You may have noticed businesses that offer title loans, or at least you’ve seen or heard advertising for them. Some of these businesses not only offer title loans, but also check cashing and pawn loans.  These are what I called “2nd tier” loan options, and they are becoming more popular than ever.  Here’s the low down on these options…

Title loans

What are title loans? Car title loans use your car as collateral for a loan, but you must own your car free and clear.  You hand over the car title and extra set of keys, and if you don’t pay, they can take your car.  Since there is no credit check, only income verification, those with poor credit are more prone to get these loans.

High interest rates

Title loans are marketed as emergency loans, similar to payday loans. They are usually for 30 days with amounts usually ranging from $300 to $2,500. The interest rates can be 30 percent a month, which is 360 percent annually. The lender usually lets you borrow up to 50 percent of the car value, which is substantially lower than its value.  The borrower signs loan papers, with the terms which include the car as collateral. read more »

Recently a study was conducted by researchers from three universities – Louisiana State University, Texas Tech University and North Illinois University – to determine if there is any correlation between credit scores and personality and job behavior. Their finding were that there was a correlation between credit scores and personality, but not with credit scores and job behavior.

Credit scores and personality

According to the research being agreeable or friendly is related to those with a low credit score. In other words, nice people have lower scores. The explanation is that someone who is nice is more likely to co-sign for a credit card or loan for a friend or family member. They don’t turn down the sales clerk who asks them to apply for a credit card. read more »

I get on my soap box this time of year to remind you to get free copies of your credit reports from all three credit reporting agencies – Equifax, Experian and TransUnion. You are entitled to receive a free credit report from each company every twelve months, according to the Fair Credit Reporting Act (FCRA).  Have you ordered any this year? If not, go to www.annualcreditreport.com to get your free report.   Did I say free?  Unfortunately free scores are not included.

Free from certain states

In addition, seven states have laws that give you one free credit report annually from all three companies.  The states are Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey,  and Vermont. If you are a resident of one of these states, you get one for the federal law and one for the state law, which is two a year per company, or six free a year.  Georgia is two per year. read more »

Consumer Reports National Research Center conducted a nationwide survey from July 1 to 10, 2011 of 1,258 adults 18 years and above regarding credit cards. Over one third of responders had at least one problem with their credit card company in a year and saw slight improvements in how they were treated by credit companies this year compared to last.

Credit cards are one of the lowest-rated services that Consumer Reports has analyzed with only 51 percent of responders highly satisfied with their credit cards in 2011 compared to 45 percent in 2010.  Thirty five percent of responders had at least one credit card problem in the last year, such as new annual fees, higher interest rates, lower credit limits, or limits on rewards.  The number of responders that experienced unwelcome news about lower credit limits decreased from 37 percent in 2011 from 47 percent in 2010.   Taking this into account, it is surprising that only 12 percent of responders said their credit card companies had treated them unfairly in 2011.  The proportion decreased from15 percent in 2010 and from 22 percent in 2009. read more »

The Fair Credit Reporting Act (FCRA) allows employers to review credit reports with written approval from the applicant. This has become a growing area of concern because of the economic conditions. Many have been unemployed for longer periods of time than in any time in history, which has impacted their ability to pay their debts.

Seven states passed laws which prohibit employers from reviewing credit reports, except for certain types of positions based on responsibility. These states are California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington. read more »

It is important to be aware of what is in your credit report and make sure the information is accurate.  This is your right under the Fair Credit Reporting Act (FCRA).   It is another thing to try to remove negative information that you know is correct – that is illegal.

The Federal Trade Commission (FTC) charged the operators of a credit repair company in Texas, RMCN Credit Services, of violating the Credit Repair Organizations Act.  The FTC complaint, which can be seen here, alleges the company made false statements to the credit reporting agencies and charged retainer fees of $2,000 to the consumers for services. RMCN advertised a six-month program to improve consumer’s credit reports and, according to the FTC, did not show the consumers the letters sent to the credit reporting agencies disputing all the negative information on the consumers’ credit reports.   Even after the investigation was completed by the credit reporting agencies and information was verified with detailed payment data, RMCN continued to send the dispute letters. read more »

How do you know if you have a credit report?  If you pay by cash or debt card and don’t own a credit card; or never had an installment loan, such as mortgage, auto or student loan; you probably don’t have a credit report.  If you haven’t used credit, there won’t be any credit information on you.   You could also contact www.annualcreditreport,com to get your credit report free from the three credit reporting agencies – Equifax, Experian and TransUnion.

It is great to have no debt and pay as you go, but is it?  When you need credit for a purchase for which you can’t pay in cash, such as a mortgage or card loan, you won’t be able to qualify for the loan.  Lenders base your ability to pay on your payment history in the both the present and the past.  If you don’t have any credit history there is no basis to make a decision on the loan.  You would probably have to get someone to co-sign for the loan and they would be responsible, if you can’t make the payments.  In addition without credit, you won’t be able to get the lower interest rates, which will cost you more for the loan. read more »

This is one of the scoring myths that may be hard to believe. When you pay off an installment loan, there may be a slight positive impact to your FICO credit score, but very little.  And, in many cases your score won’t change at all.

Installment loans are usually auto and mortgage loans, and you pay a fixed amount per month for a specified number of years. The loan amount is usually thousands of dollars, secured either by your car or home.  Installment loans don’t have a large impact on your score, since borrowers tend to pay these loans before their credit cards. They don’t want to lose their home or car.  The amount of the loan compared to the balance remaining, does not impact the score as it does for credit cards, because it takes years to pay off the loan and reduce the amount owed.  For a mortgage loan, there is very little reduction in principal for many years. read more »

The latest data from the Federal Reserve G-19 Statistical Release indicated that consumer credit dropped in August 2011, which was the most in one year. Total consumer credit was $2.4449 trillion in August 2011; compared to $2.4544 trillion in July. The decrease was $9.5 billion or -4.6% from July 2011, compared to an $11.9 billion increase in July 2011.

Non-revolving debt (credit cards)

Most of the decrease was attributed to non-revolving credit, which decreased by 5.2 percent or $7.23 billion from July 2011; compared to a rise of $15.48 billion in July 2011.  This was the largest decline since August 2008. Non-revolving debt included student loans, auto loans and mobile home loans.  Loans secured by real estate, such as home mortgages and home equity lines of credit, are not tracked for this report. read more »

If you have filed for bankruptcy, you may be the target of a credit repair scam called “file segregation.” In this scam you are promised a chance to hide unfavorable credit information by establishing a new credit identity. That may sound perfect, especially if you’re afraid that you won’t get any credit as long as bankruptcy appears on your credit record.  The problem: “File segregation” is illegal. If you use it, you could face fines or even a prison sentence.

The Pitch: A New Credit Identity

If you have filed for bankruptcy, you may receive a letter from a credit repair company that warns you about your inability to get credit cards, personal loans, or any other types of credit for 10 years. For a fee, the company promises to help you hide your bankruptcy and establish a new credit identity to use when you apply for credit. These companies also make pitches in classified ads, on radio and TV, and even over the Internet. read more »