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Average Credit Score in America Reaches New Peak at 700

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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In late 2016, American consumers hit an important milestone. For the first time in a decade, over half of American consumers (51%) recorded prime credit scores. On the other side of the scale, less than a third of consumers (32%) suffered from subprime scores.1 As a nation, our average FICO® Score rose to its highest point ever, 700.2

Despite the rosy national picture, we see regional and age-based disparities. A minority of Southerners still rank below prime credit. In contrast, credit scores in the upper Midwest rank well above the national average. Younger consumers struggle with their credit, but boomers and the Silent Generation secured scores well above the national average.

In a new report on credit scores in America, MagnifyMoney analyzed trends in credit scores. The trends offer insight into how Americans fare with their credit health.

Key insights

  1. National average FICO® Scores are up 14 points since October 2009.3
  2. 51% of consumers have prime credit scores, up from 48.1% in 2007.4
  3. One-third of customers have at least one severely delinquent (90+ days past due) account on their credit report.5
  4. Average VantageScores® in the Deep South are 21 points lower than the national average (652 vs. 673).6
  5. Millennials’ average VantageScore® (634) underperformed the national average by 39 points. Only Gen Z has a lower average score (631).7

Credit scores in America

Average FICO® Score: 7008

Average VantageScore®: 6739

Percent with prime credit score (Equifax Risk Score >720): 51%10

Percent with subprime credit score (Equifax Risk Score <660): 32%11

Credit score factors

Percent with at least one delinquency: 32%12

Average number of late payments per month: .3513

Average credit utilization ratio: 30%14

Debt delinquency

Percent severely delinquent debt: 3.37%15

Percent severely delinquent debt excluding mortgages: 6.9%16

States with the best and worst credit scores

What is a credit score?

Credit scoring companies analyze consumer credit reports. They glean data from the reports and create algorithms that determine consumer borrowing risk. A credit score is a number that represents the risk profile of a borrower. Credit scores influence a bank’s decisions to lend money to consumers. People with high credit scores will find the most attractive borrowing rates because that signals to lenders that they are less risky. Those with low credit scores will struggle to find credit at all.

The Big 3 credit scores

Banks have hundreds of proprietary credit scoring algorithms. In this article, we analyzed trends on three of the most famous credit scoring algorithms:

  • FICO® Score 8 (used for underwriting mortgages)
  • VantageScore® 3.0 (widely available to consumers)
  • Equifax Consumer Risk Credit Score (used by the Federal Reserve Bank of New York)

Each of these credit scores ranks risk on a scale of 300-850. In all three models, prime credit is any score above 720. Subprime credit is any score below 660. All three models consider similar data when they create credit risk profiles. The most common factors include:

  • Payment history
  • Revolving debt levels (or revolving debt utilization ratios)
  • Length of credit history
  • Number of recent credit inquires
  • Variety of credit (installment and revolving)

However, each model weights the information differently. This means that a FICO® Score cannot be compared directly to a VantageScore® or an Equifax Risk Score. For example, a VantageScore® does not count paid items in collections against you. However, a FICO® Score counts all collections items against you, even if you’ve paid them. Additionally, the VantageScore® counts outstanding debt against you, but the FICO® Score only considers how much credit card debt you have relative to your available credit.

American credit scores over time

Average FICO® Scores in America are on the rise for the eighth straight year. The average credit score in America is now 700.

On top of that, consumers with “super prime” credit (FICO® Scores above 800) outnumber consumers with deep subprime credit (FICO® Scores below 600).

We’re also seeing healthy increases in prime credit scores, defined as Equifax Risk Scores above 720. According to the Federal Reserve Bank of New York, 51% of all Americans have prime credit scores as measured by the Equifax Risk Score. Following the housing market crash in 2010, just 48.4% of Americans had prime credit scores.20

A major driver of increased scores is the decreased proportion of consumers with collection items on their credit report. A credit item that falls into collections will stay on a person’s credit report for seven years. People caught in the latter end of the real estate foreclosure crisis of 2006-2011 may still have a collections item on their report today.

In the first quarter of 2013, 14.64% of all consumers had at least one item in collections. Today, just 12.61% of consumers have collections items on their credit report. Overall collections rates are approaching 2005-2006 average rates.40

Credit scores and loan originations

Following the 2007-2008 implosion of the housing market, banks saw mortgage borrowers defaulting at higher rates than ever before. In addition to higher mortgage default rates, the market downturn led to higher default rates across all types of consumer loans. To maintain profitability banks began tightening lending practices. More stringent lending standards made it tough for anyone with poor credit to get a loan at a reasonable rate. Although banks have loosened lending somewhat in the last two years, people with subprime credit will continue to struggle to get loans. In June 2017, banks rejected 81.4% of all credit applications from people with Equifax Risk Scores below 680. By contrast, banks rejected 9.11% of credit applications from those with credit scores above 760.22

Credit scores and mortgage origination

Before 2008, the median homebuyer had an Equifax Risk Score of 720. In 2017, the median score was 764, a full 44 points higher than the pre-bubble scores. The bottom 10th of buyers had a score of 657, a massive 65 point growth over the pre-recession average.23

Some below prime borrowers still get mortgages. But banks no longer underwrite mortgages for deep subprime borrowers. More stringent lending standards have resulted in near all-time lows in mortgage foreclosures.

Credit scores and auto loan origination

The subprime lending bubble didn’t directly influence the auto loan market, but banks increased their lending standards for auto loans, too. Before 2008, the median credit score for people originating auto loans was 682. By the first quarter of 2017, the median score for auto borrowers was 706.26

In the case of auto loans, the lower median risk profile hasn’t paid off for banks. In the first quarter of 2017, $8.27 billion dollars of auto loans fell into severely delinquent status. New auto delinquencies are now as bad as they were in 2008.28

Consumers looking for new auto loans should expect more stringent lending standards in coming months. This means it’s more important than ever for Americans to grow their credit score.

Credit scores for credit cards

Unlike other types of credit, even people with deep subprime credit scores usually qualify to open a secured credit card. However, credit card use among people with poor credit scores is still near an all-time low. In the last decade, credit card use among deep subprime borrowers fell 16.7%. Today, just over 50% of deep subprime borrowers have credit card accounts.30

The dramatic decline came between 2009 and 2011. During this period, half or more of all credit card account closures came from borrowers with below prime credit scores. More than one-third of all closures came from deep subprime consumers.

However, banks are showing an increased willingness to allow customers with poor credit to open credit card accounts. In 2015, more than 60% of all new credit card accounts went to borrowers with subprime credit, and 25% of all the accounts went to borrowers with deep subprime credit.

State level credit scores

Consumers across the nation are seeing higher credit scores, but regional variations persist. People living in the Deep South and Southwest have lower credit scores than the rest of the nation. States in the Deep South have an average VantageScore® of 652 compared to a nationwide average of 673. Southwestern states have an average score of 658.

States in the upper Midwest outperform the nation as a whole. These states had average VantageScores® of 689.

Unsurprisingly, consumers across the southern United States are far more likely to have subprime credit scores than consumers across the north. Minnesota had the fewest subprime consumers. In December 2016, just 21.9% of residents fell below an Equifax Risk Score of 660. Mississippi had the worst subprime rate in the nation: 48.3% of Mississippi residents had credit scores below 660 in December 2016.35

These are the distributions of Equifax Risk Scores by state:37

Credit score by age

In general, older consumers have higher credit scores than younger generations. Credit scoring models consider consumers with longer credit histories less risky than those with short credit histories. The Silent Generation and boomers enjoy higher credit scores due to long credit histories. However, these generations show better credit behavior, too. Their revolving credit utilization rates are lower than younger generations. They are less likely to have a severely delinquent credit item on their credit report.

Gen X and millennials have almost identical revolving utilization ratios and delinquency rates. Compared to millennials, Gen X has higher credit card balances and more debt. Still, Gen X’s longer credit history gives them a 21 point advantage over millennials on average.

To improve their credit scores, millennials and Gen X need to focus on timely payments. On-time payments and lower credit card utilization will drive their scores up.

A report by FICO® showed that younger consumers can earn high credit scores with excellent credit behavior. 93% of consumers with credit scores between 750 and 799 who were under age 29 never had a late payment on their credit report. In contrast, 57% of the total population had at least one delinquency. This good credit group also used less of their available credit. They had an average revolving credit utilization ratio of 6%. The nation as a whole had a utilization ratio of 15%.39

Sources

  1. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  2. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
  3. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
  4. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  5. 2016 State of Credit Report” National 2016 90+ Days Past Due, Experian. Accessed May 24, 2017
  6. 2016 State of Credit Report” State 2016 Average VantageScore®, Experian. Accessed May 24, 2017.
  7. 2016 State of Credit Report” National 2016 Average VantageScore®, Experian. Accessed May 24, 2017.
  8. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
  9. 2016 State of Credit Report” National 2016 Average VantageScore®, Experian. Accessed July 23, 2017.
  10. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  11. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  12. 2016 State of Credit Report” National 2016 90+ Days Past Due, Experian. Accessed July 23, 2017.
  13. 2016 State of Credit Report” National 2016 Average Late Payments, Experian. Accessed July 23, 2017.
  14. 2016 State of Credit Report” National 2016 Average Revolving Credit Utilization Ratio, Experian. Accessed July 23, 2017.
  15. Quarterly Report on Household Debt and Credit May 2017” Percent of Balance 90+ Days Delinquent by Loan Type, All Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  16. Calculated metric using data from “Quarterly Report on Household Debt and Credit May 2017” Percent of Balance 90+ Days Delinquent by Loan Type and Total Debt Balance and Its Composition. All Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017. Multiply all debt balances by percent of balance 90 days delinquent for Q1 2017, and summarize all delinquent balances. Total delinquent balance for non-mortgage debt = $284 billion. Total non-mortgage debt balance = $4.1 trillion$284 billion /$4.1 trillion = 6.9%.
  17. 2016 State of Credit Report” State 2016 Average VantageScore®, Experian. Accessed July 23, 2017.
  18. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
  19. Ethan Dornhelm, “US Average FICO Score Hits 700: A Milestone for Consumers,” Fair Isaac Corporation. Accessed July 23, 2017.
  20. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  21. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  22. Survey of Consumer Expectations, © 2013-2017 Federal Reserve Bank of New York (FRBNY). The SCE data are available without charge at http://www.newyorkfed.org/microeconomics/sce and may be used subject to license terms posted there. FRBNY disclaims any responsibility or legal liability for this analysis and interpretation of Survey of Consumer Expectations data.
  23. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Mortgages, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  24. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Mortgages, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  25. Quarterly Report on Household Debt and Credit May 2017” Number of Consumers with New Foreclosures and Bankruptcies, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  26. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed May 24, 2017.
  27. Quarterly Report on Household Debt and Credit May 2017” Credit Score at Origination: Auto Loans, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  28. Quarterly Report on Household Debt and Credit May 2017” Flow into Severe Delinquency (90+) by Loan Type, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  29. Quarterly Report on Household Debt and Credit May 2017” Flow into Severe Delinquency (90+) by Loan Type, from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  30. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed July 23, 2017.
  31. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed July 23, 2017.
  32. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed July 23, 2017.
  33. Graham Campbell, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klauuw, “Just Released: Recent Developments in Consumer Credit Card Borrowing,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 9, 2016. Accessed July 23, 2017.
  34. 2016 State of Credit Report” State 2016 Average VantageScore®, Experian. Accessed July 23, 2017.
  35. 2016 State of Credit Report” State 2016 Average VantageScore®, Experian. Accessed July 23, 2017.
  36. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  37. Community Credit: A New Perspective on America’s Communities Credit Quality and Inclusion” from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  38. 2016 State of Credit Report” National 2016 VantageScore®, Experian. Accessed July 23, 2017.
  39. Andrew Jennings, “FICO® Score High Achievers: Is Age the Only Factor?” Fair Isaac Corporation. Accessed July 23, 2017.
  40. Quarterly Report on Household Debt and Credit May 2017” Third-Party Collections (Percent of Consumers with Collections), from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.
  41. Quarterly Report on Household Debt and Credit May 2017” Third-Party Collections (Percent of Consumers with Collections), from the Federal Reserve Bank of New York and Equifax Consumer Credit Panel. Accessed July 23, 2017.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Hannah Rounds
Hannah Rounds |

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

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Lenny App Review: Offers Credit Lines, Credit-building Tools, and Free FICO Score Monitoring

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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Lenny App Review: Offers Credit Lines, Credit-building Tools

If you’re looking to build credit history, the Lenny app offers a credit-building product that’s worth checking out. Lenny is a licensed lender of California that provides students and other candidates who have limited credit history access to credit lines.

Once approved for a Lenny credit line, you can transfer money to a connected bank account or send money to friends and family. The Lenny credit line account includes additional resources, such as a credit score monitoring tool. There’s also a Lenny Points program that rewards you for actions that have a positive impact on your credit score.

You won’t qualify for the credit line if you live in a state other than California. However, anyone in the U.S. can use the Lenny app to send and receive money from their own bank account. There’s also a waiting list you can sign up for that will notify you when the Lenny credit line becomes available in other states.

In this post, we’ll review what you need to know about the Lenny app before signing up, including:

  • How Lenny works
  • How to earn Lenny Points
  • How much Lenny costs
  • Pros and cons

How Lenny Works

After downloading the app to your device, setting up an account requires entering your name, Social Security number, and birthdate. You must provide personal information to use the Lenny app even if you’re not applying for a credit line because Lenny is a financial institution and has to verify your identity.

California residents have the option to apply for the Lenny credit line within the app dashboard. The credit application won’t impact your credit score. Once approved for a credit line, the account record and payments are reported to two credit bureaus, Equifax and TransUnion.

The credit line interest rate ranges from 7.90% to 14.99% APR, and the credit line is open-ended, which means you can revolve a balance from month to month.

The initial credit line offered is typically between $100 and $1,000 depending on your creditworthiness. The Lenny Points program allows you to earn points to unlock credit line increases as well.

How to Earn Lenny Points

lennyYou can earn Lenny Points when you pay bills on time, keep your credit utilization below 30%, or pay your bill off in full. You also earn 10 Lenny Points just for signing up.

Here’s the amount of Lenny Points you can earn for each action:

  • 2 Lenny Points for an on-time payment
  • 4 Lenny Points for a month-end credit utilization ratio under 30%
  • 4 Lenny Points for paying your bill in full

The actions that earn Lenny Points are the same actions that improve your credit score, so the rewards program enforces habits that will benefit you long term.

You can earn additional Lenny Points when you reach certain credit scores. For example:

  • 30 Lenny Points for reaching 670
  • 40 Lenny Points for reaching 740
  • 50 Lenny Points for reaching 800

Lenny Points never expire. You can get your first credit line increase when you reach 60 Lenny Points, the second when you reach 100 Lenny Points, and the third when you reach 140 Lenny Points.

Keep in mind, the purpose of Lenny increasing your credit limit isn’t so you can rack up more debt. A higher credit limit can increase your available credit limit, thus lowering your credit utilization rate and likely improving your credit score. Credit utilization is how much credit you’re using compared to how much is available to you.

To calculate credit utilization, divide the amount you owe by your credit limit and multiply by 100. For example, if you owe $500, and your credit limit is $1,000, your credit utilization is 50%. You always want to keep your credit utilization below 30%, and Lenny gives you a reward for doing so.

Lenny Costs and Terms

Lenny charges a $2 per month membership fee for the credit line account. Lenny does offer a referral program that can help you cover the cost. A referral gets you and the person you refer a $5 bonus.

The penalty fee for a late payment, returned payment, or returned check is $15. You get one late fee waiver per calendar year. If you pay your bill with a check, there’s also a $15 fee. According to the Lenny website, these fees can change without notice.

Pros and Cons

Lenny gives you a free FICO score Pro: Lenny gives you a free FICO score. FICO scores are still considered the industry standard of measuring creditworthiness, so having access to FICO score monitoring is a major benefit of this product. Lenny offers the FICO 8 score based on Experian data.

Con: The Lenny account isn’t free. You’ll need to set aside $24 per year for the membership fee.

Pro: The Lenny Points program. The Lenny Point system is innovative in the way it incentivizes you for actions that will build your credit. Lenny rewards you for paying your bills on time, keeping your utilization low, and paying off your balance in full, which can encourage good lifelong credit habits.

Con: It’s a credit line you may or may not need. You shouldn’t open this account or take out any form of credit on a whim, especially if you’re a student. Although building credit is necessary for future major purchases, taking out credit before you’re ready can do more harm than good. Make sure you’re at a place where you’re prepared to manage credit responsibly or are bringing in a steady income to pay the bill before opening an account.

Pro: Lenny comes with credit recommendations, and it’s easy to use. The credit education component of the Lenny credit line account is valuable. The dashboard gives you advice on actions you can take to improve your score. And even if you don’t use the credit line feature, Lenny could be an easy way to transfer money between friends.

Con: Only available in California. Non-California residents won’t qualify for the credit line at this time.

Other Ways to Build Credit without a Lenny Line of Credit

You need credit to build credit; there’s no way around this fact. The problem is financial institutions are often hesitant to give you credit unless you already have a positive credit history. Lenny serves consumers that may not be able to qualify for credit elsewhere, but it’s not the only option.

Here are a few other ways to build credit:

Appeal to a cosigner: A cosigner applies for credit or a loan with you and also assumes responsibility for your debt, which minimizes the risk for financial institutions and improves your chances of getting approved. Asking someone to cosign for you is no small favor since the account will also appear on their credit and negatively impact their credit score if you skip payments. For this reason, family and close friends will probably be the most willing to cosign for you.

Become an authorized user on another account: If you know someone who’s kept a credit card in good standing for a long time, you can ask to become an authorized user on their card. Becoming an authorized user makes their account appear on your credit history. The new record can lengthen your credit history and have a positive impact on your score.

Get a secured credit card: Secured credit cards are cards that require a deposit for your credit line. Once you build up enough credit history, you can start qualifying for regular forms of credit that don’t require a deposit. You can also get your deposit back from the card issuer. Check out secured card options here.

Who Will Benefit the Most from Lenny

The two standout features of Lenny are the Lenny Points reward system and the FICO score tracking tool. These features may be a great benefit to someone who’s unfamiliar with credit because of the credit education component. However, Lenny has an annual membership fee, and there are other methods of building credit on your own, such as applying for a secured credit card, that are free.

You can find a list of fee-free secured cards here. For the education aspect of building credit, you can always fall back on a site like Credit Karma that offers free credit scores, reports, and advice on how to improve your score.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Taylor Gordon
Taylor Gordon |

Taylor Gordon is a writer at MagnifyMoney. You can email Taylor at taylor@magnifymoney.com

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5 Ways to Finance Your New iPhone 7

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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Finance Your New iPhone 7

Apple released a new iPhone this month. Cue fireworks.

The iPhone 7 comes with a slew of new and improved features, including a sharper camera and the controversial missing headphone jack.

Apple also announced a special financing option for people interested in purchasing the phone, which costs a whopping $649 on the low end and as much as $969 for the most expensive model. If you use Apple’s financing offer, you can make payments interest free for 12 months.

But is Apple’s financing option the best way to buy the new iPhone? We dug into the fine print. Here’s what you need to know:

You’re really signing up for a credit card. Apple’s special financing offer is really just a credit card with a few perks. Apple partnered with Barclaycard, Barclays’ global payment business, to offer no-interest financing for iPhone buyers through a credit card. Customers can use the card to pay for the iPhone 7 or any other Apple products.

Beware of deferred interest charges. If you don’t pay off your iPhone fully within 12 months, you’ll be in for a nasty surprise. The Apple Barclaycard comes with a deferred interest clause. That means that if you even have $1 left to pay on your card after your interest-free promotional period is up, the card will charge you all of the interest it deferred over those months. The APR will vary from 14.24% to 27.24%. Either way, it’s definitely going to sting.

Your interest-free promotional period will vary by how much you spend. The period is six months for purchases of $498 or less; 12 months for purchases from $499 to $998; and 18 months to pay off a charge of $999 or higher.

The bottom line: Pay down your bill ASAP. Apple’s Barclaycard financing option can be a good deal — but only if you pay off your card before your promotional interest-free period ends.

Other Ways to Finance the New iPhone 7

Find a no-fee credit card. If the deferred interest clause makes you nervous, you could easily find another no-fee credit card that offers a 0% interest promotion that doesn’t carry such a clause.You can find a list of 0% interest cards here. Just be sure to pay it down before your promotional period ends, or interest will begin to accrue.

Finance through a mobile carrier. Another option would be to finance payments through your mobile phone carrier. Typically, this requires you to put a down payment on your phone and pay the remaining balance in installments that are added to your monthly bill for 17 to 30 months, depending on the carrier and plan. Most plans set the payment plan term at 24 months. This could be the better choice for anyone who is able to put down a decent amount toward the price of the phone. The more you pay upfront, the less you’ll have added to your monthly bill to pay off the phone.

Trade in your old phone to save. A third option to save on the new iPhone 7 would be to trade in your old smartphone for credit toward a new phone. All of the big carriers — AT&T, Sprint, T-Mobile, and Verizon — and Apple currently have offers that award credit toward a new iPhone 7 if you trade in older models of the iPhone and, in some cases, Android phones. The trade-in value will be deducted from your monthly bill over the next 24 months. The remaining cost of the new phone will be spread out over payments for the 24 or 30 months. If you leave the carrier before completing payment, you’ll have to pay the balance due on the phone.

Use Apple’s iPhone Upgrade Program. Another option would be to finance the phone with Apple’s iPhone Upgrade Program. The program would enter you into a 24-month, 0% APR agreement with the tech giant’s other bank partner, Citizens One. You’ll need a credit card to get started with the program. If you get approved, your card will be charged monthly over 24 months for the  installment loan which includes the iPhone 7, AppleCare+ (a $129 value) and any applicable taxes. You won’t be charged any additional interest through Apple or Citizens One. The highlight of this program is that you have the option to upgrade to the latest iPhone after six months or 12 payments, whichever comes first. You also won’t be tied down to any single carrier if you go with Apple’s iPhone Upgrade Program, which means if you dislike your plan, you will able to switch anytime.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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What to Do When a Family Member Steals Your Identity

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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What to Do When a Family Member Steals Your Identity

Imagine you’re 20 years old and you’re ready to open your first credit card.  You fill out application after application, but you’re constantly rejected. Looking for a reason, you pull your credit report and find that your credit has already been established — and wrecked — by none other than your parents.

This scenario isn’t all that uncommon. It’s a case of so-called “familiar fraud,” which occurs when the victim knows or is related to the person who steals their identity. Children are an especially easy target for family members, because they are much less likely to be vigilant about their credit history and their personal information is often easily accessible.

In fact, familiar fraud is five times more likely to happen to teenagers, according to a 2015 study by Javelin Strategy & Research. Child identity theft by a relative can be a touchy issue for obvious reasons. In many cases, the parent may have good intentions and may not even think what they have done is wrong.

“[Parents] don’t really necessarily see it as a crime or see it as harmful until later,” says Eva Velasquez, CEO of the Identity Theft Resource Center, a consumer protection group. “[They say] ‘My credit is ruined and I have to keep lights in the house so I’m going to use my kid’s [information]. They are benefiting from it and they’re my kid anyway.’” If the parent isn’t able to pay their debts off, they can wind up doing more harm than good.

And when children find out that their credit has been ruined, it’s not an easy matter to rectify. More than one-third of young people who fall victim to familiar fraud only find out when debt collectors start calling, and another 7% find out when they are rejected for new credit.

Victims of familiar fraud could report the crime to relieve themselves of the debt. Victims of identity theft probably wouldn’t hesitate to file a police report about an anonymous hacker. The story changes when the hacker is their parent or a sibling.

So what do you do if you realize that a family member has used your personal information to open financial accounts in your name?

Here are some steps to follow:

Create a paper trail.

The key to getting fraudulent accounts removed from your credit history is to create a paper trail showing you were the victim of identity theft. Start your paper trail by filing a report with the police and filing a report online or by phone with the Federal Trade Commission. Make copies of all of your reports, Velasquez recommends.

If you know a family member or friend stole your identity and you’re nervous about the idea of going to the police, consider this: Filing a police report doesn’t necessarily mean you’re pressing criminal charges against your family member.

“Creating a report is creating a record of the theft so that the victim can prove the debt is not theirs,” says Adam G. Singer, a consumer attorney located in New York City. “That is a matter of civil law. If a person were to press charges, it would then become a matter of criminal law.”

Contact each lender individually.

Make a list of all the fraudulent accounts that have been opened under your name and contact each lender or debt collections firm individually. Explain that the charges were fraudulent and that you would like to dispute them.

Even if you have a copy of your police report and an FTC complaint handy, the lenders may ask you to provide further proof that the accounts weren’t opened by you.

This could mean bringing a birth certificate that proves you were a minor when the fake account was created or documentation that shows  you weren’t living at the address or in the area where the account was created. Make sure to take notes on all of the conversations that you have with any institutions along the way.

Add a fraud alert to your credit report.

Protect yourself from future fraud by adding a fraud alert to your credit reports. Contact one of the three credit reporting agencies — Experian, TransUnion, or Equifax — to place a 90-day fraud alert on your credit report. When you have an alert on your report, a business has to verify your identity before it issues credit. This makes it more difficult for someone else to open more accounts in your name.

When you contact one credit bureau and request a fraud alert, the alert will also be applied to your files at the other two bureaus as well. You can extend the alert to stay in effect for up to seven years after filing a police report or filling out a complaint form on the Federal Trade Commission’s website.

Alternatively, you could consider a credit freeze.

When your credit is frozen, no one can open a new line of credit under your name unless you agree to thaw your account. Fees depend on the state, but victims of identity theft can usually ask to have those fees waived.

Make credit checks a monthly ritual.

Many young people don’t realize their identity was stolen to open financial accounts until debt collectors begin calling. It’s important to start tracking your credit history early, says Karen C. Altfest, a financial adviser with Altfest Personal Wealth Management.

“You have to know what’s in your accounts and you have to know what’s going on,” she says.

There are some identity theft protection services that charge monthly fees to monitor your credit year-round. But you can also use free services like Credit Karma and Credit Sesame to check your credit report for free and without penalties to your score.

At the very least, comb through your monthly financial statements and make sure nothing looks out of the ordinary. Another easy tip is to ask your bank to alert you anytime charges over a certain dollar amount are made on your account.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

Brittney Laryea
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Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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3 Smart Money Moves to Make Before You Get Divorced

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Smart Money Moves

Ending your marriage is both difficult and life-changing. There are many things to think about, from deciding where you’re going to live to learning to deal with the realities of being newly single.

What you may not think about is how best to protect your credit from the adverse effects of a divorce.

In my two-plus decades in the credit environment I’ve heard countless disaster stories about how divorce has ruined both spouses’ credit reports and scores. If you wait until after your divorce is final to take stock of your credit health, it may be too late to undo the damage.

There are a few steps everyone should take to protect their credit before they get divorced. This strategy will help limit your credit’s exposure to your divorce will almost always allow you to re-enter the world of being single with the cleanest credit report possible.

Here’s how…

Close joint credit card accounts

Divorce may allow you to sever ties with your spouse, but you could still be on the hook for shared credit debt. Even if a court assigns payment responsibility to one spouse or the other, your creditors do not have to recognize the assignment because they were not a party to the divorce settlement agreement.  That means any joint credit cards will still be the responsibility of both spouses even after your divorce.

Any use or abuse of the joint credit cards will blow back and harm the credit reports and scores of both spouses. It’s because of this potential harm that all joint credit cards should be closed prior to your divorce. Normally this would be poor advice because of the potential damage you can cause to your credit scores by doing so, but the downside of continued liability on a credit card that isn’t being paid is even more problematic.

Optional: Before you close any account, it’s a good idea to open a few new cards in your name. Once you start closing credit cards you’re going to lose the buying power that comes with plastic and you are going to need cards to use in their place. Opening a few cards in your name prior to closing your joint credit cards will allow you to continue functioning as efficiently as possible during and then after your divorce.

Sell or refinance your joint assets (house, car, etc.)

If you have joint loans secured by either your home or your car then you will still have liability for the debt even after your divorce.  This is problematic for two reasons. First, if your ex-spouse is assigned payment responsibility in your divorce settlement and he or she starts missing payments then your credit reports and scores will suffer. Second, even if the accounts are being paid on time, the large amount of debt will harm your debt-to-income ratios, which are important metrics considered by lenders when determining how much you can qualify for when you apply for loans.

You will not be able to convince your lenders to simply take your name off of joint loans, just like you won’t be able to convince your credit card issuers to remove your name from joint card accounts. That means the only way to separate yourself from the joint loan is to either sell the house or car, refinance it into your name alone, or buy the home or car from your spouse. Of course, some of these options may not be feasible.

You may not be able to afford to buy or refinance the loan into your name alone. You may not have a job or you may not be able to qualify for the loan amount needed to do so. And, you may simply not want the house or the car for whatever reason. In these cases the best move is to simply sell the house or the car, divide the proceeds with your soon-to-be ex-spouse and move on with your life.

Protect your credit from identity theft

Identity theft continues to be one of the fastest growing white collar crimes in the United States. And because your spouse likely has access to your personal information, he or she could easily apply for credit in your name during or after your divorce. This is not unheard of, especially if the divorce becomes contentious.

Thankfully, there three ways you can minimize the risk of this type of fraud, each with varying difficulty and expenses.

For free: MagnifyMoney’s Identity Theft Guide is free and breaks down all the ways you can protect your financial identity. You can check your credit reports once every 12 months at annualcreditreport.com at no cost. But this once-a-year checkups are hardly sufficient when you’re trying to protect your credit reports from fraud. To keep a closer eye on your accounts, sign up for a site like CreditKarma.com, which will ping you anytime there’s new activity on your account.

On the expensive side: There are costly credit monitoring services that you can buy that will passively monitor all three of your credit reports for changes that could be indicative of fraud and alert you via email if there are any potential problems. You’ll be paying roughly anywhere from $9 to $15 per month in perpetuity for those tri-bureau monitoring subscriptions. Some are certainly better than others. Check out MagnifyMoney’s review of monitoring services here. 

The best low-cost option: The best, most cost-effective option is to place a security freeze on your three credit reports. That essentially removes them from circulation until you choose to make them available again. It also prevents anyone from opening new credit under your name. The security freeze, or credit freeze, is not free but the cost is a fraction of credit monitoring subscriptions. The cost is different state by state but it is usually less than $30 to place the freeze on all three of your credit reports and in some states it’s less than $10. The freeze prevents any disclosure of your credit reports to new lenders until you’ve given permission to the credit bureaus to provide them.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

John Ulzheimer
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John Ulzheimer is a writer at MagnifyMoney. You can email John here

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4 People With Perfect Credit Scores Tell Us How They Did It

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Perfect Credit Scores

After 25 years working in the credit reporting industry, I’ll admit it — I’ve become fairly obsessed about my own credit score. I track my credit scores about as diligently as my doctors track my weight and cholesterol.

Intuitively, I know having an 850 credit score isn’t really all that important. In fact, the real “perfect credit score” is closer to the 760 mark. That’s about as high as your score needs to be to get the best treatment from lenders. In 2015, less than 20% of U.S. adults could say they earned a FICO score greater than 800. And a mere 16% of adults managed an 800+ VantageScore, which is another widely used credit score.

Despite all this, I couldn’t help but fantasize about hitting 850. And, last month, I finally did it.

Since there’s still so much interest in achieving perfect credit, I decided to track down a few other people who have perfect (or darn near perfect) credit scores. I wanted to hear what they were doing, credit-wise, to achieve such impressive scores.  To keep things fair and consistent, we asked everyone to run their FICO score using the free Discover credit score tool. (This FICO score is based on data from Experian, one of the three major credit bureaus.)

What I found were four very different pictures of perfection…and what it takes to achieve it. (Want to share your perfect credit score story with us? Send us a note at info@magnifymoney.com.)

Dominique Brown Dominique Brown
32 years old
Alexandria, Va.

His score: 850

His credit stats: Dominique has 25 revolving credit accounts on his credit report and another 14 in the form of installment loans (as a REALTOR, he invests in real estate properties). Overall, the average age of these accounts is just under 15 years. Dominique has one hard and fast rule about how much available credit his family uses: “We never go over 20% utilization ever in any billing period.” He’s not kidding. His credit report shows a super low utilization rate of 2%.

How he uses credit: Dominique’s credit card habits begin and end with his budget. “In my house, we plan every dime that we make before the month starts,” he says. “For every purchase that we can, we put it on the credit card and just pay it off in full by the due date.” Since he pre-plans his monthly earnings and spending, Dominique never worries about needing enough to afford a certain bill. And by using credit almost exclusively, he earns tons of rewards points.

His secret: Dominique credits his mother with instilling good financial habits in him at an early age. “She would give me an allowance every two weeks for chores and I had to manage my money for savings, fun and goals just like an adult,” he says. She also gave him three rules to live by: save 10% of his money, always stick to a budget and never spend more than he earned.

Thoughts on hitting 850: “This may sound weird to some, but to have an 850 credit score was not a milestone for me financially,” he says. “I realized a long time ago that your credit score is only half the battle … cash flow management is what matters the most.”

BrendaBrenda Vaughn
44 years old
Athens, Ga.

Her score: 825

Her credit stats: Brenda has 6 credit cards including 3 general use credit cards (cards that can be used anywhere) and 3 retail store credit cards. Her credit history is 25 years old. She has a mortgage loan with a balance. And, she has borrowed money to buy cars and to pay for tuition.

How she uses credit: Brenda still has the first credit card she opened at age 19, at her mother’s urging. She admits it took her a while to get the hang of it. “I didn’t always [pay my bill on time] and it was out of control a couple of times,” she says. Nowadays, she uses her cards primarily to earn cash back and pays them off every month. “My parents gave me a set amount of money each month while I was in college and said if I needed more then I needed to get a job and so I did.”

Her secret: Even with her history of missed payments on her accounts, Brenda’s score is still incredible. She has time on her side there. Since she hasn’t missed a payment in the past 15 years, those old negative marks have long been removed from her credit report. Negative marks can only stay on your credit report for up to 7 years.

Jim Jim Droske
51 years old
Willowbrook, Ill.

His score: 830

His credit stats: Jim has 9 credit cards and as of last month a total of $7,720 on those cards. That balance seems pretty high but because he has such a high total available credit across all his cards — $88,000 — his utilization rate is super low. He’s using only 9% of the credit he could be using, he says. Jim’s credit history is 32 years old and the average age of his accounts is about 10 years.

His secret: To put it simply, Jim is the perfect credit customer. He’s never missed a payment and he’s never had an account go to collections. At age 24, Jim was thrown into a job in finance, running the lending department at an auto dealer. He saw firsthand how important credit scores were when it came to getting the best finance rates from lenders. “I read a lot about how credit and credit scores work and still do,” he says. With Jim’s super long credit history and perfect payment record, it’s no wonder his credit is stellar.

How he uses credit: Jim is steadfast about what he charges — and what he doesn’t. “I only use credit for bigger purchases that can not reasonably be paid for in cash,” he says. “I do not charge for points and always pay much more than the minimum payment due until it is paid off.” He only carries a balance on three of his 9 credit cards just to keep them active, he says.

johnJohn Ulzheimer
48 years old
Atlanta, Ga.

My score: 850

My secret: Like most of the people I spoke with, I have one huge advantage here. I’m kind of old! And that means my credit history is older than average — 22 years and counting. Fortunately, credit scoring models take age into account when they calculate scores. The older your credit history, the higher you score will be.  I also have a stellar payment history. I can say I haven’t missed any payments since 1991, when I graduated from college and started working at Equifax.

My credit stats:  I have 13 credit cards and a total of 19 accounts, active and inactive on my credit report. As of last month, I carried a total of $9,500 on those cards with a total credit capacity of $133,000. That makes my utilization rate a low 7%.

How I use credit: I pay my cards in full each month and have never carried a balance. The beauty of not carrying a balance is that I never have to pay interest, no matter what my APR is. In fact, I have no idea what my APRs are because they’re irrelevant to me. I don’t shy away from applying for credit but only do when I actually need it.  I learned about credit from my years working for Equifax and FICO.

So what’s the real secret to scoring 850?

Here’s what all of us have in common…

None of us avoid credit. In fact, we all have a TON of credit cards. But we use them wisely. None of us have negative marks on our credit reports and we keep our monthly balances low relative to our total credit limit. Last but not least, we all have credit histories that are at least 15 years old, which makes up 15% of our FICO score alone.

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

John Ulzheimer
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John Ulzheimer is a writer at MagnifyMoney. You can email John here

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The Perfect Credit Score Isn’t Really 850

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Do you really need an 850 credit score to get the best rates?

Most people assume that in order to get the best treatment from lenders, you need to have perfect credit. Across both of the most common credit scoring brands, FICO and VantageScore, that highest score is 850 out of the now-standard range of 300 to 850.

But the truth is that while it’s nice to boast that you’ve maxed out your credit score, it’s almost impossible to achieve the magical 850. It’s also entirely unnecessary. There is no lender or credit product that requires you to have a credit score of 850 in order to be approved.  There is no lender or credit product that requires you to have a credit score of 850 in order to earn the best terms. In fact, your credit scores can be 90 to 130 points off the maximum and still result in your getting approved for the best deals from mainstream lenders.

To put it bluntly, 850 doesn’t buy you anything but bragging rights.

Case in point, according to Informa Research, which tracks interest rates by credit scores on a daily basis, the lowest rates offered on various mortgage related loans are being offered to people with scores at or higher than 760. And, the lowest rates offered on various auto loans are being offered to people with scores at or higher than 720.

The quest for a perfect 850 is often given different fictitious monikers like “Triple-A Credit” or “A+ Credit”, when in reality there is no such designation in the world of consumer credit scoring.  Your credit “rating” is the number, whether it’s an 850 or a 525.

Earning the ever-elusive 850 credit score requires that you have a statistically perfect credit report that indicates you are completely void of any sort of credit risk. But again, this is unnecessary and you will do just fine with 760 or better, which is a much easier target to hit.

How to get to 760

A score of 760 doesn’t require perfection. You can even have derogatory entries (like a missed payment) and still get there. It just requires that these negative marks are older and limited. You can even have a balance on your credit card and still score at or above 760. Your best bet is to use 10% or less of your card’s credit limits.  That means no more than a $1,000 balance for every $10,000 in credit limits across all of your cards.

The other targets are harder to hit because they’re not entirely in your control.  For example, the older your credit history is the better you’re going to score. Since you can’t exactly control time, this will be one of those areas where you’ll do better organically as time passes.

Account diversity is also a tough one to control. People will score better if they’ve got a record of managing different types of accounts, such as credit cards, student loans, auto loans, and mortgages. Nobody will (or should) go out and buy a car or a house just to benefit their credit scores. This is one of the metrics where you will improve as time passes and you build a history of auto loans and mortgages.

If all of this seems too complicated then let’s make it really simple. If you pay all of your bills on time all the time, apply for credit only when you actually need it and use credit cards sparingly then you’re going to earn and maintain great credit scores. It would be impossible for you not to do so.

Still obsessed with hitting 850?

If you are still obsessed with credit score perfection then there are some milestones that are going to need to be met and maintained.

A perfect payment history. Your credit report is going to have to be void of any negative information, and there are no exceptions. If you’ve got derogatory entries like late payments, liens, judgments, collections, defaults and the like then an 850 is not in the cards for you.

A low utilization rate. Utilization plays a big role in your score and it can be a little confusing. Essentially, credit scoring models look at your total statement balances across all your cards and compare it to your total available credit limit. They don’t even give you bonus points if you pay that balance off in full each month. They simply look at how much your balance comes out to with each billing cycle. The lower your total statement balances are, the better off you are score-wise. To get the perfect 850, don’t even think about carrying a balance on your cards. You need to be at or close to zero percent.

You’ve shown a long history of good behavior. If you apply for credit too often, have limited credit score information or have a young credit report then you’re not going to max out your score. You can’t open a bunch of accounts in a short period of time without hurting your scores. It reduces the average age of your credit and it also means a hard credit inquiry on your account, which can also ding your score. Again, this is no big deal if you’re shooting for the ideal credit score of 760 (or in the neighborhood of that) but it can certainly hurt you on your path to 850.

Have more questions about your credit score? Send us an e-mail at info@magnifymoney.com. 

Advertiser Disclosure: The card offers that appear on this site are from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all card companies or all card offers available in the marketplace.

John Ulzheimer
John Ulzheimer |

John Ulzheimer is a writer at MagnifyMoney. You can email John here

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