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credit cards

The Perils of Skipping Loan Payments This Holiday Season

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

The holidays are fast approaching and that means there are presents to buy, trees to trim and merriment to be made, all of which will cost you money. Fortunately, your credit union, bank or credit card issuer may be willing to let you skip your monthly payment in December or January.“Skip-a-pay [programs] are a popular way for banks to add quick fee revenue while giving their clients some extra cash in their pockets,” says John Oxford, a spokesman for Renasant Corporation, which operates 171 banking, investing and wealth management offices in the South. While Renasant Bank previously offered a skip-a-payment program, it does not currently have one.At other institutions, these programs allow customers to skip their monthly payment in exchange for a small fee. Some lenders may even donate a portion of the fee to a local charity so it seems like a win-win for all involved.Not so fast, say some financial experts. Skipping one payment might not seem like a big deal, but it can have a negative impact on your finances.5 Reasons to Skip the Skip-a-Payment OptionRich Hyde, the COO of Prestige Financial Services in Salt Lake City, works with clients trying to raise their credit score and finds some use skip-a-payment programs to stretch their money through the holidays to buy gifts for friends and family. Although skipping a payment may be preferable to racking up debt on a high-interest credit card, it doesn’t come without drawbacks.You lengthen the term of your loan. You may be skipping a payment, but you’ll still need to eventually make it. “They are essentially letting you take the payment from December or January and adding it to the life of the loan,” says Kelsa Dickey, owner of Fiscal Fitness Phoenix. Skipping a payment every year means you could be paying an auto loan for five to six months longer than originally planned.You add to the interest you pay. Not only will the term of the loan be longer, but you’ll pay more interest as well. A $5,000 credit card balance at a 24.99 percent APR accrues roughly $100 in interest each month. As a result, skipping a payment means you’ll end up owing more the next month even if you haven’t used your card.You might forget to make the following payment. Hyde is concerned skipping one payment might snowball into several payments. “Customer behavior can be impacted [by skipping a payment],” he says. “Anything that gets people out of the habit of paying is a bad idea.” You could ding your credit score. If you do happen to forget the next month’s payment, than you could see a drop in your credit score. Plus, you’ll likely get hit with a late fee which typically runs around $35. Dickey adds that some people might be tempted to skip payments even if their lender doesn’t offer a skip-a-payment program. However, doing so could negatively impact your credit score and damage your relationship with the lender, making it difficult to receive loans or lines of credit in the future.You are reinforcing poor money habits. While all the above reasons are enough to say “no thank you” to skipping a payment, Dickey says there is one more to consider. “By skipping a payment, you’re saying Christmas gifts are more important than something like a car that gets you to and from work,” she says. “There’s a much deeper rooted problem of putting things that are not essentials in front of things that are essentials.” Declining to skip a payment is one step toward creating healthy money habits and smart spending priorities.When Skipping a Payment Might Make SenseWhile experts say skipping a payment to buy gifts doesn’t make much sense financially, there may be a time and place for skip-a-payment programs.“If a consumer wants to free up cash for the holidays and doesn’t mind a minimal fee and an added month on their loan, it can be a beneficial short-term move,” Oxford says, “but it should not be used to avoid a payment just because the offer is there.” To minimize the impact of skipping a payment, he recommends people use a portion of their tax refund, if possible, to make an extra payment later in the year. For people who are in a bind and considering a payday loan or going into debt to pay the bills, Hyde says skipping a payment would be the lesser of two evils. Meanwhile, Dickey believes using a skip-a-payment program is understandable in cases of unemployment. “If it comes down to putting food on the table, yes [skip a payment],” she says.Skipping a payment may also be a good strategy if you are planning to use the money from that payment to wipe out a high-interest debt. Installment loans, such as those for cars, typically have a much lower interest rate than what might apply to a credit card. Financially, it might make sense to skip an auto loan payment for one month, and send that money to pay off a credit card account.However, Dickey says most people don’t skip payments for strategic reasons. Instead, they do so to spend more on gifts or holiday deals. She asks, “If your parents knew you were skipping a payment or going into debt to give them a gift, would they want it?” She’s betting the answer is probably no. .

February 21, 2020 0 comment

Banking & Credit

Goodbye FICO, Hello VantageScore?

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

For more than 25 years, credit scores have been practically synonymous with FICO, the shortened name of the Fair Isaac Corporation. However, a new company, VantageScore Solutions, has emerged in recent years and is chipping away at FICO’s dominance in the credit score business. “VantageScore Solutions is an effort to provide more choice in the marketplace,” says Ezra Becker, vice president of research and consulting for the credit bureau TransUnion. The credit scoring company is the result of a combined effort of all three major credit bureaus: Experian, Equifax and TransUnion.The company was founded in 2006 and has gained traction. From 2014 to 2015, VantageScore credit scores were used more than 6 billion times, double the amount used from 2013 to 2014. Just as with FICO scores, VantageScore credit scores are used to determine the likelihood someone will pay back a debt. “Credit scores are a scaled representation of the probability of default,” Becker explains. Last December, House Resolution 4211 was introduced in Congress to allow Fannie Mae and Freddie Mac to use alternate credit scoring methods when making mortgage decisions. Jill Gonzalez, analyst for WalletHub.com, says if the bill is passed, it might result in the programs adopting VantageScore, a move that could be a major coup for the company.“What Fannie and Freddie do now is use outdated models,” Gonzalez says. A switch to VantageScore would change the way applications are evaluated and make it easier for borrowers who have low credit scores under the FICO model to purchase a home. Plus, it could further dent FICO’s hold on the credit score industry. Navigating the Sea of Credit ScoresBecker is quick to note Americans use the word FICO to describe credit scores in the same way they may use the word Kleenex to describe facial tissue. The word has turned into a generic term for how lenders evaluate creditworthiness, but Becker says there is actually a variety of credit scores that can be used.Each of the major credit bureaus has, at one time, created its own score. Other companies, like CreditXpert, are in the business as well. Even within FICO, there are numerous scores. While FICO Score 8 may be most widely used for credit card applications, student loans and other credit decisions, there are FICO Auto Scores, FICO Bankcard Scores and older versions of FICO’s main scoring model that may be used for mortgages.VantageScore seems to be making in-roads in the industry, in part, because it offers a simplified scoring method. “VantageScore has three scoring models,” says Bethy Hardeman, chief consumer advocate at Credit Karma. “For comparison, FICO has over 50 different scoring models.” While each credit bureau may use a different version of the FICO score for various lending scenarios – for example, for mortgage lending, Experian uses FICO Score 2, while Equifax uses FICO Score 5 – VantageScore is uniform across all three companies. The only reason a VantageScore could vary from one bureau to another is if a lender chooses not to report an account to all three companies, according to Becker.What It Means for YouA move to VantageScore could be good news for consumers, particularly those with a weak credit history. VantageScore 3.0 is the most current version and looks back 24 months at a person’s credit history, a feature that allows it to score more people who have little or no recent credit history. “[The company’s] latest scoring model can score up to 35 million more consumers compared to other models due to its broader consideration of credit data,” says Hardeman, adding that the free scores offered on Credit Karma come from VantageScore. The wider consumer net is also because the model can score people with as little as one month of credit history compared to six months for FICO scores, Gonzalez explains. Score models are created using anonymous sample consumer demographics and credit data. While VantageScore 3.0 is a relatively new model, older FICO scores may be based on decades old data. “A score created in 2002 may not be appropriate for the lending environment and consumers today,” Becker points out.The bottom line for borrowers is that VantageScore may make it easier for some people to get access to credit, but it won’t wipe away all financial sins. “If someone is undeserving of credit due to a history of not paying [bills], that won’t change [with VantageScore],” Gonzalez says.Rather than hope a change in score will make credit available, consumers should stick with the tried-and-true methods of paying on time and limiting the debt they carry. .

February 21, 2020 0 comment

Banking & Credit

6 Credit Card Blunders to Avoid This Holiday Season

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

If you've just finished paying off your credit card debt from last year's holiday shopping, you know that gift buying and paying with plastic can be a dangerous combination.There are so many things that can go wrong (and right) that it would take forever to list every possible way you could spend yourself into the poor house. But whether you're someone who always pays off credit card debt every month or you're still working on paying off debt from Christmas 2009, be sure to at least avoid these credit card blunders.[See: Best Credit Cards: Find the Right Card for You.]Falling for store credit card deferred interest deals. Planning on buying someone a big, expensive gift, or maybe getting something monumental for yourself? Wondering if you should really splurge? That's where deferred interest often lures consumers in. The store will promise that you won't pay interest if you pay off the entire purchase by the end of the advertised period."Every holiday season, many store chains that sell large and expensive items like furniture or appliances start advertising deferred interest offers on their store-branded credit cards," says Alex Gerard, CEO of CardsMix.com, a credit card comparison site. "These offers seem attractive, but they can be dangerous for your pocket if you have little discipline, like the majority of us."If you do have discipline, deferred interest deals can be swell. But it can be devastating if something goes wrong."If you don't pay off the entire purchase and owe even a penny at the end of the advertised period, you will be charged the interest for the whole introductory period," Gerard says.[See: Spend a Windfall Wisely.]Forgetting to track your spending. "The holiday spirit blinds you to how much you're really spending – until the bill comes due in January," says Howard Dvorkin, a certified public accountant and chairman of Debt.com. "So my suggestion is to keep a running list of all your holiday expenses and post them on the refrigerator or somewhere prominent in your home. Once you hit a dollar figure you agreed to stay below – whether it's $300 or $500 or even $1,000 – you and your family agrees to stop spending for the holidays."And if you still have some important gifts you really want to buy? "Everyone agrees to cut from somewhere else in the non-holiday part of the family budget," Dvorkin says.Carrying revolving debt from the holidays. Consumers plan on spending an average of $1,159 on their holiday purchases this year, according to a just-released annual survey of 2,006 consumers (between Oct. 5-9, 2016) from the credit card Discover.You know revolving debt is important to avoid, but you may want to do some math before you whip out your credit card, so you can see what you're getting into. If you were to spend $1,159 on holiday gifts this year, and you had a credit card with an average interest of 15.18 percent (the national average at the time of this writing, according to CreditCards.com), and you planned to take six months to pay it off, you would pay $201.81 each month, spending a total of $1,210.86.That arguably isn't too expensive, spending $51.86 to float $1,159 in gifts in exchange for making your family or friends happy. But, of course, the question becomes – do you only carry that revolving debt for those six months? If you're likely to buy more with your credit card and not pay it off right away, then suddenly that $201.81 payment is going to balloon and will likely become a weight around your neck. For all you know, next holiday season, maybe you'll still be paying off that $1,159 in gifts.Thus, it's vital you pay off that holiday credit card debt as soon as possible.[See: 10 Easy Ways to Pay Off Debt.]Failing to remember that the holidays are ideal for scam artists. It's smart to be something of a Grinch, assuming the world isn't full of good people when you're shopping at your computer or at the mall. From pickpockets to scammers with sophisticated equipment hoping to steal your credit card information when you shop at a public place with unprotected Wi-Fi, some people are out to get you.In Calgary, Canada, for instance, police recently alerted the media that they've seen an escalation in text messages asking consumers if they want to be secret shoppers, and while that might sound plausible, no, these text messages aren't legitimate. And throughout North America, there have been reports of fraudulent online stores and fake shopping apps being created, just waiting for people to find them and type in their credit card information.Be careful about applying for store credit cards. Like deferred interest deals, you'll get a lot of sales employees asking if you'd like to apply for a store credit card. Unless you shop there all the time, and you have a great track record of repaying your credit card debt, your answer should be: no, thanks."It's during the holidays that consumers, revolvers especially, are most susceptible to credit card debt," says Kerri Moriarty, CEO of Cinch Financial, a website that makes customized suggestions to people on what types of financial products they should get.She admits that it might seem "like a no-brainer," to open a store credit card to get a 20 percent discount, "but when you do the math on what it takes to really benefit from the action as a year-round decision and not just a Christmas Eve one, you might be surprised to realize how little of a deal there is – and even more so if you'll carry a balance on that card," she says.Forgetting about rewards on credit cards – or focusing too much on them. According to the aforementioned Discover survey, 46 percent of shoppers said their main reason for using credit cards for holiday shopping was to earn rewards. This is great, if you're racking up rewards and paying off your cards every month. But every credit card and personal finance expert who ever lived will tell you to not overspend just to get a bunch of rewards. Drowning in credit card debt isn't much of a reward.10 Tips for a Budget-Friendly Cyber Monday.

February 21, 2020 0 comment

Banking & Credit

4 Life Hacks That Cost More Than You Think

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

"Life hacks" is one of those trendy phrases that describes strategies people use to be more efficient. But you know that.You probably also are well aware that you'll often see online articles with headlines like, "Life Hacks to Save You Money." Many life hack ideas are smart, but often the breezy advice attached to the life hack forgets to mention there may be a hidden cost, too. If you hear any of these life hacks mentioned, don't discount them, but do your homework to make sure they're actually saving you money.Life hack: Use coupons at stores to save money, and you're really missing out if you don't look for coupon codes when you're ordering food online.Why this life hack can cost more than you would think: Couponing only works if you were going to buy the item, anyway. You're probably also better off if you don't let couponing become a way of life."Years ago, I attempted couponing, when it was all the rage," says Kristie Garduno, a business owner in Newport Beach, California. "I took the time to learn all the tricks and lingo and even joined a group, so we could swap coupons. I started spending more and more time trying to save money, even skipping church so I could be first in line to get a good deal on an item – that I probably wouldn't use."[See: 12 Shopping Tricks to Keep You Under Budget.]Garduno says she went way overboard, scouring the internet, looking for deals, sometimes ignoring her business, a retail website called GivingSoaps.com. She even remembers getting in arguments with cashiers over 25-cent coupons."It became almost an addiction, and I'm grateful that I stepped away when I did," Garduno says. "I have no idea how much money I wasted in the name of saving." Life hack: Do a credit card balance transfer to save you money on interest. You apply for a credit card with a low introductory annual percentage rate (APR), preferably zero and one that will remain low for 12 to 18 months.Why this life hack can cost more than you would think: Yes, transferring money from a credit card with a high interest rate to a lower interest rate can be a good idea. But some credit cards have a high annual fee, negating the savings you're going to get. Other cards have a balance transfer fee, and while it may only be 3 percent, that adds up if you're, say, transferring $5,000 from one card to another. In fact, it adds up to $150.And you'll really blow it if you miss a payment, which happened to J.R. Duren, a copywriter in Jacksonville, Florida.In 2009, Duren transferred about $3,300 from one credit card to another. All was well until he was late with a payment and saw his interest rate jump 7 percent. It wasn't a financial disaster since he paid off the card by the end of the year, but he undid some of the work he was trying to do in saving money."I'm guessing the mistake cost me at least $130," Duren says.And keep in mind it's a terrible life hack if you transfer money from the high interest credit card to the lower interest rate one, and then later you end up maxing both of them out and carrying revolving debt.[See: 12 Ways to Be a More Mindful Spender.]Life hack: Buy in bulk. You know how it works. Buy a pack of 16 paper towel rolls at a warehouse discount store, and in the long run, it's cheaper than buying a pack of four paper towel rolls at a supermarket. You spend more upfront, but over time you save money.Why this life hack can cost more than you would think: Buying in bulk can backfire, especially if purchasing perishable items. Tyler Riddell, who works in marketing and lives in Temecula, California, says, "Every time I go to Costco, I think I'm saving tons of money by buying in bulk when in reality, only half of the items I buy get eaten while the rest goes bad and ends up being thrown out."Life hack: If you're looking for a new bank, sign up with one that offers a cash bonus.Why this life hack can cost more than you would think: You really want to be careful when you choose any monthly service, whether it's a bank or a telephone plan, that offers you money to sign up. The deal being offered may be good, but the company is going to get their money back somehow. Tyler McIntyre, a New York City-based business owner in the banking industry, says he once signed up for a bank's checking account offering a $200 sign-up bonus. Before long, however, he realized he was being charged a $12 monthly fee for owning the account. In less than two years, McIntyre's signing bonus would go right back to the bank, and he would still be paying $12 a month.[See: 12 Millennial-Inspired Ways to Spend Less.]That didn't sit well with McIntyre, who knew he could get the same services for free from a community bank."I closed the account, and they took back the $200," McIntyre says.11 Expenses Destroying Your Budget.

February 21, 2020 0 comment

Banking & Credit

Dealing With Rejection: 5 Things to Do When You're Declined for a Loan

by sshrx_ns3li1 February 20, 2020

written by sshrx_ns3li1

It's not you, it's me. You may hear that line sometimes if you're dating, and someone wants to let you down easy.But if you're rejected for a loan, it's you. Not them. It's definitely you.So what should you do if you're declined for a loan? Your strategies are going to vary, depending on what type of loan you're looking for. A mortgage? A car loan? A business loan? Still, you may want to try the following to help get your loan on track.[See: 12 Habits to Help You Take Control of Your Credit.]Find out why you were denied. This is important. If your credit score is in ruins, you'll want to fix that.Judy Woodward Bates, a personal finance author who also makes local television appearances on Fox 6 TV in Birmingham, Alabama, suggests checking your credit report at AnnualCreditReport.com."Errors regarding a person's credit aren't uncommon and can have a drastically negative effect on your ability to secure a loan. If your problems are due to errors, talk to the lender again, show him proof of the errors, and reapply."And, of course, if there are no errors on your report, you'll want to work on paying off debt and paying bills on time until your score begins to climb again.You could see if somebody is willing to co-sign for your loan. You could also rob a bank. Not every option you have is a smart one. If you're a young adult with a good job but not much of a credit history, asking you parents to co-sign for a loan may not be a bad idea. There are times when co-signing for a loan isn't such a bad plan.But often it is. Because if you can't pay the loan back, your co-signer will have to. If neither of you can, then you'll both see your credit score and credit history ravaged."I personally would never co-sign a loan," Bates says. "In my opinion, if you need a co-signer, you need to work on improving your credit and not borrow more money."[See: What to Do If You've Fallen (Way) Behind on Your Credit Card Payments.]You could look for a lender that specializes in offering loans to people with bad credit. Korey Adekoya, the business development manager at Shabana Motors, a car dealership in Houston, suggests this – if you research the lender beforehand."There are plenty of places that offer bad credit loans, but some are better than others," Adekoya says. "Watch out for high interest rates that could put buyers in a pickle if they're already struggling with money."So how can you determine if a lender is ethical – or one that you should stay far away from?"You need to determine whether or not they actually want you to pay the loan back," Adekoya says. "A good lender always wants their money back, but there are some who charge large rollover fees to extend the life of your loan. This is usually a good indicator that you could be entering a cycle of debt."He also suggests asking a lot of questions and walking away if the answers aren't satisfactory."Predatory lenders prey on the weak, and your bad credit is an open invitation for them to lure you in. Take your time when configuring your loan and understand all of your options and consequences before signing the dotted line," he says.Request less money. Maybe if you were looking to get a smaller home, a less expensive car, a smaller amount of money for a personal loan – maybe your loan application, in that case, would be accepted.You might also want to try to get smaller loans from two or more lenders, to add up to what you need, suggests Raeshal Solomon, a Nashville, Tennessee author and speaker who specializes in teaching kids about the value of money."Sometimes you can get a little from more than one place to equal your total," she says.[See: 11 Money Moves to Make Before You Turn 40.]Try, try again. This is one path. Just because one lender said no, it certainly doesn't mean they all will. (It may mean that your credit isn't stellar, and you won't get the best rates. But if you need a loan, you need a loan.)"Too often people assume because one bank or lending institution denied them for a loan that they should just give up because they will be denied everywhere. This isn't the case. Lending institutions and banks all have a different set of parameters," says Ryan Fitzgerald, owner of Raleigh Realty in Raleigh, North Carolina.He says that one of his clients was denied for a home loan 10 times. He got a loan, however, on the 11th try."There were tears in his eyes when he was told he would not be able to receive a home loan. He didn't give up. He kept going and eventually closed on his house, albeit four weeks after the original closing date," Fitzgerald says.But do keep in mind, and this is just common sense, that if 10 lenders have shot you down, they probably see you as a credit risk. You may want to take that as a sign and get your finances in better shape before possibly taking on a loan you can't afford – or a loan that ends up having terrible terms.On the other hand, giving up just because you've been denied, say, once, probably is a mistake.Catherine Fiehn, who owns a photography studio in Milford, Connecticut says that she was declined for a business loan several years ago – not because she had bad credit, but because she basically had no credit."I was a ghost," she says. "I didn't use credit in any form because I never needed to."Fiehn mentioned that to her banker, who ended up visiting her studio and found a well-established storefront. Fiehn was granted her loan.8 Financial Steps to Take After Paying Off a Debt.

February 20, 2020 0 comment

Banking & Credit

3 Ways the Credit Industry Is Changing How We Apply for Loans

by sshrx_ns3li1 February 20, 2020

written by sshrx_ns3li1

If all goes as planned, you will soon be able to apply for credit by sending a text.Experian, the credit bureau, recently announced what it calls a “groundbreaking innovation.” It isn’t mainstream yet, though several lenders and card issuers are involved in a pilot program in which consumers can initiate and complete a credit application process within minutes by sending a text message.Still, while one could argue this new way of applying for credit is groundbreaking, it’s really just a natural progression of the loan application process, which has been evolving ever since the internet took off. In fact, so much has changed in the loan application world that it’s worth reviewing key milestones, as well as what could be coming down the pike.[See: 25 Fast Financial Fixes.]Lenders are aiming for more accuracy on whether you can pay them back. This could be wonderful – or terrible – news for you. It all depends how you view the lending experience.Earlier this year, Steve Smith, CEO and co-founder of Finicity, a Salt Lake City-based financial data aggregator, announced a partnership with Experian. The two companies are coming together to develop new technology that analyzes a borrower’s cash-flow data to determine whether he or she is eligible for a loan.This could work well for many people, Smith says. “This will be beneficial to those consumers that are thin-file or no-file for credit scoring, but are otherwise completely capable of managing a loan," he explains.He also sees it as a boon for small business owners. Small businesses, after all, have no credit score.“In the past, small business loans have been tied to the business owner's personal credit history. Through cash-flow analysis, all data points can be used … and not just a limited set typically provided by credit or lending organizations,” he says.But, of course, if your cash flow is erratic – insanely up one month, but in the gutter the next – and you think a lender might hold that against you, this development may not be so awesome.[See: 12 Simple Ways to Raise Your Credit Score.]Paperless mortgage loans could become a thing. As technology advances, it isn’t surprising that loans are increasingly involving less paperwork. Still, it’s striking just how little paper is involved.“We went paperless for the underwriting process two or three years ago … Nowadays, we order approximately six boxes of paper per month. Before we went paperless, we were probably ordering six boxes per week,” says Josh Moffitt, president of Silverton Mortgage Specialists, a mortgage lender in Atlanta.But not all consumers want to drop paper, Moffitt says.“Many buyers still like to work closely with a real person throughout the process,” he says. “They like to meet in person, have a coffee and bring their documentation to us. It’s not necessarily a generational thing, as we see people in their 50s who want to use the digital process, whereas some buyers in their 20s are uncomfortable with the online approach.”And mostly, Moffitt says, closing for a house is still done in person with paper, but he thinks that eventually, if consumer desire is there, buying a house from start to close, and signing everything digitally, will enter the mainstream.[See: 10 Ways Millennials Are Changing Homebuying.]We’re applying for loans faster than ever. Sonja Bullard, a sales manager at Bay Equity Home Loans in Alpharetta, Georgia, has been working in mortgage lending for 16 years and has seen a lot of changes in how fast loans can be approved. In 2001, it wasn’t exactly the Stone Age, but Bullard says that most of her clients now sign initial loan applications from their phones within five minutes.“Only a few years ago,” she says, “we would have to meet in person and sign all of the same disclosures in person, or the borrower would need to print them out from an email and sign each one.” Boston-based Brendan Coughlin, president of consumer lending at Citizens Bank, headquartered in Providence, Rhode Island, agrees. He says that the process to get a home equity line of credit was 50 to 60 days just a few years ago.“Now, there are a handful of customers who we approve and close a loan in five to seven days by using better digital technology and leveraging all the data we already have from them. And they do all of this from their home without needing to get in a car and come see us,” Coughlin says.But texting for a loan will make things even faster. It may not be faster than sitting at your personal computer or tablet and getting a loan accepted or rejected. But it does make it easy for consumers to apply for loans ASAP. Consumers, after all, are more likely to have their smartphone with them at all times, and not their tablet, laptop or personal computer.Experian’s senior product manager, Brittanee Moss, says that the texting-for-credit concept came from talking to lenders, who wanted customers to be able to apply for credit faster.“Customers don’t want to fill out lengthy forms to apply for credit, nor do they want to discover they may not qualify for a credit offer at the cash register after being invited to open a store card,” Moss says.But Coughlin thinks that sooner or later, texting for credit won’t be fast enough.“Everyone wants a simpler digital experience,” he says. “I can imagine a scenario where you can apply for a loan with a fingerprint authorization over your phone, and we all use that data we already have to make a decision.”10 Completely Careless Credit Card Mistakes You're Making.

February 20, 2020 0 comment

Banking & Credit

What to Know About VantageScore 4.0

by sshrx_ns3li1 February 20, 2020

written by sshrx_ns3li1

A lot of people think we each have just one credit score. But that's like saying every snowflake is the same. The reality is that 1,000-plus different credit score models are out there. The two most popular brands – FICO and VantageScore – alone can produce upwards of 50 different scores for a single person. And that number is about to rise.This fall, VantageScore, the company formed by the three major credit bureaus to compete with the Fair Isaac Corporation, will officially launch its latest model, VantageScore 4.0. So what does that mean for your wallet and consumer finances in general? Here's what you need to know.[See: 12 Habits to Help You Take Control of Your Credit.]What's new with VantageScore 4.0? Fundamental differences in credit scores' underlying algorithms can affect how predictive they are, how many people they can be generated for and lenders' overall conclusions regarding the creditworthiness of consumers. That's why each new model from VantageScore or FICO is worth examining. Major lenders are going to use it, which means it's going to have an impact on your wallet at some point.[See: 10 Quirky Ways to Save Money.]VantageScore 3.0, for example, is used by 80 percent of the 25 largest U.S. lenders, according to VantageScore. And VantageScore 4.0 builds on the success of its predecessor, incorporating 3.0's advances while adding a bunch more of its own. Here's a breakdown of what's new about VantageScore 4.0. "Trended" credit data: Credit scores have historically been like pictures. In other words, they consider just a snapshot in time, grading the contents of your credit report as it stands whenever the score is generated. VantageScore 4.0 is a bit more like a movie because it takes into account how credit report data changes over time. For example, VantageScore 4.0 considers how balances, credit limits and payment amounts fluctuate over a period of 24 months. This so-called trended credit data, which all three major bureaus now have, is true to its name, making it easier for lenders and consumers to spot trends in their credit history and act in the best interest of their wallets.Same model for all three credit reports: Most credit scores use slightly different recipes, depending on whether an Equifax, Experian or TransUnion credit report is supplying the data. This leads to inconsistencies beyond what any differences in the contents of those reports typically produce. In other words, VantageScore 4.0 removes an unnecessary variable from the equation by always using the same model.Better for people with limited credit: VantageScore 4.0 uses machine-learning technology to predict the future performance of people with "thin" credit files, despite the lack of a robust credit history. This makes it easier to create a credit score for such individuals, which in turn makes it easier for them to borrow.VantageScore also makes a point of ignoring tax liens and civil judgments that aren't properly documented. These should have already been removed from your credit reports in July. But this ensures such records aren't held against you.VantageScore 4.0 versus the competition. VantageScore 4.0 is not reinventing the wheel, just improving it. So the basics – most notably, the range – won't take any getting used to. With that in mind, here's a quick breakdown of how VantageScore 4.0 compares to its predecessor and their main rival in some key categories:CategoryVantageScore 4.0VantageScore 3.0FICO Score 8Score range300 to 850300 to 850300 to 850Scoreable population225 million225 million190 millionRecent credit experience needed for score1 month1 month6 monthsRate-shopping experience14 days14 days30 to 45 daysLate paymentsMortgages penalized mostMortgages penalized mostPenalized equallyCollection accountsIgnored once paidIgnored once paidIgnored if original balance is less than $100How to get VantageScore 4.0. You can't get your VantageScore 4.0 credit score quite yet. The company says it will be released in the fall through the major credit bureaus without providing further specifics. But you can check your VantageScore 3.0 credit score for free right now. They're available from a variety of sources, ranging from credit card companies such as Capital One to free credit score websites such as WalletHub.At the end of the day, knowing one of your major credit scores is enough. It doesn't really matter which type it is, as long as you get it for free, track it over time and use the information to improve. After all, there is a very high correlation between the scores produced by the most popular credit score models, according to the Consumer Financial Protection Bureau. And most major lenders use the types of credit scores that are available to consumers merely as a starting point. They often proceed to modify those scores with in-house analytics, creating their own proprietary ratings with which to judge applicants.[See: What to Do If You've Fallen (Way) Behind on Your Credit Card Payments.]As a result, the release of VantageScore 4.0 is good news for borrowers in general. But most people won't notice much of a change. The average credit score in the U.S. is currently 669, according to WalletHub data. And changes in the economic climate are far more likely to affect that than a new-and-improved credit score model.25 Ways to Fix Your Finances Fast.

February 20, 2020 0 comment