Tag: Bad Credit

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Pay Down My Debt, Personal Loans

No Credit, or Poor Credit? Here Are Your Loan Options

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Mixed Race Young Female Agonizing Over Financial Calculations in Her Kitchen.

Updated November 03, 2017
Don’t have a credit history established, or have a low credit score? It can be challenging to find lenders that will approve you if you have a thin credit file or poor credit, but it’s not impossible.

You still have options when it comes to personal loans, and these options come from reputable lenders.

What’s even better is that these lenders will only conduct a soft credit inquiry when you apply to find out what rates they can offer you. This means your credit score won’t be negatively affected, so you don’t have to worry about damaging it further.

In this article we’ll review how to find reputable lenders, why you should stay away from two popular options people turn to when they’re in a poor credit situation: payday and title loans. And what you can do to increase your credit score.

Check for approval without a credit hit

It’s worth noting low scores aren’t always indicative of how responsible you are with credit. A low score, or thin file, could just be a result of a short credit history. If you have a clean history (no late payments, low credit utilization, etc.), you’ll have an easier time obtaining a loan over someone who has had delinquencies on their record, but might have a higher score.

If you have bad (or no) credit, you should apply to as many lenders as possible that use a soft pull to ensure you don’t hurt your credit score. We recommend starting with LendingTree, where you can use one short application form to get rates from multiple lenders at one.

LendingTree: Dozens of lenders partner with Lending Tree – and many of them may approve people with poor or no credit. You can fill out a simple form and compare multiple offers in minutes. We highly recommend starting your shopping experience here first to have a good chance of getting a loan. (Note: MagnifyMoney is owned by LendingTree)

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Here are 5 personal loan lenders for people who have less than ideal credit (meaning under 700) that will let you check your rate without impacting your credit score:

OppLoans: If you have no or bad credit, OppLoans is an online lender that could help. If your credit score is below 630 (or if you have no credit score at all), OppLoans will work with you. You can check to see if you are approved without impacting your score. And – unlike payday lenders – OppLoans offers much more affordable borrowing options. They also have great reviews – with a customer service rating of 4.9/5 stars.

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LendingClub: People with credit scores below 600 can get approved. You can borrow $1,000 – $40,000 and get the money deposited into your account within a few days. Fixed APRs range from 5.99%-35.89% on terms up to 5 years. LendingClub has an origination fee of 1%-6% on its loans. LendingClub is not available in Iowa or West Virginia.

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Upstart: Borrow between $3,000 and $50,000 for up to 5 years with APRs ranging from around 9.45% to 29.99%. While the minimum credit score needed to qualify is 640 (Upstart will also consider applicants who don’t have a score), you must have a clean credit history. You could also be eligible for next day funding.

Avant: You could borrow anywhere from $2,000 to $35,000 through Avant, and you could receive your funds as soon as the next business day. APRs range from 9.95% – 35.99%. Although the minimum credit score varies, you have a much better chance if your score is above 580. Avant is available in all states except Colorado, Iowa, West Virginia, and Vermont.

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Prosper: Another peer-to-peer marketplace lender, Prosper’s loans are similar to LendingClub’s. You can borrow $2,000 to $40,000 with APRs ranging from 5.99%-36.00% on 3 and 5 year terms. There’s an origination fee of 1%-5%, and its minimum credit score is 640.

There are several other personal loan lenders that will do a soft credit check. You can find them on our personal loan table here. While many of these lenders have minimum credit score requirements, you’ll find they take other factors into account aside from your FICO score.

Additionally, since these lenders only do a soft credit pull, you’re free to shop around for the best rates without fear of damaging your credit score.

Why You need to Stay Away from Payday Loans and Title Loans

Not eligible for personal loans? Don’t turn to payday loans or title loans.

If you’re not familiar with either, you might be wondering what’s so bad about them. After all, they seem convenient – most offer “fast cash,” and if you live in a populated area, you’ll probably find a payday loan or title loan shop nearby.

However, both require you to give something in exchange for funds, and neither require any sort of stringent approval process to ensure borrowers can afford the loans.

Payday Loans

Payday loan companies require you to write a check for the amount you wish to borrow, plus a set fee. The lender holds onto the check until the loan becomes due (typically on the borrower’s next payday, hence the name), and gives the borrower the money they need in the meantime.

The problem? If you can’t pay when the loan balance becomes due, you can choose to extend the term of the loan. When you do, you get hit with more fees. The APR on payday loans is extremely high, so you’ll pay more each time you extend your loan term.

Payday loans are on the smaller side – anywhere from $100 to $1,000. According to PayDayLoanInfo.org, the average term is two weeks, with 400%+ APRs. When you factor in fees, the APR can go up to 780%.

[Stuck in a Payday Loan Trap? Here are the ways out.]

Title Loans

Title loans require you to give your car’s title to the title loan company in exchange for an amount equal to the appraised value of your car. You usually have to own your car outright to be eligible for a title loan, and the term is around 30 days.

Like payday loans, if you can’t pay on time, you may choose to roll the loan over to the next month, incurring more fees. If you can’t pay back the loan at all, you run the risk of the lender repossessing your car.

As you can tell, both of these options are bad ideas if you want to stay clear of getting into a horrible debt cycle. These loans are purposely too expensive for borrowers to afford. If people are looking for quick cash because they don’t have any, it stands to reason they’ll be in the same situation a week or two from the time they borrow.

Non-Profit Credit Counseling to Rebuild Credit Score

You want to make every effort to improve your credit score, even after you’re approved for a loan, because having a good credit score will benefit you in other areas of life. For that reason, you might want to consider teaming up with a non-profit credit counseling service.

These companies can provide you with personalized advice on your specific situation so you can work on rebuilding your credit score. They can also work with your creditors and negotiate on your behalf to possibly lower interest rates or get better terms on your existing debt.

It can be tricky to find a reputable credit counseling agency – even with a non-profit organization. If you’re interested in a credit counseling service, USA.gov lists a few considerations and questions you should ask before committing. You want to make sure the credit counseling agency is actually going to help you get your credit and financial situation under control.

Alternative to Ways to Build Your Credit Score

If you don’t qualify for a personal loan, and don’t want to turn to payday or title loans, there are a few steps you can take to increase your credit score. This post has 6 tips to help get you started. These methods won’t boost your score immediately, but over time, you’ll see an improvement.

The Federal Trade Commission also has 6 alternatives to payday loans on its website, which might apply to your situation. For example, if you’re a member of a credit union, you could inquire about a loan through them as you have an established relationship already.

Also, if you haven’t started budgeting and tracking your spending, you should – doing so can help you spot problem areas with your money.

Read the Fine Print and Shop Around

Regardless of which loan you decide to apply for, always consider the cost. You want to make sure you’re getting the best possible terms, which means getting the lowest APR offered. Typically, cash advances and credit cards are going to have higher APRs than personal loans but lower than payday lenders.

Remember to always read the fine print. Loans of any type have plenty of fees associated with them that you should avoid. Shop around for the best deals and work on improving your credit score so better options become available to you.

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Erin Millard
Erin Millard |

Erin Millard is a writer at MagnifyMoney. You can email Erin at erinm@magnifymoney.com

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Best of, Personal Loans

Best Options for Covering the Cost of Adoption

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

adoption

Updated November 03, 2017
You probably can’t put a price on the value of your child, but for couples who wish to adopt, the entire process can be quite costly. According to AdoptionHelp.org, it can cost anywhere from $0 to $1000 to adopt a child from a county foster program and anywhere from $10,000 to $25,000 to adopt a newborn through a non-profit agency.

Also, adoption attorneys for newborns general run anywhere from $20,000 to $30,000. The adoption process may vary from state-to-state but if you go through a private agency, costs usually include agency fees, legal expenses, hospital documentation and retrieval of medical records, and disruption rates just to name a few.

If you feel that you are ready to start or grow your family through adoption but don’t have the funds to cover all the fees and expenses, you may consider an adoption loan.

What is an Adoption Loan?

An adoption loan is basically a personal loan that you can take out to use for adoption-related costs. There are many personal loans on the market so you shouldn’t limit your options as long as the loans you are considering are low-interest, have no or low fees, and flexible repayment terms.

If you search online for the term ‘adoption loans’ you may find a few offers, but it’s best to search for personal loans to broaden your search at first and help you locate the best loan option for you. We will feature some of the best personal loans to use for adoption below to help you get started.

What to Watch Out For

Before you choose a loan for adoption costs, there are a few things you need to watch out for. Consider a realistic amount of how much you need. You may be able to cover some of the costs on your own but some lenders who offer personal loans for adoption might encourage you to take out more than you need.

When taking out a loan, only you know how much you truly need so it’s important to research the process thoroughly and formulate a realistic amount of expenses you can’t cover from your savings.

Another thing to watch out for is how some lenders may prey on couples’ vulnerability and eagerness to adopt with this loan. Companies who send out messages like “your child’s life is worth any costs” should be examined with caution.

Heartfelt promotional messages, catchphrases, and unrealistic promises should not be an effective way to market a loan to a consumer. When you take out a personal loan, you should always look at how affordable it will be. Is the interest rate low? Is there an origination fee or any hidden fees? How short or long are the terms? Is there a prepayment penalty?

Ask yourself all of these questions and make sure you are positive about the answers and comfortable with them before you take out a loan. Like with any loan, you’ll ideally want something low interest, with no fees and no prepayment penalties.

Be wary of lenders promising affordable loans for people with bad credit as this is almost never possible. In order to secure a low interest rate for your loan, you need to have good credit.

Affordable Adoption Loan Requirements

Lightstream allows you to borrow anywhere from $5,000 to $100,000 with fixed APRs that range from 5.99% (with autopay) to 16.19%. Terms range from 24-84 months and the shorter your term is, the lower your rate may be. However, the lowest rates are reserved for borrowers with excellent credit. There is no origination fee and the minimum credit score you need to apply is 680. There will be a hard pull of your credit report upon applying.

America’s Christian Credit Union specializes in adoption loans and lend up to $50,000 which should be more than enough to cover adoption expenses. APR rates start at 5.99% but can range from 8.90% to 10.90% for most borrowers. Borrowers have up to 84 months to pay back their loan and the loan is good for domestic and international adoptions. This lender also offers home equity loans with no closing costs or annual fees to use for adoption costs which includes a quarterly adjustable HELOC with a current starting APR of 3.5% and an annual adjustable HELOC with a current starting APR of 4%.

SoFi is a popular lender offering a variety of personal loans at competitive rate and terms. Borrowers can receive anywhere from $5,000 to $100,000 with fixed APRs ranging from 5.49% to 14.24% and variable APRs ranging from 5.19% to 11.34% as long as borrowers sign up with auto pay. Terms go all the way up to 7 years and there are no fees or minimum credit score required as long as your accounts are all in good standing.

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Upstart offers quick and easy approvals for loans up to $50,000 with APR rates ranging from 9.45% – 29.99%. Borrowers need at least a minimum credit score of 640 to qualify. Loan terms are 3 and 5 years and there is no early repayment fee. There is however, an origination fee of 3.655%-8% to keep in mind.

Other option for adoption: Grants

Before you look into loan options, you should to see if you qualify for any grants to help fund the costs of adoption. An adoption grant can help provide you with partial funding throughout the adoption process to ease the financial burden.

There are quite a few adoption grants available, but most have specific criteria. For example, in order to qualify for a specific grant, you may need to adopt through a licensed agency or adopt within the country.

National Adoption Foundation – This organization has very few strict requirements and even considers single adults who wish to adopt. The program has no exclusions as to race, ethnicity, gender, age, sexual orientation and income and awards grants ranging from $500 to $2000 depending on the needs of the family and the circumstances surrounding the adoption.

HelpUsAdopt.org– This organization has awarded $920,000 in adopting grants since 2007. They award grants to needing couples, singles, and LGBT applicants who are U.S. citizens and wish to adopt. Recipients can use the funds for private, agency, or domestic adoption and award amounts range from $500 to $15,000. The organization awards grants in February, June, and October each year.

A Child Waits Foundation – If you are adopting internationally and your annual household income falls below $120,000, you may qualify for an adoption grant from this agency as long as you are a U.S. or Canadian citizen. Applicants can apply for a grant no sooner than 3-4 months prior to when their family makes their final adoption trip. There is a $20 application fee and grant amounts equal up to $5,000.

If you need funding to help you adopt a child, its best to consider all your options and try to obtain a grant along with a low interest loan to help cover the rest of your financial needs. You can compare more personal loan options for adoption all in one chart with our comparison tool.

Chonce Maddox
Chonce Maddox |

Chonce Maddox is a writer at MagnifyMoney. You can email Chonce at chonce@magnifymoney.com

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Personal Loans

Avant Loans: Review These Rates Before You Apply for a Loan

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Avant Loans Review

Updated November 01, 2017

Avant* is a personal loan platform willing to accept borrowers with less than perfect credit scores.

The interest rates are between 9.95% – 35.99% and loans are as small as $2,000 and as high as $35,000.

Avant does not charge a prepayment fee.

The origination fee is 4.75%, which may be lower than the competition.

They also emphasize speed, and can get the loan to you by the next business day if you have all of your documentation.

What credit do you need?

In general, you will have a much better chance of being approved if your score is above 600, and you can apply for a loan here. Avant is available in all states except: Colorado, Iowa, West Virginia and Vermont.

If you have excellent credit, you may be able to get an interest rate as low as 4.82% with another lender and should definitely shop around.

While Avant* can offer access to competitive rates, you should make sure you compare their rates to other providers. And if you are willing to borrow at 35.99%, you should put together a plan to build your credit score over time so that you can get lower cost options. We can help you get started with our debt guide.

Have you tried these lower rate options?

More and more lenders are willing to work with responsible people who have less than perfect credit.

You may qualify for a low rate credit card to pay off your other bills. If your credit score is above 680, you will mostly likely be able to qualify for a low interest rate credit card. You can check to see if you are approved for a credit card without hurting your score. We have a list of where and how to check for your PRE-APPROVED and PRE-QUALIFIED credit card offers.

There are other personal loan companies with lower rates. We keep a list of companies that offer good personal loan rates to people with less than perfect credit. Unlike a lot of other sites, you won’t get calls from a bunch of loan companies.

You only get in touch with the ones you’re interested in dealing with. And many will tell you your rate without doing a hard pull of your credit report or requiring a phone call.

See our list of low rate personal loans you might qualify for

You should apply for several you feel comfortable with so you have several rates to compare and you can get lenders fighting for your business.

Are you trying to build your credit score?

Don’t use a loan through Avant (or any loan) just to build your credit score.

Yes, a loan through Avant is reported to the major credit bureaus and paying one on time is a good thing for your credit report.

But there’s a much cheaper way to improve your credit and have a bigger impact.

Get a secured credit card. Even with really bad credit you can get approved – and some have no fees at all.

Using one to build credit is simple – we have a guide here.

You just charge a small amount on the secured card every month, and pay the bill on time and in full each month. After about a year or so of doing that you could see a substantial rise in your score if you make all your other payments on time.

There is no need to get a loan simply to improve your score.

Done all of that?

Avant can be a very good option for borrowers, given its transparency and speed. You can check your rate without hurting your score by clicking on the link “Apply Now” below.

Avant

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It’s better than most options you’ll find from payday loan shops because:

It’s a real installment loan. You’re given a real monthly payment, and your payments pay down the loan itself, not just interest, so you have at least a shot at paying it all off if you keep up the payments.

You can check your rate without impacting your credit score. Avant will use a soft pull to provide you with a rate. We applaud this, because it enables consumers to shop for the best loan for their needs without worrying about harming their credit score. Many traditional lenders do not offer this.

Reviews of their customer service are decent. No one likes paying high rates, and Avant is not a place for really low rates. But they do get decent reviews online for their customer service and treating people with decency

But make sure you get a secured credit card as well so you can more quickly build up your credit profile. That will help you graduate to lenders who can offer you much more reasonable rates, or get a lower rate through Avant.

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Brian Karimzad
Brian Karimzad |

Brian Karimzad is a writer at MagnifyMoney. You can email Brian at brian@magnifymoney.com

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Best Credit Cards for Bad Credit November 2017

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If you have bad credit, it can be difficult to get approved for loans and credit cards. But it is not impossible. Even people with bad credit have options – which we will now explain.

What exactly is a bad credit score? When we’re talking about obtaining credit via credit cards, the magic number is somewhere between 620 and 650. If your credit score falls below 650, you’re going to have a difficult time obtaining credit from some of the larger lending institutions, and if it’s below 620, you’re going to have a difficult time obtaining credit from anyone — including smaller financial institutions like credit unions and independent marketplace lenders.

There are, however, some products for which you’ll have an easier time qualifying. Before you apply, make sure you’re prepared to be responsible with your new line of credit so you can boost your score and credit history rather than damaging it further. The best way to do this is to spend within your means by creating a budget and sticking to it. Here are some helpful tools to help you do just that. Remember to always pay your bill off in full on or before the due date each month to establish good credit.

Here are the products and topics we’ll be discussing today:

Check if You’re Pre-qualified

Before you apply for a credit card check if you’re pre-qualified from a variety of institutions. This does not hurt your credit score. Sites such as CreditCards.com provide good tools that can match you to offers from multiple credit card companies without impacting your credit score. This is a good first step when looking to apply for credit. You can read our complete guide to getting pre-qualified for a credit card here.

Build Credit with Secured Credit Cards

If you are trying to rebuild your credit, one of the best approaches is to get a secured credit card. In order to get the card, you will have to write a check to deposit with the credit card company. This money will be your line of credit.

In order to effectively rebuild your credit, you must actually use the card, and we recommend not charging more than 20% of your credit line. For example, if you have a $500 credit line, you should not charge more than $100. Then, pay off your balance in full every single month. You can even build credit with $10 a month on a secured card and see your credit score rise.

After you’ve consistently managed your secured card well over a period of time, you may be able to increase your credit line beyond your initial deposit or migrate to an unsecured credit card. With most companies, this is a tedious process that you’ll have to initiate. You also aren’t guaranteed to get results even after you’ve made a request.

Discover operates differently than most companies in this realm, making it our number one pick for secured cards.

Discover it® Secured Card

If you’re looking for a secured credit card, look no further than Discover it® Secured Card. On top of being great for people with a bad credit score, Discover will also accept applicants who have no credit history at all. Discover offers great ways for you to rebuild your credit and be on the way to an unsecured card.

Build Credit with Secured Cards

Discover it® Secured Card - No Annual Fee

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Discover it® Secured Card - No Annual Fee

Annual fee
$0 For First Year
$0 Ongoing
Minimum Deposit
$200
APR
23.99% APR

Variable

Credit required
bad-credit
Bad

Also Consider

OpenSky® Secured Visa® Credit Card from Capital Bank N.A.

OpenSky Secured Visa

This card does not do a credit check, and no bank account is needed to apply. This is beneficial for those with low credit scores or no access to a bank account. If you’ve filed for bankruptcy, you’re in luck because they don’t care to know, unlike other institutions. However, OpenSky charges a $35 annual fee, which Discover does not. This can be a deal breaker if you don’t want to pay a fee, since there are many secured cards without fees.

Read MagnifyMoney’s full Secured Credit Card Guide.

Our Credit Union Favorite

If you’re looking to open a credit card with bad credit, it can be hard to find a card you qualify for. That’s where credit unions come in. They are sometimes more accepting of your credit history and have cards especially designed for people with low credit scores — helping your approval chances.

Georgia’s Own Visa Classic

Georgia’s Own Credit Union offers a variety of credit cards all with low interest. Their Visa Classic unsecured card is positioned toward those who need to rebuild credit and boasts a low APR. When you apply for a credit card on Georgia’s Own website you are directed toward an application that is for all credit cards they offer. This means that depending on your creditworthiness, you may not be directed to the Visa Classic as an option. Therefore, if you want to apply directly for the card, the best bet is to speak with a loan officer who will tell you if you’re pre-approved for the Visa Classic card.

Our Credit Union Favorite

Visa® Classic from Georgia's Own Credit Union

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Visa® Classic from Georgia's Own Credit Union

Annual fee
$0 For First Year
$0 Ongoing
APR
12.99%-17.99%

Fair Variable

Credit required
bad-credit
Bad

Best for Cash: Personal Loans

If you’re looking to get some cash in your pocket, credit cards in general aren’t your best answer. Cash advances are not ideal, and putting a purchase you can’t currently afford onto a credit card with a high interest rate attributable to your not-so-great credit score is going to be an expensive venture.

Instead, you’ll want to consider personal loans. They’re admittedly a little more work up front with the application process, but the savings can be worth it. YOu can check to see if you are prequalified without impacting your credit score at most lenders. And LendingTree (the parent company of MagnifyMoney) has created a tool that lets you compare rates from dozens of lenders at once, without impacting your score.

LendingTree

LendingTree, our parent company, offers a one-stop tool that can help borrowers find numerous personal loan offers. After entering some basic information, you can receive offers from lenders in a matter of minutes. If you prefer to go directly to the lender’s site you can use one of the options listed below.

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LendingTree

Loan Amount
up to $35,000
Term
up to 60 Months
APR Range
5.99%-35.99%
Origination Fee
Varies
Credit Required
Bad or Could be Better/Average/Good/Excellent
Soft Pull
You can get your rate without hurting your score.

Pros Pros

  • Check Multiple Offers at OnceYou can check personal loan offers from a wide range of lenders including Avant, LendingClub and Best Egg. The entire process happens online for free and is fast and easy.
  • Soft Pull on Your CreditLendingTree performs a soft pull on your credit in order to give you accurate loan offers. This does not affect your credit score and can give you a good picture of what to expect if you're approved for a loan.

Cons Cons

  • Need to Create and Account to View OffersThe only way to view your personal loan offers is to create and account at LendingTree. This is a minor step, but it does allow you the ease of saving your offers so you can review them later.
Bottom line

Bottom line

LendingTree offers a great tool that lets you easily check your rates for a variety of lenders, all in a matter of minutes. This is a great way for you to see what rates you may get and allows you to shop around for the best offer, without the hassle of going to multiple websites.

Avant

Avant offers personal loans even to those with less-than-desirable credit. Because there is no prepayment penalty, you can pay off your loan before the end of your term without consequence.

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Avant

Loan Amount
$2,000 – $35,000
Term
up to 60 Months
APR Range
9.95%-35.99%
Origination Fee
4.75%
Soft Pull
You can get your rate without hurting your score.

Pros Pros

  • Apply Online The entire Avant application process happens online. This saves you the hassle of filling out paperwork and visiting a local branch.
  • Find Your Interest Rate Before You Apply Avant allows you to preview the interest rate you would be offered with a soft pull on your credit. This will not impact your credit score. This is helpful if you’re shopping around for different rates and gives you a realistic picture of what to expect should you choose Avant.
  • Could Save Money over Subprime Credit Cards Depending on the interest rate and upfront fee percentage you are offered, a personal loan from Avant could save you money over putting purchases on a subprime credit card. The ability to preview your interest rate can also help you compare between personal loans and other possible options.

Cons Cons

  • High Interest Rates Because you’re a subprime borrower, you’re not likely to qualify for the lowest interest rate offered. You’re more likely to be offered something closer to the 35.99% rate. This is a very high rate, and it’s important that you make all of your payments on time to avoid paying interest and damaging your credit score.
Bottom line

Bottom line

While there’s only one con for Avant’s personal loans, it’s a pretty big one. The interest rate can be extremely high, so do your math before deciding if this is a good product for you. And be sure to take advantage of the fact that they’ll let you check your interest rate before officially submitting your application. Use this feature to shop around for best offers and check if you qualify for a better loan

OneMain Financial

Avant is easier to apply for as the application process will take place online, but if you’re willing to go somewhere in person, you can also apply with OneMain. Its application is also online, but in order to be approved, you’ll have to show up at a local branch with documentation backing the information you submitted at home.

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OneMain Financial

Loan Amount
up to $25,000
APR Range
17.59%-35.99%
Origination Fee
No origination fee
Credit Required
Average/Good/Excellent

Pros Pros

  • Talk to a Loan Officer At OneMain you have the benefit of talking to a loan officer and explaining your personal situation. This is a positive experience that can help you explain anything that can’t be seen on an application.
  • Receive Money Same Day If you apply online before noon, you usually will receive the loan the same day. This is helpful if you need money quickly. After the loan is approved, you have 14 days to change your mind and return the loan proceeds. If you do that, you will not be responsible for any of the accrued interest.

Cons Cons

  • High Interest Rates Accrued Daily Even though the interest rates may be more reflective of your situation, they are still high. Interest accrues daily, which could add years to your loan if you don’t pay on time. Be sure to make your payments on time each month to avoid paying high interest rates.
  • Must Meet in Person You have to physically bring your paperwork into a OneMain branch after applying online. You will also have to complete an interview with a loan officer. This can be a tedious process if there is no OneMain branch located near you.
  • Must Borrow a Minimum of $1,500 Depending on how much cash you need, the $1,500 minimum may be too high if you only need a couple of hundred dollars. There is no maximum loan amount offered.
Bottom line

Bottom line

OneMain locations can be a good choice if you want to have your loan the day you apply. If you’re okay meeting someone in person and have the transportation to get to your closest branch, this may be an option worth exploring. Make sure you decide if this offer is right for you and if you need a loan over $1,500. Check to see if you’re pre-qualified for a better offer from other institutions.

Last Resort: Subprime Credit Cards

Subprime credit cards are those that lending institutions issue to those with “bad” credit. They are not a good solution to your credit woes. They almost always come with high interest rates and a litany of fees — both of which make it difficult to use this product responsibly.

For example, First Premier makes a business out of lending to subprime borrowers with bad credit. Most of their applicants are only awarded a $300 line of credit. That’s after they pay a $95 fee just to apply (which is not a common practice in the credit card industry) and a $75 annual fee. If you are approved for a higher credit limit, your annual fee for the first year may be higher ($79-$125). In the second year, the annual fee drops ($45-$49), but at this point you are charged a $6.25-$10.40 account servicing fee every single month.

The cherry on top? The card’s APR is 36%. Heaven forbid you are ever late on a payment — your balance will skyrocket with the insanely high interest rate. Don’t forget about the late payment fee — up to $38.

Another example is Credit One Bank — not to be confused with Capitol One Bank, though their logos do look eerily similar. Not every Credit One Bank credit card comes with outrageous fees. In fact, there are 26 separate possible card agreements. But if you are a subprime borrower, you’re likely to qualify for higher rates.

Your credit may not be great, but that doesn’t make subprime credit cards a “fair” product. You may qualify for other, better options that aren’t as laden with fees. That’s why we recommend you first check if you’re pre-qualified for offers then look at store cards and personal loans before choosing a subprime credit card.

Bad Credit FAQs

Store cards can be used as payment anywhere the credit card company, such as MasterCard or Visa, is accepted. Private label cards can only be used at the branded company’s store. For example, if you get a private label card for New York & Company, you can only use it for purchases at New York & Company. You would not be able to use it at any other store.

Your best bet is to ask. If you are applying online, pick up the phone and call or use the company’s online chat if available.

If you have a physical card in front of you, you’ll notice that store cards always have the associated credit card company shown on the front, whether that be Visa, American Express, MasterCard, or another.

Private label cards tend not to display this information, though a major financial institution that a lot of companies work with for their private label cards is Comenity. If you have a card associated with Comenity Bank, it is likely a private label card.

No. Most businesses have an online application for their store cards.

Personal loans are typically issued by more reputable lenders who aspire to more transparency than those in the payday loan space. Payday loans are often advertised as having interest rates somewhere between 10% and 30%, but that interest is charged over a short period of time, making their effective APR (annual percentage rate) much higher. Some payday loans have an effective APR of 400% or more.

The lender isn’t likely to tell you that, though. Many businesses in this space are predatory. Payday loans also tend to come with outrageous fees.

While rates and fees on personal loans for those with bad credit aren’t ideal, they’re more than substantially lower than those of payday loans. Make no mistake about it: despite enticing advertising promises of deceptive payday lenders, personal loans are an infinitely better option.

Borrowing cash from your credit card company often comes with a fee of 1%-5%. That may not seem terrible when you look at the upfront fees of many personal loans, but you also have to account for interest.

Unlike purchases you charge to your card, interest on cash advances starts accruing immediately. You do not get to wait for your next statement to be issued. The interest rate for cash advances is also often higher than that of regular purchases.

A personal loan is an installment loan with a balance that will go down if you pay the minimum payment each month. This makes it far easier to manage than debt accrued via a cash advance. If you only pay the minimum payment on a cash advance each month, your balance will go up at a quick pace, potentially spiraling out of control.

First of all, the less you charge, the easier it will be to pay back. Since you have a bad credit score, you may have had issues with charging too much in the past and being unable to pay it off.

Secondly, around 30% of your credit score is made up of your credit utilization ratio. You find this ratio by dividing the amount of credit extended to you by the amount you have borrowed. By borrowing only 20% of your available credit, you reduce the risk of having your current balance negatively impacting your credit score.

It can sometimes take a year or more to see your score improve by 100 points if you are doing everything correctly and responsibly.

Yes, but only if you use them responsibly, paying the balance off in full every month. Keep in mind your credit utilization ratio here, too.

Potentially. Ten percent of your credit score is made up of something called “credit mix.” You don’t need to have every single type of credit in your credit report, but you should have more than one type. Here are the five that count:

  • Credit cards
  • Installment loans
  • Retail accounts
  • Finance company accounts
  • Mortgage loans

Conceivably, if you have a mortgage or business debt tied to your Social Security number or EIN, you might be able to get away with rebuilding your score through a personal loan (which is an installment loan). The key is to manage all of those debts well — and to do so consistently — especially since you already have bad credit.

No. Transactions on prepaid debit cards do not get reported to the credit bureaus. Also, it’s important to remember than many prepaid cards come with a ton of fees.

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne at brynne@magnifymoney.com

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Best of, Credit Cards

Credit Cards: Find the Best Credit Card Offers & Deals – November 2017

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Credit Cards: Find the Best Credit Card Offers & Deals

Updated November 1, 2017

The best credit cards can help you earn $2 or more for every $100 you spend – an easy way to make $100s or even $1,000s a year. When done properly, low rate credit cards are also the cheapest way to borrow. You can get 0% interest for up to 2 years. And credit cards are the best way to build, rebuild or maintain an excellent credit score, without paying fees.

But if you get it wrong, you can easily end up buried under a pile of expensive debt. This is a step-by-step guide that will help you find the best credit cards while avoiding expensive traps.

How to Choose and Use a Rewards Card

It is now easy to earn great rewards when you use a credit card for your spending. You should earn at least 2% cash back, and can earn even more with a bit of work. The money can add up quickly. If you spend $1,000 a month, you can earn $240 a year. It is not very often you can get something for nothing. But if you make the right choice and follow the rules, you can earn significant rewards.

How to Choose

Best Cash Back Credit Cards

Cash back credit cards are a great way for you to earn money back from everyday purchases. There are two types of cash back credit cards — flat-rate and category. Flat-rate cards offer the same cash back rate for all purchases, while category cards offer higher rates for certain purchases like gas, grocery, travel, and dining. Below we break down the best cash back credit cards.

Best Flat-Rate

These are the top cards offering a flat cash back rate.

Citi® Double Cash Card – 18 month BT offer

1% When You Buy + 1% When You Pay

Citi® Double Cash Card – 18 month BT offer

The Citi® Double Cash Card – 18 month BT offer is the best overall cash back credit card. So long as you pay your statement balance in full and on time every month, you will earn 2% cash back. You earn 1% unlimited cash back on all of your purchases. You then earn an additional 1% on payments based on your purchases. The bonus cash back can take up to two billing cycles to post.

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  • No caps on how much cash back you can earn.
  • Cash back earning formula is easy to understand
  • There is a range of interest rates. You won’t know yours until after you apply

Key Information

Credit Score Required : Good or Excellent Credit

Purchase Interest Rate : 14.49% – 24.49% Variable

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer : 0% for 18 months

BT Fee : 3% or $5, whichever is greater

Tip: Make sure you pay your statement balance in full and on time to maximize your cash back.

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Fidelity® Rewards Visa Signature® Card

Unlimited 2% Cash Back on Every Purchase

Fidelity® Rewards Visa Signature® Credit Card

The Fidelity® Rewards Visa Signature® Credit Card offers Fidelity customers a generous 2% cash back on all purchases, with no limits or category restrictions. The cash back you earn must be deposited into a Fidelity account, but you don’t need to have a Fidelity account to apply for the card. If you do not have a Fidelity account, they will open a Fidelity Cash Management Account to deposit your cash back. It works like a checking account with no minimum balance requirement and no monthly fees.

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  • Simple cash back earning formula
  • No caps on how much cash back you can earn
  • You need to have a Fidelity account in order to redeem your cash back

Key Information

Credit Score Required : Excellent Credit

Purchase Interest Rate : 14.99% Variable

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer : None

BT Fee : 3% or $5, whichever is greater

Tip: You don’t need to keep your retirement or stock accounts with Fidelity to qualify for this card. Anyone can apply.

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Best Category Bonuses

Here are the top cash back cards that pay much higher rates in certain bonus categories, which can be a great way to boost your returns.

Fort Knox Federal Credit Union Visa® Platinum Card

Unlimited 5% Cash Back on Gas

Fort Knox Credit Union Visa® Platinum Card

If you spend a lot of money on gas, there is no better card than this. You can earn unlimited 5% cash back on spending at gas stations. You will earn 1% on all other spend. You must be a member of the credit union, but anyone can join. Pay $5 to join the American Consumer Council of Kentucky (you can do that here) and you will be eligible to join.

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  • No limit to the cash back you can earn, even in the bonus category
  • You have to be a member of the credit union to get the card

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : as low as 10.25%

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer : None

BT Fee : None

Tip: If you are not yet a member, you can use the non-member application process. Once approved, you can join with your $5 contribution to American Consumer Council.

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Blue Cash Preferred® Card from American Express

6% Cash Back at U.S. Supermarkets (Up to $6,000 of Spend)

Blue Cash Preferred® Card from American Express

The unparalleled 6% cash back rate at U.S. Supermarkets makes this one of the best cards on the market for heavy grocery shoppers. Even with the $95 annual fee, most grocery shoppers will come out ahead. You will also earn 3% cash back at U.S. gas stations, 3% at select U.S. department stores and 1% on all other purchases. You’ll earn the sign up bonus of a $200 statement credit after you spend $1,000 in purchases within the first 3 months of account opening.

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  • Simple, easy to understand bonus offer
  • There is an Annual fee

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 13.99% – 24.99% Variable

Annual Fee : $95

Sign-on Bonus : $200 statement credit after you spend $1,000 in purchases  within the first 3 months of account opening.

Intro Purchase APR : 0% for 12 months

Intro Balance Transfer : 0% for 12 months

BT Fee : 3% or $5, whichever is greater

Tip: If you spend less than $200 a month on groceries, you will earn less than 2% cash back (after taking into account the fee) and would be better with Citi Double Cash or Fidelity American Express. But, if you spend more each year, this is a great option.

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PenFed Premium Travel Rewards American Express® Card

4.25% Cash Back on Airfare Expenses

PenFed Premium Travel Rewards American Express® Card

If you buy a lot of plane tickets every year, this card can be particularly lucrative. You will earn 5 points for every $1 spent on air travel. When you convert those points to a prepaid Visa card, those 5 points turn into a 4.25% earn rate. You earn 1 point per $1 on all other purchases. There is no annual fee, no foreign transaction fees and 20,000 bonus points when you spend $2,500 within three months of account opening.

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  • No annual fee and no foreign transaction fees
  • The conversion from points to $ can be confusing
  • You must be a member of the credit union

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 9.74% – 17.99% Variable

Annual Fee : $0

Sign-on Bonus : 20,000 bonus points when you spend $2,500 within 3 months of opening an account.

Intro Purchase APR : None

Intro Balance Transfer : 0% for 12 months

BT Fee : 3%None

Tip: Keep an eye open on the redemption opportunities. You can sometimes find better deals than just prepaid Visa® cards.

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Uber Visa Card

4% for Dining Out

Uber Visa Card

This card appears to have millennials’ interests at heart, offering higher rewards rates for eating out and credits toward streaming subscriptions. The Uber Visa Card offers 4% back on dining purchases, from restaurant and bar purchases to takeout and UberEATS. Also offered: 3% back on hotel and airfare including vacation home rentals; 2% back for online purchases covering everything from Uber and online shopping to video and music streaming; and 1% on everything else.

As mentioned, dining purchases are defined as spending at restaurants, bars, on takeout or via the UberEATS service. Points can be redeemed for Uber credits, gift cards or cash back.

Another perk: There is no annual fee with this card. And there’s a terrific sign-up bonus that requires you to spend $500 within 90 days from account opening to earn $100. Also, you can earn up to a $50 credit for online subscription services after you spend $5,000 or more on your card per year.

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  • Good disclosure: they tell you what you need to know
  • Simple introductory bonus
  • Impossible to know your interest rate until you apply

Key Information

Purchase interest rate : 15.99%, 21.74% or 24.74% Variable

Annual fee : $0

Sign-on bonus : Earn $100 after spending $500 on purchases in the first 90 days.

Intro purchase APR : None

Intro balance transfer : None

BT fee : $10 or 3%, whichever is greater

Tip: Use this card for all dining, hotel and airfare purchases to maximize your rewards at the higher rate.

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Do you spend a lot of money in other categories? You can find the best cash back credit cards for every category here.

Best Travel Credit Cards

If you would like to earn free travel, there are a number of credit cards designed specifically to help you earn free flights quickly. Here are the best travel rewards credit cards.

Best Credit Cards for U.S. Travel

Bank of America® Travel Rewards Credit Card

Best No Annual Fee Travel Card – Miles Can Be Used Anywhere

Bank of America® Travel Rewards Credit Card

With this card, you earn unlimited 1.5 points for every $1 you spend. There are no restrictions and no blackout dates. Every 100 points can be redeemed for $1 worth of travel. The rewards get even better if you have “Preferred Rewards” at Bank of America®. If you’re a Preferred Rewards client, you could increase your points earned with a bonus of 25% – 75%.

There is no annual fee and no foreign transaction fees. You can use your points for a wide range of travel options, including flights, hotels, vacation packages, cruises, rental cars and even pesky baggage fees.

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  • Simple introductory bonus
  • No limit to the points you can earn
  • There is a range of interest rates. You won’t know yours until after you apply

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 15.99% – 23.99% Variable

Annual Fee : $0

Sign-on Bonus : 20,000 bonus points after making at least $1,000 in purchases in the first 90 days.

Intro Purchase APR : 0% for 12 months

Intro Balance Transfer Offer : None

BT Fee : 3% or $10, whichever is greater

Tip: The Preferred Rewards program offers excellent rewards. If you rollover your old 401(k) or IRA to Merrill Edge®, you can get up to a 75% credit card bonus and ATM fee reimbursement with a Bank of America® checking account.

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The Amex EveryDay® Credit Card from American Express

Best No Annual Fee Travel Card – Earn Airline Miles & Hotel Points

The Amex EveryDay® Credit Card from American Express

You can earn 2 points for every $1 spent at U.S. supermarkets, up to $6,000 per year in purchases. You will earn 1 point on all other purchases, including supermarket spending above $6,000. There is an added bonus if you use your credit card for 20 purchases per month — you will get a bonus of 20% more points on those purchases. That means you would get 2.4 points on grocery store spend (up to $6,000) and 1.2 points on everything else.

You will be earning Membership Rewards Points, which have a wide variety of redemption options such as conversion into frequent flier miles. Participating airlines include Delta, Virgin America, British Airways, Virgin Atlantic and more. You also have the option to convert points into hotel programs, including Hilton and Starwood.

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  • Simple introductory bonus
  • The 2-point bonus on grocery store spending is capped
  • You need 20 transactions each month to get the the 20% bonus

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 13.99% to 23.99% Variable

Annual Fee : $0

Sign-on Bonus : Earn 10,000 Membership Rewards® points after you use your new Card to make $1,000 in purchases in your first 3 months.

Intro Purchase APR : 0% for 12 months

Intro Balance Transfer : 0% for 12 months

BT Fee : 3% or $5, whichever is greater

Tip: Make sure you use this card for all of your everyday spend. The 20% bonus is based upon the number of transactions made, not the value of those transactions. Even buying a package of gum in the grocery store counts.

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Best Credit Cards for International Travel

These are the best credit cards for use when traveling outside of the country. None of these cards have foreign transaction fees. And some of them even have chip and pin, helping to increase acceptance.

Platinum Rewards MasterCard® from First Tech FCU

No Annual or Foreign Transaction Fee + Chip and Pin Functionality

First Tech Credit Union Platinum Rewards MasterCard®

This card is a great companion for overseas travel with no annual fee or foreign transaction fee. Even better, the card offers chip and pin functionality. Most major credit card issuers in America have rolled out chip and signature, which can be problematic overseas. If you try to use your card at a ticket machine or with a waiter’s portable payment device, you have a good chance of being rejected.

It’s easy to join the credit union —membership is free if you work for a sponsor technology company, work for the state of Oregon or live in Lane County, Oregon. Otherwise, you just need to join the Financial Fitness Association with a one-time fee of $8. There is a sub-par rewards program: 1 point for every $1 you spend.

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  • No annual fee or foreign transaction fees
  • You have to be a member of the credit union

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : as low as 10.99% Variable

Annual Fee : $0

Sign-on Bonus : $200 bonus cash back after you spend $500 on purchases in the first 3 months from account opening.

Intro Purchase APR : None

Intro Balance Transfer APR : 0% for 12 months

BT Fee : None

Tip: Use this card for foreign travel, not for rewards since you earn a very low rate.

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Capital One® QuicksilverOne® Cash Rewards Credit Card

Best Foreign Travel for Fair Credit

Capital One® QuicksilverOne® Cash Rewards Credit Card

This card is designed for people with average credit. If you have defaulted on a loan in the past five years (but not more than once), or if you have had limited credit history (at least one account for less than three years), you would be considered “average.” With this card, you can earn 1.5% unlimited cash back. There is also no foreign transaction fee, but be aware of the $39 annual fee.

You can use this card to build your credit score by keeping your utilization low (ideally below 20%) and make your payments on time and in full every month. Capital One® provides free access to your FICO score so you can track your score and see when you are eligible for an upgrade to a no-fee card.

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  • No limit to the cash back you can earn
  • No confusing categories or limits
  • No annual fee or foreign transaction fee

Key Information

Credit Score Required : Average

Purchase Interest Rate : 24.99% (Variable)

Annual Fee : $39

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer Offer : None

BT Fee : None

Tip: Use this credit card to build your score and avoid expensive foreign transaction fees.

 

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How to Use

In order to maximize your cash back, make sure you follow these suggestions:

  • Use your chosen cash back card for ALL of your spending. Your goal should be to replace cash, checks, automatic debits and debit cards completely. For example, you can automate bill payments (like your cell phone) to be debited from your credit card. This will make your life easier (only one payment to make each month) and it will make budgeting easier (you can set a target for spending and track it easily).
  • Set up automatic monthly payments for the statement balance, not the minimum due. If you set up automatic payments, you will ensure that your payment will be on time every month. And if you set up the automatic payment for the statement balance, you will ensure that you are never charged interest and only charge what you can afford to repay.
  • Avoid cash advances. If you use your credit card to take out cash, most companies will charge a cash advance fee that averages 3%. The interest rate on cash advances is usually above 20%. And there is no grace period, which means interest starts accruing right away.

Best Low Rate Cards

If you’re someone who carries a balance month-to-month, a low rate credit card can be a great way for you to save money. Whether you want to complete a balance transfer, finance a large purchase, of simply have a low rate card in your wallet, there is a card for you. See below for our top picks.

How to Choose and Use a Low Rate Credit Card

When done properly, credit cards can be the cheapest way to borrow. Just make sure you choose the right credit card for your situation and automate a plan to pay off the debt as quickly as possible.

How to Choose

Best Balance Transfer Credit Cards

With a balance transfer credit card, you can transfer debt from a high interest rate credit card to a 0% introductory promotional rate. You can find no fee balance transfers for up to 15 months. If you are willing to pay a fee, you can find balance transfers for 18 or 21 months. The fee is usually worthwhile – if you want to do the calculation, you can use the calculator on our interactive tool.

Remember: You cannot transfer debt between two credit cards of the same bank.

Here are the best 0% balance transfer offers in the market today. All of these credit cards waive interest – which means there is no retroactive interest charge to worry about.

Chase Slate<sup>®</sup>

No Fee – introductory 0% on transfers for 15 months

Chase Slate®

With the Chase Slate® credit card you can enjoy an introductory balance transfer offer for 15 months and pay no balance transfer fee when you transfer a balance during the first 60 days your account is open. The intro $0 transfer fee is a great way to save money when completing your transfer. In addition to the balance transfer offer, you pay no interest on purchases for 15 months — great for those who want to pay off a large purchase over time without accruing interest.

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  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • Interest rate is not known until you apply.

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 15.99% – 24.74% Variable

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : 0% for 15 months

Intro Balance Transfer Offer :  0% for 15 months

BT Fee : $0 Introductory balance transfer fee for transfers made during the first 60 days of account opening After, 5% of the amount transferred, with a minimum of $5.

Tip: Compete your transfer within 60 days from account opening to take advantage of the intro $0 transfer fee.

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Citi Simplicity® Card - No Late Fees Ever

0% intro APR on transfers and purchases for 21 months; 3% balance transfer fee

Citi Simplicity® Card – No Late Fees Ever

Citibank has a strong intro balance transfer offer, with a long 21 months. In addition, the Citi Simplicity® Card – No Late Fees Ever has some added perks. There are no late fees, no penalty rate and no annual fee. Although you should always try to pay on time, it is nice that this card will not punish you for the occasional mistake. In addition to the balance transfer offer, you pay no interest on purchases for 21 months.

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  • No late fee, no penalty APR and no annual fee
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • There is a range of interest rates. You won’t know yours until you apply.

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 14.99% – 24.99% Variable

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : 0% for 21 months

Intro Balance Transfer Offer : 0% for 21 months

BT Fee : 3% or $5, whichever is greater

Tip: Make sure you transfer your balance within 4 months of opening the card, otherwise you lose the promotional offer.

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Paying off credit card debt sometimes requires more than one balance transfer credit card. If you want even more choices, check out our full guide to the best balance transfer cards, or use our balance transfer calculator to see which cards will save you most.

Best 0% Purchase Credit Cards

With a 0% introductory purchase offer, you will not be charged interest for purchases made on the credit card during the promotional period. This is a great way to finance a purchase. Even better, none of these top cards charge retroactive interest if you don’t pay off the balance during the promotional period. (A lot of store credit cards offer 0%, but then hit you with a big penalty. But don’t worry – these recommendations don’t do that).

Citi® Diamond Preferred® Card

0% intro on Purchases for 21 Months

Citi® Diamond Preferred® Card – 21 Month Intro Offer on BT and Purchases

If you are looking to finance a purchase, Citibank offers the longest 0% intro purchase promotion of any credit card in the MagnifyMoney database. The intro APR on purchases will be 0% for the first 21 months after opening the credit card. This is a fantastic length of time for you to pay off your balance. Additionally, Citi® Diamond Preferred® has a 0% intro APR on balance transfers for 21 months. There is also no annual fee and the ability to choose your payment due date from any available due date in the beginning, middle or end of the month.

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  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • Interest rate is not known until you apply.

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 13.99% – 23.99%

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : 0% for 21 months

Intro Balance Transfer Offer : 0% for 21 months

BT Fee : 3% or $5, whichever is greater

Tip: The 21 months starts from when you open the credit card, not when you make the purchase. So make sure you time your application with your planned purchase.

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TruWest Visa® Signature Card

0% Intro on Purchases for 18 Months – Credit Union Membership Required

TruWest Visa® Signature

TruWest is a credit union with restricted membership. Unfortunately, you need to live in certain regions of Texas or Arizona, or work for a few select employers  to join. You can learn about membership eligibility here. If you are able to join, you will find a long 18-month 0% intro APR period. Even better, the credit card has reasonable credit union interest rates after the promotional period ends. There is no annual fee on the card.

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  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • There is a range of interest rates. You won’t know yours until you apply.

Key Information

Credit Score Required : Good or Excellent

Purchase Interest Rate : 8.90% – 9.90%

Annual Fee : $0

Sign-on Bonus : Earn $100 when you spend $100 in the first 90 days of account opening.

Intro Purchase APR : 0% for 18 months

Intro Balance Transfer Offer : 0% for 18 months

BT Fee : 3%

Tip: Make sure you check your membership eligibility before you apply.

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Best Low Interest Credit Cards

Having a credit card with a rate that stays low is a good idea. In case of an emergency, you will always have access to a low cost way to borrow. Here are some great low interest rate options:

Langley Select Visa Platinum Card from Langley FCU

As Low as 8.00% APR from a Credit Union Anyone Can Join

Langley Select Visa® Platinum

Anyone can join Langley Federal Credit Union by joining an association during the signup process for $5. If you have excellent credit and just want a place for emergency spending with no rewards, consider keeping this card on hand. Although the rates start as low as 8.00% Variable, not everyone will get a rate that low. It’s more of a hassle than a regular bank card, but if you insist on the very lowest rate you may get it with this card.

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  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • There is a range of interest rates. You won’t know yours until you apply.
  • You have to join the credit union.

Key Information

Credit Score Required : Excellent

Purchase Interest Rate : as low as 8.00% Variable

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer Offer : None

BT Fee : None

Tip: You need to have an excellent credit score in order to qualify for the lowest interest rate.

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You might get a lower rate from a credit union or bank near you that doesn’t accept nationwide applications, and you can check our full list of low interest credit cards to see if there is one that works for you.

How to Use

If you need to borrow money, credit cards can be an incredibly low cost way of borrowing. Just make sure you pay attention to the following tips:

  • Get that balance transfer done quickly! If you are transferring a balance, make sure you complete the transfer as soon as possible. The introductory offer starts from when you open the card, not when the transfer is completed. And you can lose the offer with most issuers if you wait more than 60 days to complete the transfer.
  • Automate your monthly payments. If you pay late, you can be charged a costly late fee. And, if your payment is 60 days late, you can lose the introductory offer entirely.
  • You cannot transfer debt between two cards of the same bank. For example, if you open a Citibank account you will only be able to transfer debt from credit cards other than Citibank.

Best Cards to Help Build or Rebuild Your Credit Score

If you’re someone who is new to credit or has poor credit history, there are credit cards designed for you. These cards are a great way to begin your credit journey, or to improve your credit score. See below for our top picks.

How to Choose and Use a Credit Card to Build or Rebuild Your Score

If you are looking to build or rebuild your credit score, a credit card can be the perfect tool.

How to Choose

If you have no credit, or your credit score is below 620, you should consider a secured credit card.

If you have limited credit history (less than three years) or you have only defaulted once on a credit card or loan (not multiple times), you should consider a credit card for fair credit.

Best Secured Credit Cards if You Have Bad or No Credit

Secured credit cards are the best option if you need to build or rebuild your credit score. The best secured credit cards have no annual fees. If you’re going to use a secured credit card, it will help you grow your score if you pay your balance on time every month, keep your credit utilization low, and you apply for an unsecured credit card after 12-18 months of regular use.

Need to know more? These are ways that you can build your credit without paying interest and spending just $10 a month, and these are tips for improving your credit score.

Discover it® Secured Card - No Annual Fee

No Annual Fee Secured Card with Free FICO Score; $200 Deposit Required

Discover it® Secured Card – No Annual Fee

This is our favorite secured credit card. There is no annual fee and you will get free access to your credit score. In order to open the card, you will need to deposit at least $200, depending upon your creditworthiness. If you have previously filed bankruptcy, you still have the chance to be approved. With this secured credit card, you will earn 2% cash back at restaurants or gas stations (on up to $1,000 in combined purchases each quarter) and 1% cash back on all other purchases.

Our favorite part of this card is the automatic monthly reviews starting at 8 months to see if you can be transitioned to an unsecured card. If you qualify, you will be graduated (and get your deposit back).

Transparency Score 25
Transparency Score
  • No annual fee
  • Free FICO credit score

Key Information

Credit Score Required : No credit, 670 or less

Purchase Interest Rate : 23.99% variable APR

Annual Fee : $0

Sign-on Bonus : Get a dollar-for-dollar match of all the cash back you’ve earned at the end of your first year, automatically.

Intro Purchase APR : None

Intro Balance Transfer Offer : 10.99% for 6 months from date of first transfer, for transfers under this offer that post to your account by January 10, 2018.

BT Fee : 3%

Tip: This product reports to all three credit bureaus. It is a great tool to build your score. But, if you miss payments, you can do damage to your score.

GO TO SITE SecuredFULL REVIEW 

Rate Advantage Secured Visa by Coastal FCU

No Fee Secured Card; Credit Union Membership and $100 Deposit Required

Rate Advantage Secured Visa

This card has no annual fee, and you only need to deposit $100 in a Collateral Savings Account to get started. If you’re not a member of Coastal Credit Union, you can join an organization for $18, which is deducted from your initial deposit, and become a member. So you’ll need $118 to get started. While the initial deposit is lower than the Discover it® Secured Card – No Annual Fee, you lose out on the rewards. This card takes more work to open, since it involves joining a credit union, but anyone can apply.

Transparency Score 27
Transparency Score
  • A single interest rate that you know up front, before you apply
  • You have to join a credit union

Key Information

Credit Score Required : Anyone can apply

Purchase Interest Rate : as low as 16.25% Variable

Annual Fee : $0

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer Offer : None

BT Fee : 3% or $5, whichever is greater

Tip: It is easy to join the credit union. Join an organization for $18 and you will become eligible.

GO TO SITE Secured

We also have a list of several other no annual fee secured credit cards from both banks and credit unions anyone can join. Or browse our list of hundreds of secured cards to compare rates, fees, and deposit requirements.

Best Credit Cards if You Have Fair Credit

If you have fair or average credit, you might be able to qualify for an unsecured credit card. If you have more than one default in the last five years, you will find it difficult to get approved. In addition, if you are currently delinquent on any of your accounts it will also be hard to get approved, and you should try a secured card instead.

Here are some good cards for people with fair credit:

Capital One® QuicksilverOne® Cash Rewards Credit Card

1.5% Cash Back for People with Average Credit – with $39 Annual Fee

Capital One® QuicksilverOne® Cash Rewards Credit Card

Capital One® has created a credit card specifically for people with average credit. If you have defaulted on a loan (but not more than one) in the last five years, or you have limited credit history (at least one account for less than three years), you would meet the definition of average credit. With this card, you will earn unlimited 1.5% cash back on every purchase with no limit on how much you can earn, and no changing categories.

Transparency Score 30
Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • There is an annual fee

Key Information

Credit Score Required : Average

Purchase Interest Rate : 24.99% Variable

Annual Fee : $39

Sign-on Bonus : None

Intro Purchase APR : None

Intro Balance Transfer Offer : None

BT Fee : None

Tip: Watch your credit score closely. As you pay down your debt, your score will improve. Once your score is above 700, you can find a lot of choices for credit cards with better rewards or no annual fee.

GO TO SITE SecuredFULL REVIEW 

You may also want to try and see if you are pre-qualified for a credit card before applying. Banks can perform a ‘soft’ pull on your credit file to give you a sense of whether you might qualify for one of their products. It leaves no mark on your credit score, and you can see a full list of ways to check if you’re pre-qualified here.

How to Use It

In order to build your credit score with one of these cards, you should follow our tips. By doing this, you should see real improvement in your score.

  • Don’t use more than 10% – 20% of your available credit. For example, if you have a $500 credit limit, never spend more than $50. That keeps your utilization low.
  • Use your card every single month. You should make sure you have a transaction every month, so that positive data is reported to the credit bureaus.
  • Automate and pay your statement balance in full and on time every month. Even just one late payment could crush your score. And by paying the balance in full, you will avoid any interest expense.
  • Watch your score closely. Keep an eye on your credit score. After 12 months, you should really start to see a big improvement. Once your score is above 650, you should try to get your secured card converted or apply for an unsecured credit card.

A Special Note: Beware Predatory Companies

Many lenders target consumers with FICO credit scores of less than 650. If you have searched for “credit cards for bad credit,” you will probably find offers from companies like First Premier. In addition to high interest rates, these lenders often require application processing fees, maintenance fees and more. You could be given a $300 credit limit and see a big portion of it eaten up with fees.

Stay away from these specialist subprime lenders. Instead, consider the following:

  • If you need to borrow, consider a personal loan instead. You can find much better deals. Search for options here.
  • If you want to build your credit score, use a secured credit card instead.

Other Benefits of Using a Credit Card

Not only can you use a credit card to earn rewards, borrow at low rates or build your credit score for free – but there are many other benefits available. Here are some of the benefits that you can find:

Available on Most Credit Cards

  • $0 Liability on Fraudulent Activity: Credit cards are the best way to protect yourself from fraud. So long as you report the fraud to your credit card company, you will not be liable for any losses on any major credit card.
  • Car Rental Collision Insurance: If you waive collision coverage when renting a car, your credit card may provide secondary coverage of $50K or more.

Available on Some Credit Cards

  • Retail Purchase Protection: Protects you from loss, theft, fire or accidental damage for a limited period of time after your purchase has been made. Not all cards protect you from loss, so look it up in the Purchase Protection Coverage Description Document.
  • Price Protection: If you buy something in stores and you see an advertised price, you will receive the difference between the two prices.
  • Extended Warranties: Duplicates both manufacturers and store warranties for a limited length of time and for limited dollar values (varies by card).
  • Travel Accident Coverage: If you are injured during travel, and you purchased the tickets via credit card, your company fully insures you.
  • Lost Luggage Coverage: You can receive compensation for lost, stolen or damaged luggage if you purchased flight or travel tickets using your credit card.
  • Trip Interruption Cancellation Coverage: If travel delays keep you from completing a trip, and you purchased the tickets on your credit card, the full value of the tickets will be refunded
  • Concierge Services: Certain cards offer free access to local concierge services that can help you make dinner reservations, purchase event tickets, and locate items while you are abroad.

Should You Get a Credit Card?

Credit cards are like knives. Used well, they are great (even essential) tools. But if you start playing with them, you can get into trouble quickly.

There are two big risks associated with swiping plastic:

  • You spend more than you should, because it is just too easy
  • You pay higher interest rates than you should, adding years to your debt repayment

Before using a credit card, you need to answer the following question honestly:

Do I trust myself with plastic? Can I exhibit the necessary self-control to spend only what I can afford to pay in full every month?

If you have the discipline and self-control, keep reading and we will help you find the best credit card for your needs. But, if you don’t, it is possible to live a long and fulfilling life without plastic cards in your pocket.

Which type of card is best for you?

Why do you want a credit card? The answer to that question will determine which type of card is best for you.

Just remember this critical rule when selecting a credit card:

You should have a Rewards Card for your spending. You should have a Low Rate Card for your borrowing. But you should avoid mixing the two. The best Rewards Cards tend to have higher interest rates. And the best Low Rate Cards often have no (or bad) rewards.

FAQ

The minimum payment calculation differs by credit card issuer. The most common is 1% of the principal balance plus any interest or fees that accrued in the month (or a set amount, like $25, if the minimum due is very low).

If you use your credit card at an ATM to take out cash, a few things will happen. First, you would be charged a cash advance fee, which is usually about 3%. Second, interest would start accruing immediately, because most issuers do not have a cash advance grace period. And the cash advance interest rate is usually much higher than the purchase rate. Don’t be surprised to see interest rates as high as 24% (or higher).

While there is no over-limit fee, having a credit card with a balance that is greater than the credit limit can have a very negative impact on your credit score. In general, you want to keep your credit card balance below 20% (ideally below 10%) of your credit limit.

We do not recommend closing credit cards, because it can reduce your credit score. Closing unused credit cards does two things. First, it reduces your total available credit. That increases your utilization, which is bad for your score. Second, the age of your open credit cards helps your score. If you close old accounts, you can hurt your score over time.

The law requires that any payment amount beyond the minimum due must be applied to the highest APR balance first. The minimum due is at the discretion of the credit card companies. However, it is usually applied to the balance with the lowest APR first. Your goal is to eliminate high APR debt – so don’t be afraid to make much bigger payments on credit cards. The extra amount will always go to the most expensive debt first.

Each application for new credit can take 5-10 points off your credit score. If you are planning on applying for a mortgage or auto loan in the near future, you have to be very careful. Even just 5 points can be painful. However, if you are not going to be applying for a mortgage or auto loan in the next 6-12 months, you should not worry too much about your credit score. Instead, focus on getting out of debt quickly.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

TAGS:

Advertiser Disclosure

Balance Transfer, Best of

Credit Scores That Get Balance Transfer Credit Cards

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you’re someone who struggles with credit card debt and high interest rates, a balance transfer might be a way to dig yourself out of indebtedness. There are various balance transfer credit cards that offer long 0% intro APR periods that provide you with ample time to pay off your balance. Depending on your credit score, you may qualify for some of the cards we list below.

Keep in mind that the credit score ranges listed below don’t guarantee that you will be approved for a card simply because you fall within the given credit range. Lenders consider numerous factors when determining eligibility.

Excellent credit

Chase Slate<sup>®</sup>

APPLY NOW Secured

on Chase’s secure website

Read Full Review

Chase Slate®

Intro BT APR
0%

Introductory rate

Balance Transfer Fee
$0 intro balance transfer fee when you transfer a balance during the first 60 days your account is open. After 5% of the amount transferred, with a minimum of $5.
APR
15.99%-24.74%

Variable

Duration
15 months
Credit required
fair-credit

Average

BankAmericard® Credit Card

Apply Now Secured

on Bank Of America’s secure website

BankAmericard® Credit Card

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$0 Intro balance transfer fee for the first 60 days your account is open. After that, 3% (min. $10)
APR
12.99%-22.99%

Variable

Duration
15 months
Credit required
good-credit

Excellent/Good

Discover it® - 18 Month Balance Transfer Offer

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® - 18 Month Balance Transfer Offer

Intro BT APR
0%

promotional rate

Balance Transfer Fee
3%
APR
11.99%-23.99%

Variable

Duration
18 months
Credit required
good-credit

Excellent/Good

Citi Simplicity® Card - No Late Fees Ever

APPLY NOW Secured

on Citibank’s secure website

Read Full Review

Citi Simplicity® Card - No Late Fees Ever

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 3% of the amount of the transfer, whichever is greater
APR
14.99%-24.99%

Variable

Duration
21 months
Credit required
good-credit

Excellent/Good

Citi® Double Cash Card – 18 month BT offer

APPLY NOW Secured

on Citibank’s secure website

Read Full Review

Citi® Double Cash Card – 18 month BT offer

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 3% of the amount of the transfer, whichever is greater
APR
14.49%-24.49%

Variable

Duration
18 months
Credit required
good-credit

Excellent/Good

Citi® Diamond Preferred® Card

APPLY NOW Secured

on Citibank’s secure website

Read Full Review

Citi® Diamond Preferred® Card

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 3% of the amount of the transfer, whichever is greater
APR
13.99%-23.99%

Variable

Duration
21 months
Credit required
good-credit

Excellent/Good

Sphere® Credit Card from Santander

APPLY NOW Secured

on Santander’s secure website

Read Full Review

Sphere® Credit Card from Santander

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$10 or 4% of the amount of the transfer, whichever is greater
APR
13.49%-23.49%

Variable

Duration
24 months
Credit required
fair-credit

Average

Wells Fargo Platinum Visa® Card

Apply Now Secured

on Wells Fargo’s secure website

Wells Fargo Platinum Visa® Card

Intro BT APR
0%

promotional rate

Balance Transfer Fee
3% Intro for 18 months, then 5%
APR
16.15%-25.99%

Variable

Duration
18 months
Credit required
good-credit

Excellent/Good

Good credit

Chase Slate<sup>®</sup>

APPLY NOW Secured

on Chase’s secure website

Read Full Review

Chase Slate®

Intro BT APR
0%

Introductory rate

Balance Transfer Fee
$0 intro balance transfer fee when you transfer a balance during the first 60 days your account is open. After 5% of the amount transferred, with a minimum of $5.
APR
15.99%-24.74%

Variable

Duration
15 months
Credit required
fair-credit

Average

BankAmericard® Credit Card

Apply Now Secured

on Bank Of America’s secure website

BankAmericard® Credit Card

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$0 Intro balance transfer fee for the first 60 days your account is open. After that, 3% (min. $10)
APR
12.99%-22.99%

Variable

Duration
15 months
Credit required
good-credit

Excellent/Good

Discover it® - 18 Month Balance Transfer Offer

APPLY NOW Secured

on Discover’s secure website

Read Full Review

Discover it® - 18 Month Balance Transfer Offer

Intro BT APR
0%

promotional rate

Balance Transfer Fee
3%
APR
11.99%-23.99%

Variable

Duration
18 months
Credit required
good-credit

Excellent/Good

Citi Simplicity® Card - No Late Fees Ever

APPLY NOW Secured

on Citibank’s secure website

Read Full Review

Citi Simplicity® Card - No Late Fees Ever

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 3% of the amount of the transfer, whichever is greater
APR
14.99%-24.99%

Variable

Duration
21 months
Credit required
good-credit

Excellent/Good

Citi® Double Cash Card – 18 month BT offer

APPLY NOW Secured

on Citibank’s secure website

Read Full Review

Citi® Double Cash Card – 18 month BT offer

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 3% of the amount of the transfer, whichever is greater
APR
14.49%-24.49%

Variable

Duration
18 months
Credit required
good-credit

Excellent/Good

Chase Freedom<sup>®</sup>

APPLY NOW Secured

on Chase’s secure website

Read Full Review

Chase Freedom®

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 5% of the amount of the transfer, whichever is greater
APR
15.99%-24.74%

Variable

Duration
15 months
Credit required
good-credit

Excellent/Good

Fair credit

We recommend using LendingTree, MagnifyMoney’s parent company, to shop for the best personal loan. With a single online form, you can see results from dozens of lenders and shop around for the best deal. By using LendingTree to look for a personal loan, a soft credit pull is performed, which means your credit score will not be negatively impacted. Here are options for fair credit:

MasterCard Platinum from Aspire FCU

APPLY NOW Secured

on Aspire Credit Union’s secure website

Read Full Review

MasterCard Platinum from Aspire FCU

Intro BT APR
0%

promotional rate

Balance Transfer Fee
$5 or 2% of the amount of the transfer, whichever is greater
APR
9.15%-18.00%

Variable

Duration
6 months
Credit required
fair-credit

Average

LEARN MORE Secured

on LendingTree’s secure website

LendingTree

Loan Amount
up to $35,000
Term
up to 60 Months
APR Range
5.99%-35.99%
Origination Fee
Varies
Credit Required
Bad or Could be Better/Average/Good/Excellent
Soft Pull
You can get your rate without hurting your score.

Bad credit

*The credit score ranges listed above are for FICO Scores and obtained from Experian.

FAQ

The amount of time your have to complete your transfer will vary by credit card. Many cards require you to complete your transfer between 30 to 60 days from account opening, but check your specific card agreement for specifics. A good rule of thumb is to complete your transfer as soon as possible; the 0% intro APR period often starts from the day your account is opened.

Many cards charge a balance transfer fee ranging from 3 to 5 percent of the amount you transfer. So if you transfer $1,000 to a card with a 3 percent fee, you will accrue a $30 fee and owe $1,030. But be advised: There are cards that have $0 intro transfer fees.

Any remaining balances will accrue interest. The rate depends on your card agreement.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at alexandria@magnifymoney.com

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Advertiser Disclosure

Best of, Building Credit

The Best Options for Rebuilding Your Credit Score – November 2017

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

The Best Options for Rebuilding Your Credit Score

A strong credit score is a vital part of your overall financial health. But rebuilding a damaged (or non-existent) credit score can feel impossible. Don’t despair. There are plenty of avenues you can take in order to rehabilitate your credit score and it all begins with identifying your starting point. 

How Bad is Your Bad Credit Score? 

Before you start to panic about rehabilitating your bad credit score, let’s determine if it’s even bad. Where do you fall in the range of FICO and VantageScores?

  • Above 750: Excellent Credit
  • 680 – 749: Good Credit
  • 620 – 679: “Near Prime” or Acceptable Credit
  • 550 – 619: Sub-prime
  • Below 550: Bad Credit or No Credit Score/Thin File

Your credit score isn’t the only thing that will keep you from being approved for credit. These factors are common reasons for being declined.

  • Your debt-to-income ratio is above 50%
  • You have no credit score
  • You have been building up a lot of debt recently
  • You are unemployed

In order to focus on rehabilitating your credit score, you’ll need to start with getting a line of credit. This may sound impossible because you’re constantly getting declined. Fortunately, there are options tailored specifically for people looking to re-establish credit.

[Read more about bad credit scores here.]

Rehabilitating a Bad Credit Score (550 and under) 

Get a Secured Card

You’ll use your own money as collateral by putting down a deposit, which is often about $150 – $250. Typically, the amount of your deposit will then be your credit limit. You should make one small purchase each month and then pay it off on time and in full. Once you prove you’re responsible, you can get back your deposit and upgrade to a regular credit card. Read more about secured cards here.

[Check out our secured credit card database here.]

Rebuilding from a 551 – 619 score 

Apply for a Store Credit Card

You might be used to checking out at a store and being asked if you’d like to open a credit card. While these credit cards come with really high interest rates and are great tools to tempt you into buying items you don’t need, there is a big perk to store credit cards: they’re more likely to approve people with low credit scores. Just be sure to only use the card to make one small purchase a month and then pay it off on time and in full. Unsubscribe to emails about deals and don’t even carry it around everyday in your wallet if you can’t resist the desire to spend. Read more here. 

[Find all the details about how to improve your score here.]

If you’re unable to get a store credit card, you should apply for a secured card.

Rebuilding from the 620 to 650 score 

If you’re on the 620 end of the spectrum, you may want to consider applying for a store card or, if you’re rejected, a secured card. Store cards typically approve into the lower 600 range. Just be careful that you aren’t tempted into the spending traps like 30% off sales for card members. Just make one small purchase a month and pay it off on time and in full. 

650 really isn’t a terrible credit score. You’re average and even closing in on good credit, which starts at 680. Lower interest rates and better options will be available to you, which is why it’s important to get there.

If you’re looking to get a credit card with a 650 score, then you should consider checking to see if you’re pre-qualified for any cards. This will help minimize your chance of rejection upon applying.

It will be a harder to be approved with a debt-to-income ratio above 40%.

Otherwise, your goal in this bracket should be to use no more than 20% of your total available credit. Pay your bills on time and in full. And keep pumping that positive information onto your credit report until you reach the 700+ category. 

Who You Need to Avoid 

Access to credit and loans may come easier than you expect, but that should also be a danger sign. There are several lenders who are willing to provide lines of credits or loans to people with poor credit. These options are often very predatory. If you’re simply trying to rebuild your credit history and improve your credit score, then there is no need to take this offers. If you’re in desperate need of a line of credit for an emergency, but have bad credit, please email us at info@magnifymoney.com for a tailored response.

Here are the options you need to avoid when trying to rebuild credit:

1. Payday and Title Loan Lenders – There is never a need to take out a payday or title loan if you’re trying to merely rebuild or establish credit history. Most of these lenders don’t report to the bureaus and you’ll likely end up in a painful vicious cycle of borrowing and being unable to pay it down.

[How to get out of the payday loan trap.]

2. First Premier – The bank claims to want to offer people a second chance when it comes to their finances, but its fee structure and fine print prove the exact opposite. First Premier charges you a $95 processing fee just to apply for a credit card. Then it levies a $75 annual fee on the credit cards and most cards only come with a $300 limit. You’re paying $170 for a $300 credit line! The APR is a painful 36%. In year two the annual fee reduces to $45, but then you’re charged a monthly servicing fee of $6.25. And to top it all off, you’ll be charged a 25% fee if your credit limit is increased. Stay away from this card! Use the $170 it would take to open the card and get a secured card instead.

[Read more about First Premier here.]

3. Credit One – Credit One does an excellent job of confusing consumers into thinking they’re applying for a Capital One card. The logos are eerily similar and easily confused.

Creditone

Capital one

While Credit One is not as predatory as First Premier or payday loans, there is really no need to be using it to rebuild your credit score. Credit One makes it a bit tricky to get to its terms and conditions without either going through the pre-qualification process or accepting a direct mail offer. You’ll see this when clicking to look at its credit card option.

Screen Shot 2015-08-17 at 4.34.54 PM

A quick Google search yielded this terms and conditions sheet, which may be slightly different than the one you’d receive if you applied for a card. According to the one we found, Credit One charges an annual membership fee from $0 to $99. Credit line minimums are between $300 and $500. So you could be paying $99 for a $300 credit limit. APR is relatively standard, but on the high side, with 16.99% to 24.99%. Given the high annual fees, we recommend saving your money and using a secured card with no annual fee to begin rebuilding your credit score.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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Advertiser Disclosure

Balance Transfer, Best of, Pay Down My Debt

Best balance transfer credit cards: 0% APR, 24 months

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

btgraphic

Looking for a balance transfer credit card to help pay down your debt more quickly? We’re constantly checking for new offers and have selected the best deals from our database of over 3,000 credit cards. This guide will show you the longest offers with the lowest rates, and help you manage the transfer responsibly. It will also help you understand whether you should be considering a transfer at all.

 

1. Best balance transfer deals

No intro fee, 0% intro APR balance transfers

Very few things in life are free. But, if you pay off your debt using a no fee, 0% APR balance transfer, you can crush your credit card debt without paying a dime to the bank. You can find a full list of no fee balance transfers here.

Chase Slate<sup>®</sup>

15 month 0% intro APR with $0 intro transfer fee

Chase Slate® – 0% Introductory APR for 15 months, $0 Introductory BT Fee

With Chase Slate® you can save with a $0 introductory balance transfer fee for transfers made during the first 60 days of account opening, 0% introductory APR for 15 months on both purchases and balance transfers, and $0 annual fee. Plus, receive your Monthly FICO® Score and Credit Dashboard for free.

You can get longer transfer periods by paying a fee, so this deal is generally best if you have a balance you know you‘ll pay in full by the end of the promotional period. And don’t expect a huge credit line with this card, so it may be best for smaller balances you can take care of quickly.

Also keep in mind you can’t transfer a balance from one Chase card to another, so this is good if the balance you want to move is from a bank or credit union that’s not Chase.

Transparency Score
Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • There are late payment and cash advance fees

Tip: You have only 60 days from account opening to complete your balance transfer and get the introductory rate.

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BankAmericard® Credit Card

Long 0% intro APR with no intro balance transfer fee
(For Excellent credit)

BankAmericard® Credit Card – 0% Intro APR for 15 months, $0 Intro BT Fee

There is an introductory 0% APR for your first 15 months for purchases and for any balance transfers made within 60 days of opening your account. After that, a Variable APR that’s currently 12.99% to 22.99% will apply.

You need excellent credit to get this card and you can only transfer debt that is not already at Bank of America.

You can get longer transfer periods by paying a fee, so this deal is generally best if you have a balance you know you’ll pay in full by the end of the 15 month promotional period.

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Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • No penalty APR – paying late won’t automatically raise your rate (APR)
  • There are late payment and cash advance fees

Tip: You can provide the account number for the account you want to transfer from while you apply, and if approved, the bank will handle the transfer.

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0% balance transfers with a fee

If you think it will take longer than 15 months to pay off your credit card debt, these credit cards could be right for you. Don’t let the balance transfer fee scare you. It is almost always better to pay the fee than to pay a high interest rate on your existing credit card. You can calculate your savings (including the cost of the fee) at our balance transfer marketplace.

These deals listed below are the longest balance transfers we have in our database. We have listed them by number of months at 0%. Although you need good credit to be approved, don’t be discouraged if one lender rejects you. Each credit card company has their own criteria, and you might still be approved by one of the companies listed below.

Sphere® Credit Card from Santander

Longest 0% intro balance transfer card

Santander Sphere® – 24 months, 0% intro APR, 4% BT fee

If you have a big balance, or know you can’t pay off your balance quickly – go as long as you can with a good balance transfer rate, even if it comes with a fee.

At 24 months this is the longest 0% APR balance transfer card in the market right now, so you have 2 years to get the balance paid down.

There’s a $35 late payment fee and a penalty APR of 30.99% applies if you make a late payment, and will apply to your existing balances until you make 6 straight months of on time payments.

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Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • The range of the purchase interest rate based on your credit history (13.49% – 23.49%) is more than 10%, which is a wide range.
  • There are late payment and cash advance fees.

Tip: You have 90 days after you open the account to complete the balance transfer.

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Discover it® - 18 Month Balance Transfer Offer

Decent 0% intro balance transfer period

Discover it® – 18 Month Balance Transfer Offer: Intro 0% for 18 months, 3% BT fee

This is a basic balance transfer deal with an above average term. If you don’t have credit card balances with Discover, it’s a good option to free up your accounts with other banks. With this card, you also have the ability to earn cash back, and there is no late fee for your first missed payment and no penalty APR. Hopefully you will not need to take advantage of these features, but they are nice to have.

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  • Interest is waived during the balance transfer period, no foreign transaction fees and no late fee for your first late payment
  • The range of the purchase interest rate based on your credit history (11.99% – 23.99% Standard Variable Purchase APR) is fairly standard
  • There is a cash advance fee

Tip: Complete your balance transfer as quickly as possible for maximum savings.

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Citi Simplicity® Card - No Late Fees Ever

No late fees and long 0% intro period

Citi Simplicity® Card — No Late Fees Ever: 0% intro for 21 months, 3% balance transfer fee

The Citi Simplicity® Card — No Late Fees Ever offers a long intro period at 0% for 21 months on balance transfers made within four months from account opening. This provides plenty of time for you to pay off your debt. There are several other perks that make this card unique: no late fees, no penalty rate, and no annual fee. If you’re someone who misses a payment on occasion, you won’t be penalized. But make it a goal to pay your bill on time. (Autopay is a great feature.)

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TRANSPARENCY SCORE
  • No late fee, no penalty APR and no annual fee
  • Interest is not deferred during the introductory promotional period. It is waived.
  • There is a range of interest rates. You won’t know yours until you apply.

Tip: Complete your balance transfer within four months from account opening to take advantage of the 0% intro offer.

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Low rate balance transfers

If you think it will take longer than 2 years to pay off your credit card debt, you might want to consider one of these offers. Rather than pay a balance transfer fee and receive a promotional 0% APR, these credit cards offer a low interest rate for much longer.

The longest offer can give you a low rate that only goes up if the prime rate goes up. If you can’t get that offer, there is another good option offering a low rate for three years.

Variable Rate Credit Card from UNIFY Financial CU

Longest low rate balance transfer card

Unify Financial Credit Union – As low as 5.99% APR, no expiration, no BT fee

If you need a long time to pay off at a reasonable rate, and have great credit, it’s hard to beat this deal from Unify Financial Credit Union, with a rate as low as 5.99% with no expiration. The rate is variable, but it only varies with the Prime Rate, so it won’t fluctuate much more than say a variable rate mortgage. There is also no balance transfer fee.

Just about anyone can join Unify Financial Credit Union. They’ll help you figure out what organization you can join to qualify, and you don’t need to be a member to apply.

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Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • There are late payment fees.

Tip: If you’re credit’s not great, this probably isn’t for you, as the rate chosen for your account could be as high as 18%.

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Prime Rewards Credit Card from SunTrust Bank

Long low rate balance transfer card

SunTrust Prime Rewards – 4.25% variable APR for 36 months, $0 intro BT fee

If you live in Alabama, Arkansas, Florida, Georgia, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, Washington, D.C., or West Virginia you can apply for this card without a SunTrust bank account.

The deal is you get the prime rate for 3 years with no intro balance transfer fee. That’s currently 4.25% variable, though your rate will change if the prime rate changes, either up or down, and you have 60 days to complete your transfer with no fee. After that, it’s $10 or 3% of the amount of the transfer, whichever is greater. Also beware the prime rate deal isn’t for new purchases, so only use this card for a balance transfer.

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Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • The range of the purchase interest rate based on your credit history (12.24% – 22.24%) is more than 10%, which is high.
  • There are late payment and cash advance fees.

Tip: You have only 60 days from account opening to get the intro $0 transfer fee.

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For fair credit scores

In order to be approved for the best balance transfer credit cards and offers, you generally need to have good or excellent credit. If your FICO score is above 650, you have a good chance of being approved. If your score is above 700, you have an excellent chance.

However, if your score is less than perfect, you still have options. Your best option might be a personal loan. You can learn more about personal loans for bad credit here.

There are balance transfers available for people with scores below 650. The offer below might be available to people with lower credit scores. There is a transfer fee, and it’s not as long as some of the others available with excellent credit. However, it will still be better than a standard interest rate.

Just remember: one of the biggest factors in your credit score is your amount of debt and credit utilization. If you use this offer to pay down debt aggressively, you should see your score improve over time and you will be able to qualify for even better offers.

MasterCard Platinum from Aspire FCU

For less than perfect credit

Aspire Credit Union Platinum – 0% intro APR for 6 months, 0% intro BT fee

Balance transfer deals can be hard to come by if your credit isn’t great. But some banks are more open to it than others, and Aspire Credit Union is one of them, saying ‘fair’ or ‘good’ credit is needed for this card. Anyone can join Aspire, but if you’re looking for a longer deal you also might want to check if you’re pre-qualified for deals from other banks, without a hit to your credit score, using the list of options here.

You’ll be able to check with several banks what cards are pre-screened based on your credit profile, and you might be surprised to see some good deals you didn’t think were in your range. That way you can apply with more confidence.

Transparency Score
Transparency Score
  • Interest is not deferred during the balance transfer period, which means if you do not pay off your balance by the end of the promo period, you will not be charged the interest that would have accrued during the deferral period.
  • The ongoing interest rate isn’t known when you apply.

Tip: Only Aspire’s Platinum MasterCard has this deal. Its Platinum Rewards MasterCard doesn’t have a 0% offer. And if you transfer a balance after 6 months a 2% fee will apply.

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2. Learn more

Checklist before you transfer

Never use a credit card at an ATM

If you use your credit card at an ATM, it will be treated as a cash advance. Most credit cards charge an upfront cash advance fee, which is typically about 5%. There is usually a much higher “cash advance” interest rate, which is typically above 20%. And there is no grace period, so interest starts to accrue right away. A cash advance is expensive, so beware.

Always pay on time.

If you do not make your payment on time, most credit cards will immediately hit you with a steep late fee. Once you are 30 days late, you will likely be reported to the credit bureau. Late payments can have a big, negative impact on your score. Once you are 60 days late, you can end up losing your low balance transfer rate and be charged a high penalty interest rate, which is usually close to 30%. Just automate your payments so you never have to worry about these fees.

Get the transfer done within 60 days

Most balance transfer offers are from the date you open your account, not the date you complete the transfer. It is in your interest to complete the balance transfer right away, so that you can benefit from the low interest rate as soon as possible. With most credit card companies, you will actually lose the promotional balance transfer offer if you do not complete the transfer within 60 or 90 days. Just get it done!

Don’t spend on the card

Your goal with a balance transfer should be to get out of debt. If you start spending on the credit card, there is a real risk that you will end up in more debt. Additionally, you could end up being charged interest on your purchase balances. If your credit card has a 0% balance transfer rate but does not have a 0% promotional rate on purchases, you would end up being charged interest on your purchases right away, until your entire balance (including the balance transfer) is paid in full. In other words, you lose the grace period on your purchases so long as you have a balance transfer in place.

Don’t try to transfer between two cards of the same bank

Credit card companies make balance transfer offers because they want to steal business from their competitors. So, it makes sense that the banks will not let you transfer balances between two credit cards offered by the same bank. If you have an airline credit card or a store credit card, just make sure you know which bank issues the card before you apply for a balance transfer.

Comparison tools

Savings calculator – which card is best?

If you’re still unsure about which cards offer you the best deal for your situation, try our calculator. You get to input the amount of debt you’re trying to get a lower rate on, your current rate, and the monthly payment you can afford. The calculator will show you which cards offer you the most savings on interest payments.

The calculator will show you which cards offer you the most savings
Balance transfer or a loan?

A balance transfer at 0% will get you the absolute lowest rate. But you might feel more comfortable with a single fixed monthly payment, and a single real date your loan will be paid off. A lot of new companies are offering great rates on loans you can pay off over 2, 3, 4, or 5 years. You can find the best personal loans here.

And you might find even though their rates aren’t 0%, you could afford the payment and get a plan that takes care of your debt for good at once.

Use our calculator to see how your payments and savings will compare.

Balance Transfer Graph

Questions and Answers

Yes, you can. Most credit card companies will allow you to transfer debt from any credit card, regardless who owns it. Just remember that once the debt is transferred, it becomes your legal liability.

Yes, you can. Most banks will enable store card debt to be transferred. Just make sure the store card is not issued by the same bank as the balance transfer credit card.

As a general rule, if you can pay off your debt in six months or less, it usually doesn’t make sense to do a balance transfer.

Here is a simple test. (This is not 100% accurate mathematically, but it is an easy test). Divide your credit card interest rate by 12. (Imagine a credit card with a 12% interest rate. 12%/12 = 1%). In this example, you are paying about 1% interest per month. If the fee on your balance transfer is 3%, you will break even in month 3, and will be saving money thereafter. You can use that simplified math to get a good guide on whether or not you will be saving money.

And if you want the math done for you, use our tool to calculate how much each balance transfer will save you.

With all balance transfers recommended at MagnifyMoney, you would not be hit with a big, retroactive interest charge. You would be charged the purchase interest rate on the remaining balance on a go-forward basis. (Warning: not all balance transfers waive the interest. But all balance transfers recommended by MagnifyMoney do.)

Many companies offer very good deals in the first year to win new customers. These are often called “switching incentives.” For example, your mobile phone company could offer 50% off its normal rate for the first 12 months. Or your cable company could offer a big discount on the first year if you buy the bundle package. Credit card companies are no different. These companies want your debt, and are willing to give you a big discount in the first year to get you to transfer.

Completing a balance transfer is easy. If you are applying for a new credit card, most credit card companies will just ask you for the account number of the credit card that has the debt. The transfer will then happen automatically. (It will look like the balance transfer credit card made a payment for you). You can also call your credit card company, and complete the transfer easily on the phone.

Automate your payments so that it doesn’t happen! If you do miss a payment, you will be charged a late fee. If you become 60 days late, you could lose your promotional interest rate and could be charge the punitive rate, which is often near 30% with most companies.

No, you can’t. Credit card companies are trying to steal balances from their competitors. So these deals are only good if you bring balances from competitors.

Many credit card issuers will allow you to transfer money to your checking account. Or, they will offer you checks that you can write to yourself or a third party. Check online, because many credit card issuers will let you transfer money directly to your bank account from your credit card. Otherwise, call your issuer and ask what deals they have available for “convenience checks.”

In most cases, you cannot. Once a balance transfer is complete, it is complete.

Yes, it is possible to transfer the same debt multiple times. Just remember, if there is a balance transfer fee you would be charged that fee every time you transfer the debt.

You can call the bank and ask them to increase your credit limit. However, even if the bank does not increase your limit, you should still take advantage of the savings available with the limit you have.

Yes. You decide how much you want to transfer to each credit card.

No. You do not earn rewards with a balance transfer. No cash back, no points and no miles can be earned with a balance transfer.

No, there is no penalty. You can pay off your debt whenever you want without a penalty.

Mathematically, the best balance transfer credit cards are no fee, 0% offers. You literally pay nothing. The best in the market is offered by Chase, which has a 15 month 0% introductory offer with a $0 introductory fee.

However, if your debt is already with Chase, or you think it will take years to pay off your debt, you should consider a longer duration offer or a personal loan. You can find 21 month offers with 3% fees and 24 month offers with 4% fees. Your savings over the two years would likely be substantial, even when you include the cost of the fee.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Mortgage

Can I Get a Home Equity Loan with Bad Credit?

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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A less-than-perfect credit score isn’t necessarily a barrier between you and a home equity loan (definition courtesy of MagnifyMoney’s parent company, LendingTree). Why? Because unlike unsecured debts, such as personal loans or credit cards, you actually have some valuable collateral to offer the lender — your home. So while you may still face a difficult road ahead in pursuit of such a loan, for many it’s more than doable.

When applying for a home equity loan (HEL), you’re essentially leveraging the equity you’ve built up in your home. By equity, we mean the difference between the value of the home and whatever’s currently left on your mortgage. If, for example, an appraisal finds that your home is worth $150,000, and your mortgage balance is $100,000, then you have $50,000 of equity. (You can find a handy LendingTree equity calculator here.)

Generally speaking, more equity translates to more robust financing options, even if you have poor credit. That’s not to say you’ll get the best terms and interest rates. (We’ll get back to that.) But even if you’re squarely in this camp, there are options out there.

The application process for a HEL, which isn’t unlike that of a mortgage, can be lengthy. Get ahead of the game by gathering up all the relevant financial documentation. This includes your latest tax returns, proof of income and employment, home insurance documents, your home value estimate and the like. Any co-applicants ought to do the same.

What’s considered a “bad credit score” for a home equity loan?

Getting a home equity loan with bad credit is possible, but as with any other type of financing option, a good score is bound to work in your favor.

“Anything under 680 is going to be where things get a little difficult,” Nathan Pierce, a certified residential mortgage specialist and vice president of the National Association of Mortgage Brokers (NAMB), tells MagnifyMoney.

Of course, this isn’t a hard and fast rule Discover, for example, offers HELs to consumers with credit scores as low as 620.

If your score is on the lower side of the 600s, you aren’t necessarily out of the game. Lenders look at other factors besides your score. They also consider whether you have a history of responsible credit use, solid employment and income, and sufficient equity in your home.

Other factors that can impact your quest for a HEL

Debt-to-income ratio: Aim for 43 percent or less

Qualifying for a home equity loan with bad credit is about more than just your credit score. During the process, a number of factors come into play. Your debt-to-income (DTI) ratio is a biggie. This basically provides a snapshot of what you owe versus what you earn.

Many lender sites specify the 43 percent threshold. According to Pierce, a DTI that exceeds 45 percent will likely work against you when applying for a home equity loan.

“You may see some lenders that may go up to 48 percent or 50 percent, but that’s on the rare side,” he adds.

In general, lenders tend to lean more conservatively here. And, as we said, 43 percent is a big number for many lenders. The maximum DTI for applying through both Chase and TD Bank, for example, is 43 percent.

Let’s say your monthly gross income stands at $4,000 and all your monthly debt payments (from your mortgage to credit cards to student debt to auto loans) adds up to $3,000. When we divide your debt by your income, it reveals a 75 percent DTI. That is an amount that’s considered high by HEL standards, which will probably impact your ability to qualify for a home equity loan in spite of bad credit.

Loan-to-value ratio: Aim for 85 percent or less

How much equity you have in your home is another big piece of the puzzle, as it affects how much money you’ll be able to borrow. Since you’re using the home itself as collateral, owing less makes you more desirable to lenders.

It’ll also help you get approved for a larger loan amount. If your mortgage debt exceeds 85 percent of the home’s value, qualifying for a home equity loan with bad credit might prove tricky. This calculation is called the loan-to-value ratio. (You may encounter the acronym LTV.)

“For most lenders, that’s the bottom number,” says Pierce. “When you get up to 90 percent, it gets a little bit thinner, but there are some institutions out there that are going to 100 percent these days.”

Most of these will be credit unions and small community banks, as opposed to traditional banks and mortgage companies. The big guys, according to Pierce, are usually limited to 85 to 90 percent.

Low equity, when coupled with poor credit, is likely to make qualifying for a HEL an uphill battle. That’s not to say you’re out of options; you just might have to take a different financing route.

Your credit report: Getting it right

That said, you’ll definitely want to take a good look at your credit report before applying for a HEL. According to a 2012 Federal Trade Commission report, roughly one in five Americans has potential errors on his or her credit report. If you’re one of these people, disputing errors with credit bureaus can give your credit score a nice boost in the right direction. Indeed, 13 percent of consumers experienced a change in score due to their dispute, the report said.

Legitimate red marks on your report, like delinquent accounts or a past bankruptcy, could indeed makes things harder, but every lender is different.

How to shop for a HEL with bad credit

Before making any big financial decision, it’s in your best interest to shop around. Don’t let having poor credit score or disempower you or make you feel like you need to jump at the first offer. Instead, leverage what equity you have in your home to negotiate multiple offers and try to score the best terms you can.

“With a home equity loan, there could be large variations between lenders, so I’d definitely suggest checking with multiple places, as you could get pretty different options from each,” says Pierce.

Just remember that the qualifying criteria for one lender might not match another’s. But that’s all the more reason to do your homework. (Oh, and by the way: if you sign loan papers and then change your mind, the Federal Trade Commission says you have the right to cancel the deal for any reason, without penalty, within three days.)

Additionally, Pierce says that large banks and mortgage brokers might not be your best option. So check out your local community banks and credit unions, which will likely be more open to working with people who have less-than-perfect credit.

What to expect during the HEL application process

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After submitting the necessary paperwork, the application process typically takes a few weeks. This may vary depending on the complexity of the application, underscoring the importance of being prepared. If a lender needs to dive deeper to verify your income or look into other properties or assets you have, it’ll draw out the timeline.

That said, folks with good credit are more likely to snag financing options with better terms and lower interest rates. This doesn’t mean you’re out of luck if your credit score is on the lower end, but applying for a home equity loan with bad credit may result in being offered less or paying a bit more in the long run because of higher interest rates. This is when you really need to compare your options, which is why shopping around can pay off big time.

You also need to think about why you’re seeking the loan in the first place. For example, a home equity loan with a 10 percent interest rate that’s used for a home renovation — which could ultimately boost your home value — might make sense if you have room in your budget to easily absorb the monthly payment. But the same loan doesn’t add up if you’re looking to consolidate lower-interest debt. Sure, you might boost your credit score a bit, but you’ll pay more over the long haul.

Either way, be sure to really pay attention to the loan terms, especially the monthly payments. The good news is that HELs come with fixed rates, and the repayment window seem to fall in the five- to 30-year range. But if the payments are going to strain your budget, you might be better off going with an unsecured line of credit. You’ll pay more in interest, but defaulting on a HEL could result in you losing your house — no small thing.

The application process for someone with poor credit might also involve lenders limiting the amount of money they’ll let you borrow. And while hashing out loan terms and interest rates, Pierce adds that many lenders will set minimum loan amounts as well.

“You may have lenders that say they want a $25,000 minimum loan amount [if] they’re not interested in $10,000 or $15,000, which may be another factor that stops somebody from getting it,” he tells MagnifyMoney.

How to improve your chances of a HEL approval with bad credit

Reduce your DTI

If you’ve got a few strikes against you, rest easy; there are a number of things you can do to improve your odds of qualifying for a HEL. As we mentioned, reducing your debt-to-income ratio is a big one. Take a look at your monthly budget to see where you can free up extra cash to redirect toward your debt. Minor tweaks, from shrinking your cable bill to eating out less, can make a big difference; $50 here and $25 there, when used to accelerate your debt payments, will supercharge your efforts to improve your score.

While it may not be as easy to dramatically increase your salary, you can give your income a nice boost by picking up a side gig or taking on a roommate to reduce your monthly mortgage burden. The idea is to get creative and find something that works for your lifestyle. The freed-up cash can help dig you out of debt faster, which will also improve your credit score and bolster your chances of being approved for a HEL.

Bring on a co-signer

As with applying for a student loan or a traditional mortgage, introducing a co-signer can be a game changer.

Pierce says bringing a co-signer with good credit on board is a good move because lenders will feel a little safer taking a chance on you. Just do your homework, as different lenders have different qualifying options.

Wait until you have more equity

This might take a bit more time, but remember: More equity translates to a higher LTV (loan-to-value) ratio, which tips the scale in your favor when shopping around for a home equity loan.

Just as we discussed upping your take-home pay and trimming your budget to accelerate your debt payments, the same can be said for fast-tracking mortgage payments. Hacking away at the principal balance will cut the loan down quicker — and grow your equity at a faster clip. This tactic may prove tricky if you’re also tackling high-interest debt, but if you have the wiggle room in your budget, it could help reduce your timeline.

Alternatives to a HEL

Marcus Personal Loan Review: Goldman Sachs Takes on Online Lenders with Exclusive New Loan

If you’re having trouble qualifying for a home equity loan with bad credit, you also have some other financing options to explore:

Cash-out Refinance

  • What it is: A cash-out refinance lets you start over with a new mortgage that replaces your old one while letting you borrow extra that you can use as you wish.
  • Why might it be a good alternative? You’ll have one new monthly mortgage payment. If you refinance to a longer-term mortgage, that’ll also improve your credit utilization ratio, which can help boost your credit score.
  • Would someone with bad credit qualify? It depends on the situation. You may qualify, but with a higher interest rate. Pierce adds that, when compared with a HEL, there may be more limits in terms of how much cash you can take out

Personal loan

  • What it is: A personal loan is an unsecured loan. If you qualify, a lender will deposit cash right into your account that you can use any way you wish. It can be a good way to consolidate and pay off debt, so long as you can afford the monthly payment.
  • Why might it be a good alternative? No collateral. If keeping up with HEL payments means stretching your budget (and potentially defaulting), this option has an advantage: You won’t risk losing your home.
  • Would someone with bad credit qualify? Probably, but think carefully. Interest rates for people with bad credit can in some instances be upward of 35 percent. Lenders may also tack on an origination fee and/or prepayment penalty

Home equity line of credit (HELOC)

  • What it is: A little different from a HEL, a home equity line of credit (HELOC) is a revolving credit line extended to you by the lender.
  • Why might it be a good alternative? Your equity level dictates your credit limit, but you can borrow against a HELOC as much as you need to during what’s called the “draw period,” which usually lasts five to 10 years. (Side note: you’ll be on the hook for making interest payments during this time.)
  • Would someone with bad credit qualify? If you don’t have a lot of equity and/or you have a spotty credit history, getting approved for a HELOC is apt to be as challenging as snagging a HEL, Pierce says.

Last words

Getting approved for a home equity loan with bad credit is tough, but it is not impossible. The most powerful tool in your arsenal: to gradually improve your score by making consistent, on-time payments. This, in turn, will reduce your debt while improving your debt-to-income ratio. Keeping up with your mortgage payments will also help you steadily build more home equity.

Plus, you’ve got other options. Aside from potentially bringing on a co-signer, a cash-out refinance, personal loan or HELOC all represent viable alternatives, depending on what you need the money for and what terms and interest rates you can snag.

Marianne Hayes
Marianne Hayes |

Marianne Hayes is a writer at MagnifyMoney. You can email Marianne here

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Mortgage

A Guide to Home Loans for Bad Credit

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Getting a mortgage with bad credit isn’t easy. Banks and credit unions became ultraconservative with mortgage lending following the 2008 housing market crash. However, these days, tighter lending standards don’t have to force you out of the mortgage market. If you have a stable income, you may qualify for a mortgage, even with bad credit. We’ll explain the best home loans for people with bad credit, offer tips for cleaning up your credit histories and point out scams to avoid.

Quick guide to checking your credit score

If you’re just starting to shop for home mortgages, it pays to know if banks think you have bad credit or not. Here’s how FICO, the main credit score provider in the U.S., breaks down credit scores:

  • 800-plus: Exceptional
  • 740-799: Very good
  • 670-739: Good
  • 580-699: Fair
  • 579 and lower: Poor

A credit score above 740 is optimal for finding the best mortgages, but you can often secure a mortgage with a much lower score. You might find an FHA mortgage with a credit score as low as 500 (albeit with a 10 percent down payment rather than 3.5 percent rate for scores above 580), but a credit score of around 650 gives you a decent chance of qualifying for a home mortgage. Getting a mortgage with a truly bad credit score will be difficult, and improving your credit to “fair” status could make it much easier.

Where can you check your credit score? Banks and credit unions use the FICO Scores 2, 4 and 5. These are not the same scores you will find through a free credit scoring site. Unfortunately, we haven’t found a free option for checking your FICO Scores 2, 4 and 5. The best option for checking these is checking them on MyFICO, which costs $59.85.

If you don’t want to pay for a credit score, consider using a free scoring site. But don’t put too much stock in the number it offers. It may overestimate your credit score (for mortgage shopping), especially if you’ve paid off debt in collections recently, and some free scores don’t use the 300-850 scale FICO often uses. Instead, focus on the information about what’s helping and hurting your credit score, if the tool offers those insights, and use that knowledge to make improvements where you can.

You can get a free credit score through our parent company LendingTree.

Home loan programs for people with bad credit

FHA loans

FHA Loan Details

Credit score required

500, but banks have minimum underwriting
standards

Down payment required

Credit score between 500-579: 10 percent
Credit score above 580: 3.5 percent

Upfront financing fee

1.75 percent, which can be financed

Mortgage insurance

0.45 to 1.05 percent

Mortgage limits

Generally, $275,665 for single-family units, but it
varies by location and you should check the limits in your area

Fine print

Mortgage insurance premiums are paid for the life of the loan,
except when putting 10 percent or more down. If your down payment is
less than 20 percent but 10 percent or more, you must have
mortgage insurance for 11 years.

Quick take

If you have bad credit, an FHA loan offers a more accessible mortgage. While credit standards vary by lender, you may qualify for the FHA loan with a credit score as low as 500. With a credit score above the 580 threshold, you may qualify for the 3.5 percent down payment.

Unfortunately, an FHA loan can be expensive because of mortgage insurance fees. In addition to paying ongoing mortgage premiums for the life of the loan, you’ll have to pay a 1.75 percent upfront financing fee.

Pros:

  • 3.5 percent down payments (for those above the 580 credit-score mark)
  • Credit scores as low a 500
  • Can buy up to four units

Cons:

  • 1.75 percent upfront mortgage premium
  • Ongoing mortgage insurance
  • Smaller loan limits

Where to get an FHA loan

You can use the comparison tool on LendingTree or Zillow to find offers from FHA-approved lenders in your area willing to work with people with bad credit. If an online search doesn’t yield the results you want, you may need to work directly with a mortgage broker who specializes in finding mortgages for people with bad credit. You can use a site like Find A Mortgage Broker or Angie’s List to find brokers in your community.

Be sure to check the National Multistate Lending System (NMLS) to see if your broker has had any regulatory action filed against them. Regulatory actions against the broker are red flags that indicate you may want to take your business elsewhere.

Fannie Mae HomeReady Mortgage

HomeReady Mortgage Details

Credit score required

A minimum requirement of 620 generally applies
to Fannie Mae products.

Down payment required

3 percent for credit scores above 680
(for single family homes). 25 percent for credit scores
between 620-680 (for single family homes).

Upfront financing fee

None

Mortgage insurance

0.125 to 3 percent

Mortgage limits

Generally, $424,100, though it varies by location

Fine print

You must earn less than the median income in
your ZIP code to qualify,
or buy a home in a low-income zip code.
You must take a homeowner’s education class to qualify for the mortgage,
mortgage insurance can be canceled when you reach a
loan-to-value ratio of 80 percent.

Quick take

If you’ve got a fair credit score but a big down payment, the Fannie Mae HomeReady mortgage is the best conventional mortgage for you. With a 620 credit score and a 25 percent down payment, you meet HomeReady eligibility requirements, and you’ll pay no mortgage insurance. Fannie Mae offers a 3 percent down payment option, but you need a credit score of at least 680.

HomeReady mortgages also allow for cosigners who won’t live at the address with you. That means a parent or grandparent with a high credit score could help you purchase the property by co-signing. If you can find a cosigner, you may qualify for the 3 percent down payment even if your credit score falls below 680.

Pros:

  • Can qualify with credit score as low as 620
  • A low 3 percent down payment if you have a 680 credit score
  • Down payment doesn’t have to come from personal funds
  • Mortgage insurance premiums are cancellable
  • Non-occupant cosigners are permitted

Cons:

  • Up to 25 percent down payment required in some instances
  • Not all lenders offer Fannie Mae HomeReady mortgages, so you might struggle to find a bank with this offering.

Where to get a Fannie Mae HomeReady mortgage

Fannie Mae doesn’t publish a list of lenders who offer the HomeReady mortgage, so you will need to work with your lender specifically to see if they offer it. Most major banks and credit unions will be approved to underwrite Fannie Mae mortgages, but the specific product offering will vary by bank.

Consider using an online mortgage comparison engine including LendingTree or Zillow to compare offers in your area. However, once you find lenders that will work with you, you’ll have to ask them about the HomeReady mortgage, especially if you want to use the 3 percent down or co-signing feature.

The Housing and Urban Development office of housing counseling may also help you connect with lenders who offer the HomeReady Mortgage.

VA loans

VA Loan Details

Credit score required

Credit standards set by lender

Down payment required

None

Upfront financing fee

1.25 to 3.3 percent, which can be financed

Mortgage insurance

None

Mortgage limits

Generally, $424,100, though it varies by location

Fine print

Must obtain a certificate of eligibility
(for military members and spouses)
before applying for a VA loan

Quick take

For people with a military background, the VA loan is a top mortgage option. The upfront financing fee can be hefty, but it’s a good deal if you plan to live in the house for several years. That said, not all VA lenders work with buyers with bad credit, so you may struggle to find a reputable lender in your area.

Pros:

  • No down payment required
  • No mortgage insurance
  • No firm credit minimums
  • Can buy up to four unit multi-family property.

Cons:

  • Upfront funding fee
  • Not all lenders issue VA loans to borrowers with bad credit
  • Must buy home with the intent to occupy for at least 12 months

Where to get a VA loan

To take out a VA loan, you must get a certificate of eligibility (COE) through the Veterans Administration eBenefits platform. Once you get the COE, you can use the Consumer Finance Protection Bureau’s interest rate data to learn about interest rates for VA loans.

To find a VA lender who works with bad-credit clients, you’ll probably want to work with a mortgage broker. You can find mortgage brokers online or through your state’s housing finance agency. Be sure that your broker has no regulatory action filed against them before you commit to working with them.

USDA loans

USDA Loan Details

Credit score required

As low as 580, but generally 640

Down payment required

None

Upfront financing fee

1 percent (can be financed)

Mortgage insurance

0.35 percent annually

Mortgage limits

No limits, but must meet standards of affordability based on moderate incomes

Fine print

You must meet income eligibility requirements,
and the property must be in a qualified rural area

Quick take

If you’re planning to buy in a rural area (and you may be surprised what qualifies, so check), a USDA loan offers a low cost, low money down loan. Technically, the absolute minimum credit score for this loan is 580, but most lenders won’t issue USDA loans to borrowers with scores below 640. USDA loans tend to be a better deal than FHA loans, but they may have higher costs compared to VA or conventional loans. If you’ve got fair credit, but you don’t have a big down payment, the USDA loan makes sense for you.

Pros:

  • No down payment
  • Only 1 percent upfront mortgage fee

Cons:

  • Ongoing financing fee cannot be canceled
  • Finding lenders who work with bad credit borrowers can be difficult
  • Must meet location and income criteria

Where to find USDA loans

If you meet the USDA eligibility requirements, you can start shopping for USDA loans through LendingTree, but you may not find many offers if you have a credit score below 640. If you can’t easily find a lender, you’ll want to work with an independent mortgage broker who will have insider access to multiple lenders in your city. You can find reputable brokers online through Find A Broker, Angie’s List or the Better Business Bureau (search for mortgage brokers, your city). Before committing to a broker, check that your broker has no regulatory action filed against them.

Manufactured home loans for bad credit

Manufactured homes are houses constructed off-site, transported and anchored to a permanent foundation at a new home site. On average, manufactured homes cost 80 percent less than site-built single family homes, but taking out a mortgage for a manufactured home can be expensive, even if you have good credit. According to the Consumer Financial Protection Bureau, almost 68 percent of all loans for manufactured home purchases were considered higher priced mortgages. On top of already high rates, bad credit will drive your interest rate even higher. However, thanks to the lower upfront price, people with bad credit may have an easier time finding home financing for manufactured homes than for site-built homes.

FHA Title I loans (Chattel loans)

FHA Title I Loan Details

Credit score required

No credit score minimums, but
must meet ability to pay criteria

Down payment required

5 percent down for credit scores above 500,
otherwise 10 percent down

Upfront financing fee

Up to 2.25 percent

Mortgage insurance

Up to 1 percent

Mortgage limits

  • Home only: $69,678

  • Lot only: $23,226

  • Home and lot: $92,904

Mortgage term limits

  • 20 years for home only

  • 20 years for single-section home and lot

  • 15 years for lot only

  • 25 years for a multi-section home and lot

Titling requirements

Manufactured homes can be titled as personal property.

Fine print

Manufactured homes must be situated on a lot that meets
FHA property standards (such as hookups for water and electricity,
and foundation anchors) that is owned or leased by the primary
mortgage holder. Manufactured home must be at least 400 square feet.

Quick take

The FHA Title I loan is an obvious choice for people with bad credit looking to buy a manufactured home, but you need to do your research before you commit to this loan. According to the CFPB, Chattel loans had 1.5 percent higher APRs than standard mortgages. These loans also come with expensive mortgage insurance fees that can be passed on to you.

However the Chattel loan makes sense if you’re buying a used manufactured home or if you plan to rent the lot where your home sits.

Pros:

  • No credit standards
  • Flexible terms for land ownership
  • Can title home as personal property

Cons:

  • Maximum loan is $92,904
  • Some lender restrictions
  • 5-10 percent down payment requirement
  • Must be a fixed term mortgage

Where to find Chattel loans

Chattel loans are a niche product that few banks and credit unions offer. Half of all Chattel loans are issued by five banks: 21st Mortgage, Vanderbilt Mortgage, Triad Financial Services, U.S. Bank, and Credit Human (formerly San Antonio Federal Credit Union), according to a 2014 report from the CFPB. You can also find local lenders through the Manufactured Housing Association’s lender search.

FHA loan

FHA Loans Details for Manufactured Homes

Credit score required

500 (varies by bank)

Down payment required

Credit score between 500-579: 10 percent
Credit score above 580: 3.5 percent

Upfront financing fee

1.75 percent, which can be financed

Mortgage insurance

0.45-1.05 percent

Mortgage limits

Generally $275,665

Titling requirements

Manufactured homes must be titled as real
property and you must own the lot.

Fine print

All manufactured homes must meet standards set by the
FHA including foundation anchors, water and electrical hookups and more.

Quick take

A standard FHA loan makes sense if you’re planning to buy a manufactured home and land. While credit standards vary by lender, you may be able to qualify for the FHA loan with a credit score as low as 500. If you can raise your credit score to 580, you may even qualify for the 3.5 percent down payment.

This loan isn’t as easy to get as the Chattel loan, but some people with bad credit may qualify. If you want to use an FHA loan for a manufactured home, work with your loan officer closely, so your financing is in place before your home is completed.

Pros:

  • 3.5 percent down payments
  • Credit scores as low a 500
  • Up to $275,665 in financing

Cons:

  • 1.75 percent upfront mortgage premium
  • Must pay ongoing mortgage insurance
  • Must buy owner-occupied home

Where to get an FHA loan

The Manufactured Housing Association’s lender search will also provide a list of lenders who may offer FHA loans for manufactured homes in your state. If that list doesn’t provide the results you need, work with a HUD office of housing counseling center to learn about lenders who offer FHA loans for manufactured homes.

USDA

USDA Loan Details for Manufactured Homes

Credit score required

580 and below is considered a no-go;
generally 640 and up

Down payment required

None

Upfront financing fee

1 percent, which can be financed

Mortgage insurance

0.35 percent annually

Mortgage limits

No limits, but must meet standards of
affordability based on moderate incomes

Titling requirements

Home must be titled and taxed as real estate

Fine print

You must own the lot where your home is located and meet
income eligibility requirements and the property must be
in a qualified rural area

Quick take

If you’re purchasing a new manufactured home in a rural area, the USDA loan may make sense for you. The manufactured home must be new, and you have to own the site where the home is located. However, with the lowest acceptable credit score being at the 580 threshold, USDA loans aren’t suited for bad-credit borrowers. Improving your credit to “fair” could be the difference between rejection and approval..

Pros:

  • As low as no money down
  • Low financing fees
  • Competitive interest rates

Cons:

  • Higher credit underwriting standards
  • Must own lot
  • Must buy new manufactured home

Where to get a USDA loan

If you meet the USDA eligibility requirements, connect with the HUD office of housing counseling in your state. If the USDA loan is a good fit for you, staffers there will help you find lenders who work with USDA borrowers that want in on manufactured homes.

VA loans

VA Loan Details for Manufactured Homes

Credit score required

Credit score standards set by lender

Down payment required

None

Upfront financing fee

1.25-3.3 percent depending on your military status,
home buying experience and down payment.
This fee can be financed.

Mortgage insurance

None

Mortgage limits

$424,100

Titling requirements

The house must be titled as real property,
and you must own the lot where the house is located.

Fine print

Must obtain a certificate of eligibility
(for military members and spouses) before applying for a VA loan.

Quick take

The VA loan offers a down payment of 0 percent (even for manufactured homes) as long as you own (or will buy) the lot where the home is located. The drawback to the VA loan is that most lenders set their credit score standards in the 600-range, which means that people with bad credit might not qualify. On top of that, not every VA lender offers loans for manufactured homes. Those two factors mean the you may struggle to find a lender in your area who will work with you.

If you find the lender, the VA loan is a great choice, but if you can’t, consider an FHA loan instead.

Pros:

  • No down payment required
  • No mortgage insurance
  • No firm credit minimums

Cons:

  • Upfront funding fee
  • Not all lenders offer VA loans for manufactured housing
  • Must buy home with the intent to occupy for at least 12 months
  • Must own lot

Where to get a VA loan

To take out a VA loan, you must get a certificate of eligibility (COE) through the Veterans Administration eBenefits platform. Once you get this, find an independent mortgage broker who specializes in VA loans for manufactured homes or VA loans for people with bad credit. These brokers work with multiple banks and can help you find better deals than you might find on your own. Before committing to a particular broker, check for regulatory action filed against them. You don’t want to work with a broker who fails to meet the standards set by your state.

Conventional mortgages

Conventional Mortgage Details for Manufactured Homes

Credit score required

620

Down payment required

5 percent (10 percent for people with insufficient
credit for traditional scoring)

Upfront financing fee

None

Mortgage insurance

0.5 percent annually

Mortgage limits

Generally, $424,100

Titling requirements

Must own land, and home must
be titled as real property.

Fine print

You’ll have to pay mortgage insurance until your
home reaches at least an 80 percent loan-to-value ratio.

Quick take

If you’ve got a 20 percent down payment and at least a 620 credit score, and your home meets underwriting standards, the conventional mortgage is the best choice for you. This loan has competitive interest rates and no mortgage insurance for people with a loan-to-value ratio of at least 80 percent. Your home must be at least 600 square feet and meet HUD standards for manufactured homes, and you must own your lot. However, you can use this loan to purchase an existing manufactured home (built after 1976) if it is permanently affixed to an approved foundation.

Another advantage to this loan is that they do accept borrowers with thin credit files, provided they don’t have derogatory marks on their credit file.

Where to find conventional mortgages

Before you start shopping, you can use the Consumer Finance Protection Bureau’s interest rate data to learn about interest rates in your state. Compare real offers from local lenders using LendingTree, or work with your state’s housing finance agency to find reputable lenders in your area.

Other common financing deals

Aside from those mortgages, manufactured home buyers with bad credit might consider two other options. First, you might consider a retail installment contract. A retail installment contract is issued by the manufacturer (or installer) or your home. If you’re working directly with the manufacturer to take out a loan, you should take the time to understand upfront and ongoing fees, APR and what happens if you miss a payment. The Manufactured Housing Institute provides detailed information on buying and living in manufactured houses and on how to find manufacturers and lenders who can help you finance a manufactured home.

Borrowers with bad credit might also consider owner-held financing option. Owner-held financing is a readily available form of credit, but it is risky. Before signing a lease to own agreement, find a real estate lawyer who can help you uncover title issues and explain the loan. To learn more, you can either find a lawyer through your employer (who may offer legal benefits), the American Bar Association or by contacting HUD office of housing counseling in your state.

Clean up your credit before mortgage shopping

In 2016, the average new home cost $372,500, but that’s before paying interest. According to Informa Market Research, the average interest rate for a person with a credit score between 620 and 639 is 5.115 percent, but a person with a score of at least 760 gets a 3.527 percent rate. Does just a point and a half translate to much cost difference? Absolutely. If both people finance $298,000 on a new home, then the person with great credit will pay $1,343 per month. The person with lesser credit will pay $278 more, $1,621 per month. That translates to more than $100,000 more over the life of the loan.

Tips to improve your credit score

To repair your credit before taking out a mortgage, and qualify for better terms and more options, start with these three simple steps:

  1. Pay all your current debt accounts on time, each month.
  2. Reduce your credit card utilization by paying down your credit card debt.
  3. Stop applying for credit six months before mortgage shopping.

These three factors alone account for 75 percent of your credit score.

As you take care of those items, you’ll want to check your credit report from the three major credit bureaus through AnnualCreditReport.com.

You want to be sure that you recognize all the information on your credit report, and that there are no duplicate entries. Dispute any errors or duplicates. For further guidance, use the Federal Trade Commission’s free guide to disputing errors on your credit report. If you believe you’ve been a victim of identity theft, follow the Federal Trade Commission’s advice on identity theft recovery.

Disputing errors on your credit report may prevent a bank from issuing you a mortgage, so start disputes at least 90 days in advance of applying for a mortgage. While the credit bureaus should clean up the errors within 30 days, the process sometimes takes longer

Getting a mortgage after bankruptcy or foreclosure

Bankruptcy stays on your credit report for up to seven or 10 years, depending on the type, and foreclosures stay on your credit report for up to seven years, but you don’t have to wait that long to take out a mortgage. If you take steps to improve your credit, you can qualify for some mortgages one to four years after your bankruptcy is dismissed, or two to four years following foreclosure.

 

Conventional

FHA

VA

USDA

Chapter 7

Four years from discharge or dismissal (except in extenuating circumstances)

Two years (or one year in extenuating circumstances)

Generally, two years (though it is not a disqualifying standard)

Generally, three years

Chapter 11

Four years from discharge or dismissal (except in extenuating circumstances)

Must meet credit standards

Generally, two years

Must meet credit standards

Chapter 13

Two years after discharge or four years after dismissal

Two years (or one year in extenuating circumstances)

One year of payments

Generally, one year

Foreclosure

Seven years, except if foreclosure was discharged in bankruptcy (then use bankruptcy limits)

Three years except in extenuating circumstances

Generally two years

Generally, three years

Even if you can get a new mortgage just a year or two after bankruptcy or foreclosure, it makes sense to wait longer in most cases. By waiting around three or four years, the damage of the bankruptcy and foreclosure fades, and you’ll have that extra time to revive your credit score.

To get your credit in shape after bankruptcy or foreclosure, you’ll want to continue to make bankruptcy payments as agreed and consider opening a secured credit card to rehabilitate your damaged credit. Use the credit card for daily expenses, and pay it off in full each month.

Improve your shot at approval even if you have bad credit

If you’ve got bad or fair credit, and you don’t have a lot of time to improve it, you can still take out a mortgage in some cases. These are a few things that can help you get approved with a low credit score.

  • Choose a house well within your budget. If you’ve got a strong income and a low monthly payment, the bank may be more likely to approve your loan.
  • Come up with a larger down payment. While the median down payment is just 5 percent, a person with bad credit may need quite a bit more (up to 25 percent) to get a loan.
  • Work with your loan officer: Give them paperwork in a timely manner, and follow their instructions regarding credit repair, collection repayments and debt repayments. If you’re close to gaining approval, the loan officer can help you take the last few steps to meet the bank or government’s underwriting criteria. Loan officers may take advantage of manual underwriting provisions for FHA, VA, USDA and conventional loans, but that requires more information and participation from you.
  • Ask for rapid rescoring if you’re disputing errors on your credit report, or paying down credit card debt.

Rapid rescoring

A rapid rescore is a method for “re-checking” your credit score on an accelerated time scale. Banks usually only check your credit score once when they’re considering your for a loan, but they may pay a fee to see a new score if you’ve paid down debt or removed negative information from your report, according to Experian. The bank will use the new information to recalculate your credit score to see if you qualify for a loan.

Should I keep renting?

A bad credit score by itself shouldn’t stop you from buying a home. You’ll pay more in interest costs over the life of the loan, but you’ll also start building equity sooner. Plus, a few years of paying on a mortgage will help you raise your credit score, so you can refinance later on.

However, a bad credit score can be a symptom of a bad financial situation. If you’re struggling to pay your bills on time, buying a house isn’t usually a good idea. During financial stress, a new mortgage bill is more likely to be a curse than a blessing.

Watch out for these scams targeting people with poor credit

Financial scammers are always on the prowl for desperate people who might become their next victims. These are a few pitfalls that all homebuyers need to avoid as they shop for homes and mortgages.

Mortgage closing scams

Mortgage closing scams are pernicious schemes that involve falsifying wiring instructions, the FTC warns. In a mortgage closing scam, a hacker poses as a title closing agent. He or she may email you fraudulent information about where to wire the money, or claim that there’s been a last-minute change to the details.

Closing for a home is an incredibly busy time, especially if you’ve struggled to qualify for the mortgage in the first place. To prevent mortgage closing scams, ask your title agent to send the wire information in an encrypted email. You can also request a call with the details.

Anyone who has been a victim of a mortgage closing scam should report it to the FBI immediately, and log a complaint in the FBI’s Internet Crime Complaint Center.

Complex lease-to-own deals

Owner financing isn’t necessarily a scam, but it can be complex. Many owner financing deals don’t put the title into your name until you’ve paid off the entire loan, and some deals require balloon payments after a few years, the FTC warns. If you can’t cover the balloon payment, you lose every cent of equity you’ve paid.

Even worse than difficult loan terms are situations when the owner can’t legally issue a first-lien loan. If the owner has used the house to secure any other loan, then the bank has a first-lien position on the loan.

Don’t sign an owner financing agreement until a lawyer explain the details of the loan to you. You must take steps to protect yourself from owner fraud if you want to own the house in the end.

Hard money loan scams

Hard money loans are real estate loans for investors interested in flipping a property. Hard money loans come with high interest rates, hefty down payments and short payback periods. Most of the time, hard money lenders evaluate project quality rather than investor credit when issuing loans.

If you’re considering a hard money loan at all, you should have plans to flip a property for a profit. If you can’t earn a profit on the house, then a hard money loan doesn’t make sense.

If you are considering a hard money loan because you can’t find traditional financing, be careful. There’s little oversight of hard money loans, so it’s important you know what you’re getting into with these products. You can check out this guide to hard money loans if you want to learn more.

FAQs

If a bank turns you down for a mortgage, you can ask for an explanation. When you ask, the lender has 30 days to prepare an answer in writing, as required by the Equal Credit Opportunity Act and the Fair Credit Reporting Act. A few common responses include:

  • We don’t think you can afford the payment (for instance, you’ll have to high of a debt-to-income ratio).
  • Your credit score’s too low.
  • You have an insufficient down payment.

Anyone struggling to find a mortgage should consider working with a licensed mortgage broker in his/her county. Mortgage brokers work with multiple local banks and credit unions, and they can often help if a banker cannot.

The best credit score to get a mortgage is any score above a 740, but most people with credit scores above 620 will qualify for some mortgages. And yes, it’s possible to qualify for a mortgage if you have a score of 500-620.

Yes. If you took out a loan when you had bad credit, you may qualify for a much better rate by improving your credit after just one to two years of on-time payments on all your lines of credit, according to research from VantageScore Solutions. However, if your bad credit score is the result of foreclosure or bankruptcy, your credit score may not fully recover for seven to ten years, so don’t count on a massive rate drop right away if those are the reasons for your bad credit score.

Given how much easier it is to qualify for a mortgage and how much you can save when you have good credit, waiting to buy often makes sense.

VA loans don’t require a down payment, and they have no firm credit minimums, but you’ll still need to meet a bank’s underwriting standards (which could be as high as a 640 credit score). If you have a credit score of 580-640 and you meet other qualifying standards, you may qualify for a no-money-down USDA home loan..

Outside these options, the only no-money-down mortgages for people with bad credit include owner-held mortgages or rent-to-own deals. Do your homework.

Not all mortgages allow cosigners, but a cosigner could help you qualify. Asking someone to cosign essentially means asking that person to pay your mortgage if you’re ever unwilling or unable to pay the bill. We generally don’t recommend becoming a cosigner unless you plan to live in the house.

An adjustable-rate mortgage makes a lot of sense if you have bad credit and you are confident you can improve your credit score within seven years before your interest rate adjusts (in the case of a 7/1 ARM). If your credit improves, you may be able refinance at a lower, fixed rate before the interest rate adjustment takes place. However, this option is risky. You may be stuck with higher interest rates if your credit doesn’t improve or if interest rates rise by the time you need to refinance.

Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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