Bad Credit Secured Loans - Are They Worth the Risk?

In this time of financial crisis and economic difficulty more and more people are struggling to keep up with their monthly obligations. As a result individuals end up falling behind on their car payments, mortgage, utilities and are forced to look for alternative lending solutions to get them through their money problems.

In this article we'll talk about the advantages and disadvantages of bad credit secured loans and whether or not they are a viable option for you.

First off it's important to understand that secured loans will require collateral on the part of the borrrower to the lender in the event that for whatever reason you are unable to pay back the amount borrowed, the lender can sell the collateral or material property to settle the debt.

While their are lenders you can apply to for these kind of loans it's important to consider whether or not the value of the purchase you are trying to make is worth the possibility of losing your collateral assets. Many people are faced with the threat of losing their home and because they are so far behind in their payments may not be able to refinance their home with a traditional loan.

As a result of the damage done to their credit, their FICO score may suffer a severe blow making it difficult to get any kind of financial help, even with a co-signer. This is where bad credit secured loans can be of benefit to the borrower IF they are sure that they can pay back the loan without losing the collateral they've pledged to obtain it.

Depending on the size of the debt, the collateral may consist of automobiles, other homes or real estate as well as business property. The obvious downside to these types of loans is that you run the risk of losing your collateral if the debt cannot be satisfies according to the terms of the agreement.

Another bit of information to consider is that depending on the amount of inquiries made on behalf of the borrower by the lender, future opportunities to obtain traditional secured loans from lending institutions will be very difficult. Traditional lenders look at the amount of times an inquiry is made for secured and unsecured loans and if you have more than three inquiries within the space of year this could severely impact your FICO score and negatively affect your credit rating.

Student Credit Cards - Use Them, Don't Abuse Them

Once you start college, you'll enter the adult-world in many areas, including the world of credit. Today, companies offer credit cards specifically designed for you, the college student. And while these cards give you a chance to access and manage a line of credit, they also have potential downfalls.

The biggest potential downfall is, of course, the danger of falling into debt problems. If you graduate with a sky-high balance that you are unable to pay back, you'll be in danger of receiving a low credit score. And having bad credit is worse than having no credit at all.

That said, having a student credit card can be extremely beneficial. When used properly, it can serve as a tool to help build up your credit before you even finish school. Here's a look at student credit cards and how they work.

Different from the Rest

Student credit cards are designed for individuals that are just starting out in the credit world. Most of them come with a lower limit than other credit cards. Some of them require a parent or other adult to co-sign. Many let you sign up even if you do not have a regular income.

Student credit cards also often come with benefits that are geared toward the college lifestyle. They might include a rewards program based on your GPA or let you earn points when you purchase gas. Others will offer incentives such as going to an MTV event or airline tickets.

How to Use Them

Student credit cards can be a great item to have in your wallet when used properly. The first step toward wise management is to figure out what the card will be used for. You may decide to buy books and school supplies with it. Or you might want to hold on to it for emergency purposes. Once you establish guidelines on how you'll use it, try to stick to them.

When you do use the card, remember that you are actually taking out a loan. Whatever money you spend with the card will have to be paid back. So before you swipe the card, it's important to make sure you know how you'll repay the credit company. When you receive a statement at the end of the month, try to pay at least the minimum amount due. Whenever possible, pay off the entire balance right away.

What to Watch For

Many news headlines tell woes of college students that run up credit card debt. To avoid this scenario, read the fine print carefully before signing up. If you're worried about falling into debt problems, look for a card that comes with a low credit limit. If you end up with a high balance on one card, do not apply for another one until you pay off the entire amount due on the first one.

Use your student credit card wisely and you'll be rewarded in many ways. You'll have access to credit in case of an emergency, and a helpful financial tool for purchasing books and other school-related gear. When you graduate, you'll already have an established credit history. And you'll be on your way to a bright future in the credit department.

How to Build Business Credit For Your New Business

If you recently started a business then you won't have any credit established in the company's business name. The bulk of your business was built upon your personal credit score and savings. To create a professional business without using your funds this article will provide you tips to show you how to build business credit for new owners like you.

The first order of business is to make sure that you have all of your legal documents completed and set up. You will need a tax identification number, business license, physical address, telephone and fax number, business checking account and business plan. You may already have these items. But these are essential to getting business credit.

The next item you will need is a trade reference. At least five trade references are needed to build your business credit. These trade references will report how well you pay your bills to the major business credit reporting agency named Dun and Bradstreet. You can apply for credit cards for items that your company will need. Office supplies, gas cards, cell phone accounts, retail supplies and vehicle loans are some of the items that might be needed. Most small business owners might start out with secured credit cards, but can eventually transition to unsecured financing.

In personal credit ratings your FICO score determines what type of loans and interest rates you can attain. In business credit it is called a Paydex score. This score has a range between zero and one hundred. A score between 90 and 100 is deemed as excellent. A score between 75 and 89 is considered good. And scores from 70 and under are considered bad. You will need to protect your business credit score just as you would your own personal credit rating. It will make or break your business. These scores are determined and calculated by Dun and Bradstreet. How well you pay your bills on time is also a deciding factor. If you don't pay on time your Paydex score will suffer.

Business credit is needed by new owners as well as existing ones. It provides additional lines of cash to help provide working capital for equipment, inventory, or payroll. You will want to get all of your legal documents completed before attempting to start the process. After getting everything done you will need to acquire five trade references and a bank reference to report how often you pay your bills to raise your Paydex score. As your credit improves you will be able to get higher loan amounts as your business grows. One thing to remember is to not take on any loans or credit that cannot be repaid. It will take a long time to correct and repair and will negatively impact your business.

An Annual FICO Score "Check-Up" Can Help Maintain Better Financial Health

A low FICO score can keep you from obtaining a loan for a house or car, affect the rate you'll pay on insurance and it can even keep you from being able to rent a house or apartment.

Regardless of whether you've recently been denied credit or have never missed a credit card payment it's important that you obtain a copy of your credit report and FICO score at least once a year. And, if you're planning on applying for a loan for a house or a car or any other major purchase, you'll want to get an updated copy at least three months in advance so that you have time to repair any errors or negative reports. Free credit reports can be obtained by contacting any of the three major credit bureaus and, if you're working to repair a bad credit score, it might be a good idea to get signed up with a credit monitoring service.

FICO scores range from 400 to over 800 points. A score near 400 will probably exclude you from getting a credit card (though a secured credit card option might still be available), a car loan or a mortgage. With a score in the high 500s to the low 600s, you'll probably qualify for credit but the rate you'll pay will be higher and, you'll likely have to pay additional fees. If you've managed your credit properly and have a score in the low 700s or up, you'll be able to qualify for most loans, including the best balance transfer, miles and rewards credit cards. You'll also pay the lowest rates and have fewer fees attached.

In this day and age of identity theft and credit card fraud, making a FICO score and credit report "check-up" an annual event is a little like getting an annual physical from your doctor, it's a fairly painless event that can make a big difference in your overall financial health and well being.

How to Improve Your FICO Score

How to improve your FICO score is one of the greatest unsolved mysteries of the modern age. Everybody who has ever applied for credit has a credit report and a credit score, known as the FICO score. (FICO is an acronym for "Fair Isaac Corporation", named after the guys who developed the credit scoring system we use today.) But how is it computed? How do you lower it? How do you raise it?

Common sense would dictate that if you make your payments on time, your FICO score goes up. The lower your credit score, the more likely you are to be denied credit or given a loan with a higher interest rate if you were to apply for a loan. The higher your credit score, the more likely you will be granted credit and given a good interest rate. If you are delinquent on your payments, your credit score goes down. But there is much more to it. You could be paying your bills on time for years and your credit score may still be low. Or you could have a couple of late payments on your credit report and still have a good credit score.

How does the FICO score work? The FICO score can range from 300 to 850.

Here are some general tips on how to improve your credit score:

Never max out your credit cards. The FICO score takes into account the percentage of available credit you have vs. your total credit line.

Pay your credit card balances in full every month. If that is not possible, then at least pay more than the minimum payment.

Do not close your old credit accounts. The FICO score rewards you for having a longer credit history.

Cosign with someone else who has good credit. Every time the other person uses his or her good credit, you will be rewarded too!

Don't apply for too many different cards or loans at once. Your FICO score also takes into account the number of recent inquiries into your credit report by creditors. The more inquiries, the lower your FICO score.

Dispute negative or inaccurate items on your credit report. If you have any negative items on your credit report or any inaccurate items that could be adversely affecting your FICO score, then you can contact the respective creditors to dispute the information and have them update your credit report with either the correct information or have them delete the disputed information altogether.

Don't file for bankruptcy. This will cause a definite drop in your FICO score.

Don't let your house go into foreclosure. This will also cause a definite drop in your FICO score.

Don't let creditors get a court-ordered judgment against you. Judgments are part of the public record and can go on your credit report, causing your FICO score to fall. Try to resolve any financial issues with your creditors without them suing you in court for it.

Don't rely on credit counselors. Credit counselors can help you consolidate your debt and get a lower interest rate, however the fact that you are using a credit counselor will show up on your credit report and can thus affect your FICO score.

DO pay off your collection items. If you pay off an item that has been referred to collections, creditors may be willing to overlook the collection item, being that you have demonstrated that you are back on track and have brought the collection account current.
This list is by no means exhaustive. There are numerous tips on how to improve your FICO score. If you have less than perfect credit, it will take time to improve it. Unfortunately, FICO scores are not always updated in real-time, because most creditors only report to the credit bureaus (the companies that maintain your credit report) once a month. However, with discipline, given time, your credit score can be salvaged and in fact, you can raise your FICO score to impressive levels.

Buy a Car With Bad Credit - 4 Tips on Getting Approved

Financing a new or used car with poor credit is feasible. However, there are ways to boost your approval chances and possibly acquire a reasonable interest rate. Do not enter the car buying process blindly. Individuals with good credit have many options. On the other hand, if your credit is bad, you must search for a good deal. Here are four tips to help you obtain a car loan with bad credit.

What is Your FICO Score?

FICO scores range from 300 to 850. The lower the score, the higher the interest rate received on an auto loan. Having a low credit score does not remove the possibility of getting a new or used car loan. However, a low credit rating will greatly affect the interest rate on these loans.

Before applying for an auto loan, obtain an online copy of your credit report and score. If your score is below 600, consider postponing buying a car. Instead, devote six months to improving your score.

Maintain Steady Employment

Along with credit report rating, auto loan lenders require applicants to have steady employment. Often times, an applicants must earn at least $1200 a month. Steady employment usually consists of having the same employer for 90 days. Thus, avoid changing employers every two to three months. To prove employment, auto loan lenders may request copies of recent paycheck stubs.

Get Pre-Approved with a Sub Prime Auto Lender

Before browsing the selection of vehicles at car dealerships, attempt to get approved with an online sub prime lender. These lenders help many people with bad credit obtain financing. There lending requirements are flexible; however, sub prime auto loans have higher interest rates. If eager to buy a new car, accept the higher rate, and then refinance at a later date.

Apply with a Co-Borrower

The easiest way to get approve for an auto loan with bad credit is to apply with a co-borrower. If the person co-signing the loan has excellent credit, this may justify a better rate. Of course, there are risks to using a co-signer. If the primary borrower becomes incapable of making regular monthly payments, the co-signer becomes responsible for the loan.

Discover Your Equifax Range Of Possible Scores For Credit - Credit Score Inquires Don't Hurt You

Consumers with scores below about 620 will pay significantly higher rates and fees to obtain a loan. At a time when financial literacy is a major public policy issue, the educational factor alone warrants a price most favorable to consumers. Consumers will also be entitled to receive from a CRA one free credit report in a 12-month period. The CRA will be required to provide the report within 15 days of the consumer's requesting it. Consumers' ability to obtain scores easily and at a fair price will further all three of these objectives.

Consumers should not be concerned about inquiries they make, such as ordering a credit report. Self inquiries don't affect the credit score. Consumer reporting agencies and other companies sometimes use an estimated score to illustrate a consumer's general level of credit risk. Consumers should pay their bills on time every month. Remember that 35% of the credit score is comprised of payment history. The Equifax range of possible scores for credit is somewhat flexible.

Consumers with scores in the 800 range get reason codes just as consumers with scores in the 500 range. The reason codes may be used in describing to the consumer the reason for adverse action.

Lenders will use your credit score to determine if you are likely to pay your bills and also help them place you with the appropriate repayment plan. For example, if you have claimed bankruptcy in the past, they might place you at a significantly higher interest rate. Lenders studied the relationship between credit scores and mortgage delinquencies. There was a definite relationship. Lenders use FICO scores to predict what kind of borrower you'll be. Scores range from 300 to 850; the higher, the better.

Lender or credit card companies set multiple cutoff points. For example, if you are above 800, you might be offered the Platinum card. Lenders realize that many people occasionally pay late. Therefore, being late with a single payment is typically not as harmful as being late with two or more consecutive payments. This will be reflected in the Equifax range of possible scores for credit that you need to obtain your loan. Lenders may consider employment, income, expenses, assets and other factors when making credit decisions. Also, different lenders may weigh some of these factors more heavily than other lenders.

Lenders review credit scores along with the additional applicant information to decide whether they want to extend credit to borrowers who represent a particular level of risk. Typically, credit points range from 330 to 830.

Without a sufficient credit score, you either can't get loans or you are paying higher interest rates for the loan you have. We have found that NFC(TM)/American Credit(TM) is the best choice for improving your credit report and obtaining a loan at the lowest possible rate. At what point can you expect to pay a higher interest rate? Check with your Equifax range of possible scores for credit to obtain your loan.

It does not mean that you cannot get a loan. Experts say that a person with a low credit score , say, below 600, will likely receive mortgage interests rates that are nearly 3% higher than someone with a score above 700.