students are leaving campus with an average of $35,000 in student loan debt, yet the majority of students are lacking basic financial skills,” Matherson said. “How can we expect student loan borrowers to repay/escape student debt without personal finance knowledge?”

About half of respondents said they learned at least a little bit about finances in high school, while only 34% said they had taken a college course on personal finance. It appeared that parents were the biggest influence on financial knowledge, with 46% saying their parents taught them about managing money in some way and 24% saying they learned from their parents’ example.

Good Credit Pairs With Good Drinks

The LendEDU team reports that 58% of students surveyed were not actively working to build good credit. However, out of those who had a credit card, only 8% said they had been late on a credit card payment, so they may have good habits that are helping their credit without knowing. (Using a credit card can be a great way for young people to start building credit, and you can check out the best student credit cards here.)

You certainly learn a lot in college, and that includes budgeting, whether it’s for recreation or for financing your education. Developing good spending and saving habits now can help you one day when you are faced with repaying student loans or paying down a mortgage. These good habits can also benefit you in other ways, like building a good credit score. You can keep an eye on your credit by viewing your free credit report summary, updated each month, on Credit.com.

More on Student Loans:

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How Many Americans Have Gone Through Foreclosure?

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During the Great Recession, many Americans lost their homes due to foreclosure. In fact, according to real estate data company RealtyTrac, there were 6,324,545 completed foreclosures from January 2006 to April 2016.

“It is a big number,” Daren Blomquist, Senior Vice President of RealtyTrac said in an email. “Normal would be around 250,000 bank repossessions per year. These last 10 years represented the biggest loss of home ownership and shifting of real estate wealth since the Great Depression.”

The Current Status of the Housing Market

The market has improved, but that doesn’t make it immune to foreclosures. (You can see the 10 states with the biggest foreclosure problems here.)

“The foreclosure crisis is largely behind us, although still certainly lingering in certain pockets,” Blomquist said. “Unfortunately, we are already seeing signs of another housing bubble in certain markets, so people should continue to be cautiously optimistic when it comes to the housing market.”

But Blomquist says people who can truly afford to buy a home may still benefit from it.

“Homeownership done responsibly is still one of the best ways to build wealth,” Blomquist said.

What a Foreclosure Can Mean for You

“Foreclosure will obviously create a crater in a credit report for some time,” Troy Doucet, attorney with Doucet & Associates in Columbus, Ohio, said in an email. “However, foreclosure is not the end of the world. Those with foreclosure in their credit past will find their credit scores slowly improve as time passes. After a few years, they may even be able to buy another house.”

If you default on a loan or go through a foreclosure, it will appear on your credit report for seven years. But you can work to improve your credit score. (Consider these steps to fix your credit.) To see how your mortgage payments are affecting your credit you can take a look at your free credit report summary, updated monthly, on Credit.com.

More Money-Saving Reads:

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You Can Stop Living Paycheck to Paycheck. Here’s How

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Bad financial habits aren’t always easy to correct. In fact, they can be one of the most difficult things to overcome when it comes to your finances, often requiring a complete shift in the way you think about money.

If you’re like a lot of Americans, you’re living paycheck to paycheck, and it might not be all about needing a bigger income. Thirty-seven percent of Americans polled recently said they don’t have enough savings to pay for an unexpected expense like a car repair or visit to the doctor.

If you’re in a similar situation, you might be able to chalk it up to bad habits. But you can break these financial habits if you stay focused.

One of the first important steps toward doing that is to take a good, hard look at the money you have coming in versus the money you have going out so that you can establish a budget — and stick to it. That’s solid advice from Amanda Clayman, a financial therapist in New York City. But you shouldn’t stop there. You also need to pay yourself and build a cushion for emergencies.

Sound impossible? Here’s how to get started.

1. Measure Your Finances

“The first thing you need to do is just take a picture of what is happening in your financial life right now,” Clayman said. “So, not thinking about what to change, just getting a really accurate measurement on how you naturally and intuitively manage your money.”

How much money do you have coming in? Including your paycheck is a given but don’t forget other income: a second job, alimony, child support or any other miscellaneous cash. Write it all down, and add it up. Then calculate your expenses.

One of the most difficult steps in establishing a budget is determining how much money you’re spending. You can start to get a better handle on this by making a list of all your fixed expenses. This would include rent, mortgage payments, car payments, insurance, utilities, cable, etc. Next, include variable expenses like food, gas and entertainment. Don’t forget about miscellaneous and maintenance expenses like property taxes, car maintenance, tag renewals, birthday gifts, etc. Once you’ve added up your outgoing monthly expenses, subtract them from your income, and that’ll tell you whether or not you’re spending more than you earn and help you get a better idea of where to cut back.

“If we’re going to be making changes to our money, that means we’re going to be making changes to our life, so we want to start to think through some of the things that might need to be adjusted and what are alternative ways we can do that,” Clayman said. “That’s a very common reason why budgets fail. People think, ‘I’ll just not spend that money,’ but they don’t think about how that need is going to get met.”

This measurement process is important, Clayman said, because once you understand what’s going on with your income and expenses you can be clear about what’s not working and how to fix it.

2. Weigh Income vs. Expenses

The next step is determining where the imbalance lies in your budget. Is it on the income side or the expense side? “People naturally will either want to reduce spending or they’ll want to put their focus on the other side on the earnings,” Clayman said. “The next step is just encouraging people to pay attention to both sides of their budget, because sometimes people are really excellent at being frugal, but the problem is there’s just not enough money coming in.”

If you determine you spend too much you’ll want to start looking at cutbacks. One way to easily determine areas that you may be able to cut costs is to evaluate which expenses are actual needs versus wants. This can add a whole new perspective to your budgeting efforts and give you the extra push you need to cut the expenses that aren’t necessarily needs.

If you’re on the opposite side of the spectrum and need to make more money, you might want to take a look at whether you’re earning less than you should be. The single biggest impediment to making more money is that people “get used to” their current situation in life. They dream of starting a side business or getting a promotion or moving to a new company, but they are like the frog in slowly boiling water that doesn’t know its life is at risk. They simply let days turn into years and miss their opportunity to grow. They get acclimated. Their incomes flatten out. Here’s some advice on getting out of the income rut.

3. What Can You Control?

Whether you conclude that your primary budget issue is on the income or expense side, it’s still a good idea to see if there are some things you can cut back on. Your short-term discretionary spending is an easy place to start making these cutbacks. Do you buy coffee every day? Stop. Do you eat out for lunch? Take a brownbag instead.

“Some of your out-of-pocket expenses can be changed on a daily basis … versus things like cutting the cable cord or moving into a cheaper place to live,” Clayman said. “With these bigger changes, you might not have to exercise daily discipline around them, but they can be more complicated to put into place.”

Still, the savings can be substantial if you cut back on things like cable television. In fact, “Skinny TV,” or trimmed-down cable packages, can bring the price of pay TV more in line with historical trends, and consumers worried about spending more than $1,000 annually on television should consider it. Call your provider and ask if it offers a skinny package.

Whether skinny or cable, if you’re going to pay a television service bill, you might as well do it with a cash-back credit card and reap the rewards. (Just be sure not to carry a balance and create a new headache for yourself — credit card debt.)

4. What Do You Want to Protect?

It’s also a good idea to look at what is really important to you and how you can maintain that in your new budget. So, for example, if living in a certain location is important to you, because the schools are good or it’s close to your work, you might need to cut back in other areas in order to afford living there.

“There’s always competition for your money,” Clayman said. “So use this as an opportunity to think about what’s truly important to you so you can adjust down or adjust up those things that are easier changes and preserve what is important to you.”

5. Set Your Budget & Stick to It

Once you’ve determined where you can most comfortably make cuts in your budget, begin putting that money toward getting not just caught up with your bills (if you’re behind) but actually a month ahead.

“Ultimately, where I try to get people is to a point where if you are a month or more ahead of your bills, then you can begin to have your income deposited directly into your savings account,” Clayman said. “And then at the beginning of the month, you can slide whatever you’ve budgeted for the month into your checking account.”

This, she explained, can help people who might see the cash accumulate in their checking account and begin to increase their spending simply because they have extra money there.

Getting to this point certainly will take some dedication on your part, but the reward is well worth the effort. If you have a spouse, you can work together to hold each other accountable for any spending oversights. If one of you overspends, set rules that the guilty party has to contribute more to that month’s savings fund — a sort of penalty jar with a twist. It’s much easier to do when you’re working at it together, and you can make it more of a competition to keep it interesting.

If you’re single, consider creating a support group among your friends with a monetary reward for reaching your budgeting goals. Whether it’s a vacation fund or a night out on the town, the extra incentive will help keep your eyes focused on the goal and make it fun in the process.

And, as always, keeping your credit in good shape can help your budget immensely by reducing what you spend on loans over time, since good credit gives you access to lower interest rates. Checking your credit reports at least once a year (you can do this for free through AnnualCreditReport.com) and checking your credit scores (which you can do for free through Credit.com every month) can keep you aware of your standing. This can encourage you to reduce your debt and make your payments on time in order to build and maintain good credit so that you have it when you need it.

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How Much Will a Car Repossession Hurt My Credit Score?

car-repossession-hurt-my-credit-score

In most parts of the country, having a car isn’t optional. Without your own vehicle, it can be extremely difficult to get to work or provide for your family, but at the same time, car ownership can be a challenge.

If you find yourself having trouble making your car payments, you could end up losing your vehicle. That can cause all sorts of other problems, which a Credit.com reader recently asked about:

“How much does a repossession affect your credit?” —kc

Having your car repossessed can certainly cause credit problems, but the actual repossession is only one of them. Car repossessions are reported to the major credit bureaus, and as a result, will impact your credit scores.

“A car repossession is considered a negative payment event by the FICO Score,” Can Arkali, principal scientist at credit scoring company FICO, said in an email. “All else held equal, the impact of a car repossession is comparable to the impact of a collection account.”

Jeff Richardson, a spokesman for credit scoring company VantageScore Solutions, said how much a repossession affects your credit really depends on the scoring model you’re talking about, as well as other factors in an individual’s credit history. In general, a repossession is considered a derogatory event, like collection accounts, civil judgments and tax liens.

Credit Problems Leading Up to Repossession

Of course, repossessions generally don’t happen in a vacuum. Someone’s car is usually repossessed because they haven’t made their auto loan or lease payments on time, which likely would have already hurt their credit.

“Avoid it,” Richardson said, adding that people should avoid any derogatory events “at all costs.” According to VantageScore, it will take longer to recover from a derogatory event like a car repossession than it will to recover from a series of delinquencies. So even if you’re behind on payments, bringing that account to current status and avoiding a repossession may also help you spare your credit from further damage.

The Aftermath of Repossession

A repossession can remain on your credit report for 7 years from the date you initially fell behind on the loan. The loan status will change to “repossession” (it would have previously said how many days delinquent the payments were), and it will have a seriously negative impact on your credit, though that impact will lesson over time.

Rod Griffin, director of public education at Experian, said there’s no specific amount of points your credit score will drop after a repossession. Given that a series of delinquencies tends to precede repossession, someone whose car is taken back likely already has a poor score.

“Typically it’s not a unique element of the history,” Griffin said. There are probably other negative things happening, and that repossession is going to dig them in deeper.”

That’s often not the end of it either. Losing your main mode of transportation could seriously compromise your ability to get to work and make money to pay your other bills. The potential domino effect of a repossession is just one of many reasons to try to avoid it.

A voluntary repossession — giving the car back rather than having someone come and take it — will hurt your credit score just as much as a forceful repossession, Griffin said, though it could help you in the future to maintain as good a relationship as possible with an auto lender or dealer. But as far as credit goes, it won’t help.

Finally, after the lender repossesses your car, they will sell it in an attempt to recoup their losses. If the sale doesn’t cover the entire balance of the loan, you can expect to get a 1099-C for that tax year. The Internal Revenue Service treats canceled debt as income, and you may need to pay taxes on it, which can further strain your finances.

If you do go through a repossession, Griffin recommends focusing on what you can do to improve your credit while you wait for the repossession to age off your reports. That includes actions like paying down your revolving credit balances (credit card debt) and bringing current any other delinquent accounts you may have, because payment history and debt use have the greatest impact on credit scores. You can see how your score changes as a result of a repossession and your efforts to improve it by getting two free credit scores every month on Credit.com.

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22 Options for a Home Improvement Loan

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Are you ready to make some improvements to your home? Are you looking for financing options that offer more flexibility and better rates than you would get putting home improvements on a credit card?

Below, you will find an extensive list of lenders willing to finance home improvements. If you are interested in comparing terms for more loan providers all in one place, check out our comparison tool.

Besides more competitive interest rates, longer terms and higher loan amounts, financing home improvements with an installment loan gives you more flexibility. Most contractors will not accept credit cards, and being able to write a check for a contractor’s bill gives you a larger pool of contractors to choose from. It also provides an opportunity to get financing if you have not yet built enough equity in your home to qualify for a home equity line of credit. A home improvement installment loan is also an unsecured loan and your home will not be used as collateral as it would in a home equity loan or home equity line of credit.

Are You Ready To Apply?

Before you start comparing loans, it is wise to make sure that you are prepared for the loan application process, that your debt-to-income ratio is in good shape, and that you have the proper documentation prepared.

While lending requirements vary by bank, most will require the following things:

  • Proof of Income: Lenders want to know that you income is enough to not only meet your current obligation, but to potentially meet the obligation of a new loan as well.
  • Low Debt-to-Income ratio: Lenders typically want you to have less than 40% DTI.
  • A Decent Credit Score: credit score requirements vary by lender, as you will see below, but excellent or good credit scores will be eligible for the best rates and the offers with no origination fees. It is wise to have a good idea of your credit score before you start applying and comparing offers.

Why A Home Improvement Loan?

Interest Rates: Financing home improvements through a loan rather than a credit card gives you access to interest rates that are often much lower than credit cards. The list below will show that if you have excellent credit, you could see home improvement loan rates as low as 4% with no origination fee.

Easy Application: Online lenders have the easiest loan applications around. The initial application will only do a “soft pull” on your credit, which will not affect your credit score, and will allow you to see your rate.

Shorter Terms: Credit cards, because of their high interest rates and the ability to pay on them for 10 years or more, leave you in debt longer. By choosing a home improvement loan with a term of 36 to 60 months, you not only lower the interest you are paying, you will have the loan paid off in a shorter amount of time, which of course saves you money.

The Ability to Shop Around: Some lenders do a soft pull, which does not affect your credit score. This gives you the confidence to shop around without harming your score. If you’re interested in providers that do a hard pull, be sure to do all your shopping in a 30-day window in order to minimize the impact on your credit score.

Where to Get Your Home Improvement Loan

If you have excellent credit, it is worth applying for the best offers in home improvement loans. Better rates and terms will save you money in the long run.

Here are the top three offers:

  • Lightstream*: A great online option for those with excellent credit. It can finance $5,000 to $100,000.Your rate will depend upon the term and the amount of the loan, and is 0.50% higher if you do not enroll in autopay. To qualify, you’ll need good credit, as well as enough income to meet your current obligations and the loan.

Lightstream3

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  • Earnest*: Earnest offers home improvement loans of up to $50,000. It offers no origination fee and terms of up to 36 months. Earnest does a soft pull to determine your rate. The minimum credit score needed to apply is 720.

Earnest

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  • SoFi*: Fixed rates for loans start at 5.50% and variable rates start at 4.04%. There is no origination fee and SoFi will finance $5,000 to $100,000.

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*referral link

Other Options (in alphabetical order)

  • Avant*: Offers loans up to $35,000 in as little as one business day. Rates vary from 9.95% to 36.00%, there is no origination fee, and loans are available for up to 60 months. Avant loans are currently not available in Maryland, Massachusetts, New York, or Nevada,
  • Basix: Home improvement loans from Basix have no origination fee and can be up to $5,000 for 36 months. Its rates range from 25.99% to 35.99%, and you need a credit score of at least 600 to apply.
  • Best Egg: Rates range from 5.99% to 29.99% and it has an origination fee of 1.00% to 5.00%. It offers loans up to $35,000 for up to 60 months, and the minimum credit score need to apply is 640.
  • Circle Back Lending*: You can get funds in as little as 1 day with Circle Back Lending. Its rates range from 6.43% to 34.93% with terms up to 60 months. The origination fee varies from 0.99% to 4.99% and you must have a credit score of 660 to apply.
  • Discover: Discover offers home improvement loans with no origination fee. Its rates vary from 6.99% to 24.99% and it offers loans of up to $35,000 for up to 84 months. You could receive the funds in as little as 1 day, but you must have at least a 660 credit score to apply.
  • Freedomplus*: Freedomplus offers home improvement loans up to $35,000 with terms up to 60 months. Its rates vary from 8.45% to 29.90% and there is an origination fee of 1.38% to 5.00%. In order to apply, your credit score must be 600 or greater.
  • Karrot: Karrot offers loans to applicants with a minimum credit score of 660. Loan APRs range from 6.44% to 29.27% and origination fees vary from 1.05% to 4.75%. It offers terms up to 60 months and you must have a credit score of at least 660 to apply.
  • LendingClub*: With rates ranging from 5.99% to 35.89%and a minimum credit score needed of 600, LendingClub is an excellent option for those with lower credit scores. It offers loans up to $40,000 but is not available in West Virginia or Iowa.
  • Loan Depot: Loan Depot offers loans of up to $35,000 with rates ranging from 6.17% to 29.99% and origination fees of 1.00% to 5.00%. It offers 3-year terms and you must have a credit score of at least 640 to apply.
  • OneMain*: OneMain charges no origination fee. Its APRs range from 17.99% to 35.00% on loans of up to $10,000 for up to 60 months. You must have a credit score of at least 550 to apply for a OneMain home improvement loan.
  • Pave: Pave offers terms of up to 36 months and rates ranging from 6.00% to 16.00%. The maximum loan amount it offers is $25,000, the origination fee varies from 1.00% to 2.00%, and the minimum credit score needed is 660. Pave loans are currently only available in New York State.
  • Peerform: Peerform offers loans up to $25,000 for up to 3 years with rates from 7.12% to 28.09%. Its origination fee varies from 1.00% to 5.00%.
  • PenFed Credit Union: While there is no origination fee for a home improvement loan from PenFed Credit Union, you must have a credit score of at least 700 to apply and be a member of the credit union. It offers a 9.99% APR, and loans of up to $25,000 for 60 months.
  • Prosper: Prosper’s rates vary from 5.99% to 36.00% on loans of up to $35,000.The origination fee ranges from 1.00% to 5.00% and you need a credit score of at least 640 to apply.
  • Santander: Santander offers loans of up to $25,000 with rates ranging from 6.99% to 14.99% and terms up to 60 months. There is no origination fee, but you must have a credit score of at least 680 to apply.
  • Springleaf*: Springleaf offers loans of up to $25,000, terms up to 60 months and rates of 15.99% to 39.99%. Its maximum loan amount is $25,000, and there is no origination fee. Also, your credit can be as low as 550 to apply for a Springleaf home improvement loan.
  • Upstart*: Upstart offers loans of up to $50,000 with rates of 4.66% to 29.99% for up to 5 years. The minimum credit score needed to apply is 640 and the origination fee varies from 1.00% to 6.00% upfront.
  • USAA: Home improvement loans from USAA have no origination fee on loans of up to $20,000. It offers terms of up to 72 months and rates range from 8.99% to 10.99%. You must have a credit score of at least 700 to qualify for a loan from USAA and be eligible through a military affiliation.
  • Vouch*: Vouch offers loan rates of starting at 10.68% APR with loans up to $15,000 for 36 months. You will need a credit score of at least 600 to apply and origination fees vary from 1.00% to 5.00%.

When shopping around for a home improvement loan, make sure that you not only compare the APR you have been offered, but the origination fee as well. Additionally, be sure the compare all of the factors at the same term. As with any loan, regardless of the bank’s determination of your eligibility, make sure that the loan works with your budget and comfort level.

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CircleBack Lending Review: Borrowing Option for Good to Excellent Credit Scores

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CircleBack Lending is an Internet-based consumer-lending platform for both borrowers and investors. Its goal is to provide consumers with good to excellent credit with a quick way to borrow money.

CircleBack LendingThe entire process of applying for a personal loan with CircleBack Lending* is done online. It aims to have a fast application and approval process, and next day funding is available when you submit all required documents by 10AM ET.

CircleBack Lending is positioned to be a better alternative for consumers with high interest credit card debt, but your debt doesn’t have to be linked to credit cards in order to receive a loan. It offers fixed rates as opposed to variable rates, so you don’t need to worry about the interest on your loan becoming unbearable.

Let’s take a look at what CircleBack Lending has to offer, and how it compares against other peer-to-peer lenders.

Personal Loan Details

CircleBack Lending offers consumers loans ranging from $3,001 – $35,000 and you can borrow for up to 60 months.

The APR ranges from 6.43% – 34.93%.

When you apply for a loan with CircleBack Lending, you receive a credit grade after its loan analysts have gone through your profile. This is so investors know the level of risk associated with your loan. Your APR will vary depending on this credit grade.

CircleBack Lending received an “A” transparency score from MagnifyMoney for allowing potential borrowers to see rates with a soft pull and disclosing fees.

CircleBack Rates

Pros to Borrowing from CircleBack Lending

If you have high interest credit card debt with a variable interest rate, CircleBack Lending may provide a better solution. You can apply to consolidate or refinance your existing debt, and you can often do so at a lower rate than you had before.

CircleBack Lending also claims it has a quick application and funding process, so if you need the funds within a week, you’ll be covered.

Cons to Borrowing from CircleBack Lending

The most obvious con is the APR cap. 36% is extremely high when compared to other peer-to-peer lenders. The starting APR of 12.88% for a 60 month loan is also very high – and that’s the APR for borrowers who receive the best credit grade.

Credit card debt often starts with a 15 percent APR and 12.88% isn’t too far off, and even though it’s a fixed rate, you might be able to get better rates from other lenders.

Qualifications for a Loan

CircleBack Lending requires that applicants be 18 years or older, and loans are only available to those in the following states: Alabama, Alaska, California, Connecticut, Delaware, District of Columbia, Florida, Georgia, Indiana, Kansas, Kentucky, Michigan, Missouri, Montana, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Rhode Island, South Carolina, South Dakota, Tennessee, or Virginia.

Additionally, since CircleBack Lending aims to provide loans to those with better credit scores, you should have, at minimum, a 660 FICO score. Research indicates CircleBack Lending has a rigorous underwriting process, so the better your credit report looks, the better your chances will be when it comes to getting approved.

Who Can Benefit the Most from a CircleBack Lending Loan?

If your interest rate on debt is much higher than 12.88%, and you have excellent credit, you stand to benefit the most from a personal loan with CircleBack Lending. Its interest rates are unfortunately not very competitive, so you need to make sure you’ll be able to get a low enough APR to make applying worthwhile.

Fees and Gotchas

CircleBack Lending’s fees are standard when compared with other peer-to-peer lenders.

Depending on the credit grade you’re given, your loan origination fee will be anywhere from 0.99% to 4.99%.

If your payment is rejected or fails for any reason, you’ll be charged a $15 fee. CircleBack Lending specifies this fee will be incurred each time a payment fails (other lenders limit this to once per billing cycle).

If you’re late making a payment, on the 16th late date, you’ll be charged $15 or 5.00% of your monthly payment amount – whichever is greater.

Paying by check? CircleBack Lending will charge you a $15 check processing fee.

CircleBack Lending

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*Referral Link

Transparency Notes

CircleBack Lending has a minimalist website, especially compared to other personal loan providers. There isn’t much information on it at all. The company “About” page isn’t very helpful, there’s not much information on how the loan application works, and there’s little to nothing provided for investors interested in investing in its consumer loans. Its “Help” section is “coming soon,” and upon calling, no one was available to answer.

Alternatives to CircleBack Lending

Let’s look at a few other peer-to-peer lenders and see how they compare with CircleBack Lending.

  • Prosper: Its loans start at 6.68% APR and are capped at 35.97%. Its origination fee is 1% – 5%, and its loans are offered on the same 36 and 60-month terms. Borrowers can choose a loan amount between $2,000 – $35,000.
  • LendingClub*: Its APR ranges from 5.99% – 35.89%. Its origination fee is 1% – 6%. You can borrow up to $40,000. LendingClub is not available in Iowa or West Virginia.
  • Upstart*: Its APR range starts off at 4.66% and goes up to 29.99%. The origination fee is slightly more, beginning at 1% and ending at 6%. You can borrow from $1,000 up to $50,000.

Overall, these lenders are in close competition when it comes to loan terms.

Upstart has the highest origination fee, and CircleBack Lending has the highest APR cap, with Prosper trailing close behind. They all offer around the same loan amounts, with Upstart’s offering the lowest minimum loan requirement.

Shop Around for the Best Rates

With that said, it’s worth it to you as the borrower to shop around for the best rates. Applying with CircleBack Lending will not affect your credit – it’s a soft pull – so feel free to check other personal loan options including non-peer-to-peer lenders like SoFi*. See who can offer you the best rates. You shouldn’t feel obligated to take the first offer.

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The post CircleBack Lending Review: Borrowing Option for Good to Excellent Credit Scores appeared first on MagnifyMoney.

Best Options for a No Fee Personal Loan

Best Options for a No Fee Personal Loan

Updated May 30, 2016

Interest isn’t the only cost to consider when shopping for loans. Fees can also eat away at your money. Many lenders increase profits by charging all sorts of fees – application fees, origination fees and even prepayment fees! So it’s important you do your homework and find a no fee personal loan.

Below, we help get your research started by rounding up personal loan providers that respect their customers enough not to charge insane fees. This post also lists other lending companies you may already be familiar with, which offer no origination fees and no prepayment fees but do include steeper late fees.

LightStream

LightStream may be an unfamiliar name, however it’s operated by one of the largest banks in America. LightStream is the online lending division of SunTrust Bank, the 12th largest bank (in terms of total assets) in the United States. LightStream offers up to $100,000 in personal loans for a maximum term of 84 months with 5.49% to 14.49%. It is so confident in its application experience, that any dissatisfied customer will receive a $100 credit towards their personal loan. LightStream also offers a very competitive home improvement loan.

LightStream Personal Loan Fees

  • No origination fee
  • No prepayment fee
  • No late fee

What LightStream Wants to See in Its Personal Loan Applicants

  • A 720+ credit score
  • 5 years or more of significant credit history is preferred
  • No delinquencies
  • Money saved in a bank
  • Some variation of credit lines
  • Proof of stable and sufficient income

Lightstream3

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SoFi

SoFi offers personal loans ranging from $5,000 to $100,000. Terms are 3, 5, or 7 years with fixed APR ranges of 5.95% – 12.99% if enrolled in autopay. Borrowers can use SoFi personal loans for reaching nearly any goal: home renovation, credit card payoff, and more.

Something that makes SoFi stand apart from other lenders is that the company offers unemployment insurance. That means an eligible borrowers who have lost their jobs person can go 3 months in a row (12 months total) without making a loan payment. SoFi also offers job placement services.

SoFi Personal Loan Fees

  • No origination fee
  • No prepayment fee
  • A late fee applies if a payment is more than 15 days late. The late fee is the lesser of 4% of the payment due or $5.

Getting Approved for a Personal Loan by SoFi

  • You must be age of majority in your state (18, 19, or 21 – depending on your state)
  • You must be a US citizen or permanent resident
  • You must have graduated from a SoFi approved school
  • 700+ credit score

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Earnest

Besides being a no-fee lender, Earnest is appealing because the company is far from a traditional lender. Instead of focusing on credit scores, Earnest uses a merit-based lending system. Earnest aims to analyze a person’s trustworthiness instead of relying on a credit score. This is good for people with a ‘thin’ credit file – young college students, for instance. However, the application process isn’t nearly as brief as with other lenders.

Earnest Personal Loan Fees

  • No origination fee
  • No prepayment fee
  • No late fee – customers are directed to call into support if they are having trouble paying. They can get their payment amounts readjusted.

Getting Approved for a Personal Loan by Earnest

Firstly, it’s only available in 36 states: Arkansas, Arizona, California, Colorado, Connecticut, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, Washington D.C., West Virginia, Wisconsin and Wyoming.

As mentioned earlier, it’s not a quick process. Potential borrowers must be at least 18 years of age and have a good education. Ideally, applicants will have a college degree and a steady job. An applicant’s debt to income ratio will also be analyzed. With this lender, it’s not just a matter of checking off boxes as one goes through the application process. Earnest really likes to get to know its potential borrowers.

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Basix Personal Loans

Before reading any further, it’s important to know that Basix is a new lender. As such, Basix only operates in Georgia, Missouri, New Mexico and Utah. Basix launched this year (2015). It’s still expanding. This new lender aims to serve those people who lie just below the requirements of many bank loans – tens of millions of Americans, according to its founder and CEO. This may be a good option for anyone struggling to find a lender.

Basix Personal Loan Fees

  • No origination fee
  • No prepayment fee
  • $5 late fee after 15 day grace period

How to Apply for a Basix Personal Loan

  • Must be over 18
  • Have a qualifying bank account
  • Have a regular source of income
  • Have an email address
  • Credit score of at least 600

But keep in mind, as with any loan that’s easy to qualify for, interest rates are high. These interest rates are nothing as bad as payday lenders but rates are still high: 25.99% – 35.99%. It also only offers a maximum of $5,000. This is why it’s important to consider the entirety of a loan – not just its fees.

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Other No Origination Fee/No Prepayment Penalty Loans

The following are also lenders that don’t have origination fees or a prepayment fee. However, it’s important to be aware of the high late fees associated with these lenders. If paying the loan is already hard, late fees with just add to the pain. But still keep these other lenders in mind when shopping for a loan.

Discover

The most unique aspect of the Discover (yes, like the credit card) is that the loan comes with a 30-day money-back guarantee. If a borrower discovers a better loan within 30 days, they can just send Discover back the money with no interest charged.

Discover offers loans up to $35,000 with APR ranging from 6.99% to 24.99%. Loan duration is anywhere from 36 to 84 months. That’s much longer than most lenders offer.

For a Discover personal loan, applicants must be at least 18 years of age and a credit score of at least 660.

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Santander

Santander is only available in certain states: NH, CT, DE, DC, RI, MA, ME, NY, NJ, PA, MD, or VT. The Santander personal loan boasts no origination fee and no prepayment penalty. The late payment fee is an even $20. A personal loan can range anywhere from $5,000 to $25,000. A successful applicant will have at least a 680 credit score.

santander1

 

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PenFed

PenFed is another possibility if late fees aren’t a concern. PenFed is short for Pentagon Federal Credit Union. As intimidating as that may seem, military service is not required. In fact, anyone can join PenFed by making a one-time charitable contribution to one of its military-based charities. Tax-deductible donations can be as low as $14. That would more than pay for itself if a great personal loan is secured. A PenFed personal loan has no origination fee, no prepayment penalty but it does have a late fee of up to $25. You need a minimum 700 credit scores.The APR range is 10.25%-14.00% on a maximum loan of $25,000.

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USAA

USAA boasts no origination fee and no prepayment fee. But USAA personal loans come with a late fee of 5% of the remaining balance of the loan. No wonder that fee isn’t advertised anywhere online. That’s the highest late fee (by far!) of any of the loans on this page.

The application process is very similar to that of PenFed. Successful applicants will have a credit score of at least 700. The maximum $20,000 loan can be set for a term as high as 72-months at 8.99% to 10.99%. One neat aspect of applying with USAA is most applications result in instant approval.

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Next Steps Towards a No Fee or Low Fee Loan

It’s important to assess all aspects of a loan before signing and avoiding fees is an excellent start. You also need to shop around for the best option. If you do all your shopping within a 30-day window it will minimize the impact on your credit score. There are many personal loans available; it’s just a matter of finding one to fit your wants and needs.

We’ll receive a referral fee if you click on the “Apply Now” buttons in this post. This does not impact our rankings or recommendations You can learn more about how our site is financed here.

The post Best Options for a No Fee Personal Loan appeared first on MagnifyMoney.