Fintech loans are on the rise, but default rates are not that pretty


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Imagine a subprime consumer who wants to pay his credit card bills because his interest rates hover between 15% and 21%. They want to take out a personal loan with better repayment plans to pay off their existing debt.

Are people more likely to go to a bank or credit union when researching their options, or will they be more intrigued by fintech offering loans entirely online?

The latter seems to be a nicer option. And that’s what happened. Fintechs have wrested market share left and right from traditional banks and credit unions. FinTech claimed 49.4% of the unsecured personal loan market in March 2019, up from 22.4% four years earlier, according to Experian.

The level of delinquencies, however, is much higher on these non-traditional loans, with fintechs reporting a delinquency rate of 3.53% 15 months after the loans were granted, nearly double the provider rate. traditional 1.77%, according to a recent study of two companies. school teachers.

( Dig deeper: Fintech lenders will come back in force as the economy reopens )

The study – “Fintech borrowers: lax filtering or skimming– led by Marco Di Maggio of Harvard Business School and Vincent Yao of Georgia State University, was first published in 2018 and updated in late 2020. What they found is not a pretty sight. for fintech lenders.

On the one hand, the co-authors found that borrowers with high interest rates on their fintech loans are almost 40% more likely to be in delinquency, and their credit scores decline more than a bank loan. or credit union – an average decrease of 12 points instead of 0.9 points. – and their total debt increases by more than $ 8,000 after just one year.

According to Di Maggio and Yao, fintechs could target target audiences with risky credit scores and poor credit histories, as they recognize that these consumers cannot get comparable loans from a traditional banking provider. However, there is not yet enough data to support the theory that these non-bank lenders are actively marketing to at-risk consumers.

It is not exclusively an American problem. Major fintechs in India reported doubling delinquency rate between August 2019 and 2020, according to a report from TransUnion CIBIL.

“The delinquency picture is complicated and will take time to emerge due to the lagged effect of financial conditions, aid programs supported by lenders and changes in payment priorities” of Indian consumers, the report adds. of TransUnion.

Di Maggio and Yao got their data from a credit bureau that provided them with information on unsecured personal loans – a fintech favorite. The two examined a sample of over 200 million consumer credit records and rated borrowers by gender, age, marital status, and college degree, in addition to whether consumers were borrowing from a traditional provider or from a bank. a fintech.

Di Maggio says he cannot disclose which credit bureau he worked with to extract data on fintech default rates. The data – provided to Di Maggio as anonymous consumers – allowed the authors to match people with different types of loans and determine which loans came from which type of lender.

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Data that made waves

To dig deeper into the paper, The financial brand spoke to Di Maggio who said he decided to pursue the topic when he realized a profound lack of information on fintech default rates.

“I researched academic literature, looked at it [and found] it was sort of a difficult question to deal with, ”he explains, adding that it is not common or easy to find the data to back up what he and his coauthor have speculated. It’s still a fairly new conversation and the data isn’t plentiful yet, even though fintech lending is taking up space in the lending market exponentially.

Di Maggio mainly focuses on personal fintech loans, which are mainly used for the consolidation of existing debts. He sees it as the “riskiest segment” because, although borrowers may use part of personal loans to pay their unpaid bills, not all funds always go towards the intended purpose.

The vicious circle :

People only use part of the debt consolidation loan they have taken out to pay off their debts. Instead, they use a large portion of the loan to make new purchases.

And the problem has grown dramatically, he says, because people with card debt often keep the cards after paying them off and then increase the balance again.

“The worst outcome happens because if $ 40,000 wasn’t viable before, you now end up six months later with $ 80,000,” said Di Maggio. “In addition, borrowers’ results worsen in the months following the origination of the fintech loan compared to similar people borrowing from non-fintech lenders.” This is a classic weak point of debt consolidation loans. FinTechs have just made the process a lot easier.

Di Maggio’s discoveries are still making waves in the financial sector. When he first presented his research at a conference with a fintech audience, people were angry.

“We’ve had people from LendingClub, people from TransUnion that are very upset,” he says, joking that he challenged them to find data to prove he was wrong. Two years later, he says they have yet to provide him with alternative data.

It’s not all sun and roses

Fintech loans of course have their advantages, which could explain why so many consumers are moving away from conventional providers. People can get loans more easily if they have subprime credit scores, and fintech lenders will look at other forms of personal data to meet creditworthiness requirements.

( Read more: Banks play with dumping credit scores in lending decisions )

There is also much less oversight. While banking regulators threaten to incriminate banks and credit unions for breaches of compliance, fintechs have no federal oversight, although the Consumer Financial Protection Bureau does oversee some practices.

“Some observers argue that fintech lenders might be able to operate where banks don’t find it profitable,” Di Maggio and his co-author wrote in the paper, noting that fintech lenders also have lower fixed costs. to those of traditional lenders, as non-bank institutions do not have branches.

And these advantages are not lost on the attention of traditional banking providers. Banks and credit unions, while unwilling to admit it publicly, are increasingly concerned about the growing swarm of competitors.

They could win on you:

Nearly nine in ten financial institutions are also concerned that fintech loans will exceed their own loans, according to PWC.

It can then be a relief for existing providers to know that they may not have to worry as much as they think. According to Di Maggio and Yao, fintech loans may not be all they claim to be and traditional banking providers still have an edge over challengers. They have a better track record of attracting consumers who can repay their debt. And regulations once supposed to hamper traditional banking providers may be what saves them.

“I think digital lending and banking are less of a threat than, say, what’s happening to the payment system,” maintains Di Maggio, citing Stripe and a similar digital payment specialist, which he says pose a risk. significantly higher for banks than LendingClub.

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Borrowers stranded awaiting the surrender of their public service loan


After a decade of careful monitoring of student loan payments, some borrowers about to cancel their loans have found themselves stuck in a cruel final phase: the waiting period.

Public service loan forgiveness borrowers report waiting up to six months for their forgiveness requests to be approved, often without explaining why. Although loan payments are suspended For pandemic relief, borrowers are still worried about whether their approval will be processed before payments resume in October. Plus, they face the stress of knowing that a change in their employment status could upset years of careful preparation.

Data released by the Education Department last week show a backlog of paperwork of around 147,000 forms – although the agency has not released a breakdown of the number of applications from borrowers who have made the required number of payments for discount against those still pending requests that submit annual updates. The Education Department did not respond to questions about the delay.

Public Service Loan Forgiveness, often referred to as PSLF, was created to provide loan relief to borrowers who spend at least a decade working in often low-paying government or nonprofit jobs. Borrowers must make 120 qualifying monthly payments before obtaining their canceled loans.

Amy Cocuzza hit the 120 mark in January, after years of carefully monitoring her progress. She thought hers was a straightforward case: She had worked as a lawyer for a federal agency for 10 years and had submitted annual employment certification forms in recent years that showed she had made the required number of payments.

So when she submitted her application, she had no reason to believe that it would be refused. But as the weeks turned into wordless months, his anxiety grew. She started checking her account five, six, and then seven times a day. There was, after all, a lot at stake. She had planned her entire career and financial life around that promise.

“He just disappears into the void,” she said. “There is no transparency. There is no communication. You hear nothing for months and months. And you start to think, ‘uh oh, did I miscalculate somehow?’ “

In the almost four years since the first borrowers became eligible for exemption through the PSLF, the program has gained a reputation for being a bureaucratic mess. Stories of service agents miscalculating payments or borrowers getting conflicting information about their employer’s eligibility for the program are common. Refusal rates remain high, so even those borrowers who claim to have tripled their eligibility cannot ignore lingering doubts that their loans will in fact not be canceled when they are in this final stage of waiting.

The delay can have a huge mental impact on individual borrowers who wait for months, says Seth Frotman, executive director of the Student Borrower Protection Center.

“It’s just another insult to borrowers in this system,” he says. His organization is particularly concerned if the government activates payments before the backlog of forms is processed.

In some cases, there is more to the line than just the discomfort of waiting. The program states that borrowers not only make 120 qualifying payments while working for an eligible employer, but that they are still working for an eligible employer at the time their loans are canceled.

This requirement added to the stress for Melissa Pennise of Rochester, NY as she waited. She asked for forgiveness in January. She works in public health at a nonprofit organization and, like most nonprofits, resources can change based on funding from year to year. What if his job had been cut when this year’s budget was established in April?

Fortunately, this did not happen. And she logged on last week to find her $ 104,000 balance canceled.

People who have worked for forgiveness for over a decade want to get on with their lives, she says. “But there’s nothing you can do until these loans run out. “

Over the past few years, FedLoan, the service agent hired by the government to manage the civil service loan forgiveness, has improved a lot in providing borrowers with up-to-date information on their progress towards loan forgiveness, said Pennise. But once she applied, it was much harder to get answers. (FedLoan referred questions about the pardon wait time to the federal student aid office at the Department of Education.)

Borrowers like Pennise have taken Reddit, Facebook and Twitter to share stories about what to expect in the absence of more official information.

It’s not just the people who are at the end of the road who face the delays. Borrowers who attempt to certify their employment or get an updated tally of the number of eligible payments they have made are report similar delays.

Arthur DeVore III submitted his documents to certify his employer in December. He’s still waiting. He also has private loans, so every month when he pays his private loans he calls to check the status of his PSLF employment certificate form. He works for the Equal Employment Practices Commission in New York City. This is a local government agency, so it should be a hard-hitting case.

“I’m frustrated because it shouldn’t take that long,” he says. “What kind of extreme verification process do you have that takes seven months?” “

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Under normal circumstances, according to Betsy Mayotte, founder of The Institute of Student Loan Advisors, which offers borrowers free advice on paying off student loans, under normal circumstances receiving a final loan forgiveness notice in the Part of the utility loan remission typically takes between 45 and 90 days. The timeline is definitely longer than that now, she says, likely due to the disruption caused by the pandemic.

She expects the timeline to shrink again over the next few months. And the government has created a new tool that should help speed up the job certification process if your employer is already in the system as one that has been approved for PSLF. Mayotte says that, for the record, borrowers who used the tool seem to report a much shorter deadline than people who submit their documents by hand.

A simple improvement, in the meantime, would be for borrowers to receive clearer information on the schedule when they request a rebate.

“Even if the schedule is not ideal, it at least sets expectations,” says Mayotte. Right now, instead, some borrowers are reporting that customer service reps say they aren’t allowed to give a timeline. So people repeatedly call for updates or submit multiple applications, which only further clutters the system, Mayotte says.

This corresponds to what Cocuzza went through. When she first applied and asked for a deadline, she remembers being told it could take two or three months. But on subsequent calls to FedLoan, she got inconsistent responses.

“I feel like you could probably call three times an afternoon and have three different stories about what’s going on with your application,” she says.

Despite these challenges, Cocuzza’s is a success. Last week, after 154 days, she logged on after lunch – her second check of the day – to find that her request had finally been processed. His loan balance fell from $ 227,609 to $ 0.

“When I realized the loans ran out, I just started sobbing.”

More money :

Technicality delays forgiveness of student loans to more than 67,000 borrowers

Millennials don’t have kids because it’s too expensive

Should Biden cancel student debt? The loan forgiveness debate, explained



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Cover letter for a mortgage: template and how to write one


Our goal is to give you the tools and the confidence you need to improve your finances. While we do receive compensation from our partner lenders, whom we will always identify, all opinions are ours. Credible Operations, Inc. NMLS # 1681276, is referred to herein as “Credible”.

After your mortgage application, the lender will assess your application and your financial documents to verify that you meet their loan approval requirements.

If the lender finds information that raises red flags, they may ask you for a letter of explanation to shed light on the issue – whether it’s an employment interruption, a derogatory note on your unusually large credit or deposit in your bank account. .

Here’s what you need to know about cover letters, including how to write one:

What is a letter of explanation for a mortgage loan?

A letter of explanation is your opportunity to explain inconsistencies in your mortgage loan application and all the aspects of your financial history that your lender needs to better understand before they can approve you for a loan.

After requesting a mortgage, your application goes through the subscription process. The underwriter examines your credit history, employment, tax returns, assets and debts in detail to ensure that the information is complete and accurate and that you have a low risk of default on the loan.

If anything arises that could disqualify your claim, the underwriter may request a letter of explanation to help better understand the specific details of the problem.

Advice: The subscriber will verify your credit scores, employment and other items shortly before finalizing the loan. Any changes since loan approval may require an explanation before the lender authorizes your loan to close. So it is best not to change your finances until you have completed the home buying process.

If you’re looking to buy a new home, Credible can help you compare prequalified rates from all of our partner lenders in just minutes. It’s simple and secure – and you don’t even have to leave our platform.

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  • A modern approach to mortgage loans: Supplement your mortgage online with banking integrations and automatic updates. Only speak to a loan officer if you want to.

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Why you might need a letter of explanation

Just about any aspect of your loan application may require a letter of explanation, but most requests are for credit, employment, cash reserves, or fraud protection.

Here are a few things that might prompt your lender to request a letter of explanation:

Derogatory items on your credit report

Previous credit issues may prompt you to ask for a letter of explanation because they suggest that you have been having difficulty managing your debt. These problems include:

  • Late payments
  • Collectibles
  • Landfills
  • Bankruptcy
  • A short sale or foreclosure

Excessive credit requests can also be a red flag if they cause the lender to suspect that you bought credit because you had trouble getting approved.

To find: Can You Buy a Home With Bad Credit?

Unusual or inconsistent work history

You will need at least two years of stable employment, either in the same position or field, to prove that your Income Is reliable. Some circumstances that make you appear riskier in the eyes of the lender include:

  • Job losses or periods of unemployment
  • Self-employment
  • Frequent job changes
  • A new job in a different field

Buy a home away from your workplace

If your new home is more than 80 kilometers or so from your workplace, your lender might suspect that you are buying a second home or investment property rather than a primary residence.

Lending standards are stricter for non-primary residences, and interest rates are generally higher.

Lack of rental history

Lenders like to see a history of on-time rent payments for at least the past 12 months for first-time buyers. This is because inexperienced tenants may not be ready to suddenly take on a mortgage payment.

Bank deposits, withdrawals or large transfers

Lenders like money in borrowers’ checking and savings accounts to be “seasoned and sourced,” which means that the money has been there long enough and its source is apparent enough to show that it has grown. is your money versus gift money or a loan that you will have to repay.

Conversely, large withdrawals can cause the lender to think that you are in a bind.

Inconsistency in mailing address

Address discrepancies on a loan file are considered “high-level red flags” for mortgage fraud, warns Fannie Mae.

The lender will need a letter of explanation if they find any inconsistencies in your identification documents, such as a different address listed on your credit report than on your bank statements and tax returns.

Learn more: Credit Monitoring: Why You Should Get A Credit Monitoring Service

How to write a letter of explanation

It’s best to keep your cover letter short and sweet. Include as much detail as needed, but only address the specific information requested by the lender. The idea is to make it easy for the subscriber to find the information they need.

Your cover letter should be pragmatic in tone and structure. Here are some of the things mortgage experts recommend that you include in the letter:

  • The date you write the letter
  • The name, mailing address and telephone number of the lender
  • Your full legal name and loan application number
  • Your explanation, with references to any supporting documents you include
  • Your postal address and telephone number

Once you’ve gathered your information and thoughts, here’s how.

1. Be honest about your financial situation

The lender already knows, or at least suspects, a problem with the request. Now is not the time to try to convince them otherwise or to find excuses for them. Politely state the problem as a question of fact, then continue with the explanation.

2. Be brief

The underwriter wants to see all the information they need to understand the problem, but that’s all they want to see. Keep your explanation brief, to the point, and to the point.

3. Provide evidence to support your explanation

If, for example, the lender thinks you will have an excessive commute from your new home, consider getting a letter from your boss or from the human resources department explaining the situation and attach it to your letter.

Likewise, if a prolonged illness has prevented you from working, enclose your unemployment benefit statements and / or medical bills with your letter.

4. Proofread your letter for errors

An error-free letter shows that you have taken the Underwriter’s request seriously. Also, be sure to maintain a professional tone throughout the letter.

Explanation letter template

The content of your letter will of course depend on your particular situation. You can use the following template letter and replace the details in brackets with your own information and explanations:

Dated
[XYZ Bank]
[123 Broadway]
[New York, NY 20021]
[555-555-5555]
[RE: Jane Smith’s mortgage loan application #123456]

Dear loan specialist:

I am writing to you in response to the underwriter’s request for information regarding [my gap in employment] of [January 15, 2020 to June 15, 2020]. The reason for my absence from work was [the premature birth of my son on January 15, 2020].

In support of my explanation, I have attached the following documentation:

  1. [An insurance statement documenting that he was hospitalized from January 15, 2020 through April 1, 2020]
  2. [Certification of Health Care Provider for Family Member’s Serious Health Condition under the Family and Medical Leave Act form]
  3. [A letter from his pediatrician restricting him from attending daycare until June 15, 2020]

If you have any further questions, please do not hesitate to contact me.

Truly,

[Jane Smith]
[123 State St.]
[New York, NY 20012]
[555-555-0001]

What to do if your letter of explanation is rejected

In the event that the underwriter rejects your explanation, you have a few options. First, you can submit a new letter with more specific details. Include anything you might have forgotten the first time around and some additional documentation to support your explanation.

If that is not enough to qualify for the loan, you can start from scratch and try to get a mortgage with another lender, but you might encounter the same problem.

Your best bet might be to postpone your purchase while you improve your credit and / or solve the problems which precipitated the request for explanations. At the very least, the issues will be more distant in the past the next time you apply, so they might have less of an impact on the lender’s decision.

Compare several lenders

If your letter of explanation is rejected, you may want to try turning to another lender. Credible’s streamlined process can help. We make it easy to compare multiple mortgage lenders. In just a few minutes, you can view prequalified rates and generate a streamlined pre-approval letter, all without leaving our platform.

About the Author

Daria uhlig

Daria Uhlig is a Credible associate who covers mortgages and real estate. His work has been published in publications such as The Motley Fool, USA Today, MSN Money, CNBC, and Yahoo! Finance.

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Here’s why I canceled a credit card I really liked


I’ve had my share of credit cards over the years, and usually I try not to close an account unless there’s a really good reason for it. I know that having long-standing accounts can really improve my credit score, so generally that’s reason enough to keep a card, even though I rarely use it.

But years ago I ended up canceling a credit card I had made use quite frequently. Here’s why.

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The importance of good customer service

I’m the type of person who prides himself on being financially responsible. In fact, I never had a credit card balance in all the years that I held my cards. I have always been successful in charging expenses responsibly and paying my bills in full to avoid accruing interest charges.

I also have a strong history of being on time with my invoices. But a month, I encountered a catch.

Normally, I get an email notification from each of my credit cards letting me know when my bill is due. This, in turn, prompts me to log into my account and schedule each payment.

One month, I never received this email for the card in question. To this day, I don’t know why he never came. The credit card company insists it was sent, but it never reached my inbox (I even checked my spam folder, just in case).

Now you can probably see where it’s going. In the absence of this e-mail, I forgot to schedule my payment. So I got hit with late fees, and only once I got this notification and an overdue invoice did I realize what had happened.

At that time, I had been a cardholder for several years and had never been late on a payment. Well, that didn’t happen. The rep I spoke to insisted that I should have received this email and that she could not waive the late charge. I then asked to speak to his supervisor, who was also unhelpful.

Even though I had never been overdue and it was my first violation, and the account was not horribly past due (it was between 30 and 60 days), my credit card company did refused to budge. So from that point on, I refused to remain the card holder.

Lesson learned

Most of us don’t think of customer service when looking for new cards. Instead, we tend to focus on credit cards with the best cash back opportunities and the best rewards programs. But good customer service is also an important thing to look for.

The card I canceled after my frustrating customer service experience was a good card otherwise. I liked the rewards program and used the card regularly. But I wasn’t willing to stay on a card with a company that valued my business so little that they wouldn’t waive a single late fee. If you’ve had a bad experience with your credit card company’s customer service team, you may also want to consider closing your account. And that’s especially true if the cancellation won’t seriously damage your credit score and you can find a replacement credit card that offers great rewards.



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3 money tips my young clients always hate to hear


  • I work with high income tech workers, and there are three financial tips they hate to hear.
  • I always recommend watching your spending. Earning more should mean saving more.
  • I recommend a simple investment strategy over a fad strategy, and get rich over time, not overnight.
  • Read more stories from Personal Finance Insider.

After spending over a decade working with retirees who have accumulated more money than they will ever need in their lifetime, I have moved on to working with young professionals. Helping clients navigate their path to financial independence when they are starting from scratch comes with challenges, but it’s hugely rewarding.

I often tell clients that one of my jobs is to defend their and me future. Part of that job is telling them things they might not want to hear. Hate them or love them, here are my top three tips that get the most perspective. If you are serious about a path to financial independence, keep them in mind!

1. Watch your spending

My clients are high income tech employees who receive generous cash bonuses and stock compensation in addition to their base salary. They are often the first person in their family to make that much money, so they have to use their income to build wealth.

One of the first exercises I do with clients is to review their cash flow. We analyze their spending in detail so they can see where their money is going. We also calculate the percentage of their income they are saving and determine how much they need to save to meet their financial goals. Yes, that part gets personal (and maybe uncomfortable). Although I get a lot of resistance with this exercise, I feel like it is the most important step in the financial planning process.

It is essential to find a balance between enjoying your life today and saving for your future. There is a direct correlation between how much of your income you save and how long you can retire. The most effective way to close this gap is to monitor your spending.

Watching your spending doesn’t mean giving up everything you love. Take the time to think about what’s really important to you and see if your spending matches your values. Pay off your debts to reduce your fixed expenses. Anticipate non-recurring events or unforeseen expenses so they don’t ruin your budget. Get used to living on your base salary and use bonuses or stock compensation to accelerate progress towards your long-term goals.

2. Get rich slowly

You may have heard the expression “building wealth is a marathon, not a sprint”. Contrary to popular belief, an overwhelming the majority of millionaires are self-taught. You don’t need multiple six-figure incomes to become a millionaire.

In the absence of inheritance or luck in the lottery, the key to successfully building wealth lies in one word: discipline. Even if you are lucky enough to receive a life-changing windfall, a lack of discipline will quickly lead you down the road to bankruptcy.

Financial discipline, like any other type of discipline, requires consistent habits and behaviors over time. It is essential to set goals and have a plan to achieve those goals. Prioritize yourself first and save at least 20% of your income. Start saving early to take advantage of compound interest. Think about the small changes you can make over time to bridge the gap between where you are now and where you want to be. Finally, understand that there are no quick fixes when it comes to investing.

My high school orchestra teacher always said, “There is no shortcut to success. This phrase is true about many aspects of life, including your investments. A seemingly good investment decision in the short term will not make up for the lack of discipline in the long term, which brings me to my final tip.

3. Keep it simple

I have had countless clients asking me about out-of-the-box investing strategies in the hopes of generating quick and easy returns. Often, clients do not fully understand what they are getting into. They believe that these investment strategies will earn more than the stock market or compensate for the fact that they are not saving enough.

The idea that building or maintaining wealth requires investments in alternative or exotic investments is a myth. Ben Carlson, Warren Buffett and other investment experts compared the performance of simple or “lazy” wallets to some of the more complicated and expensive investment strategies and found that complex strategies have failed to beat low cost mutual funds or exchange traded funds over multiple time periods. A simple and diversified portfolio can be just as (if not more) effective in the long run when it comes to investing.

The keep-it-simple philosophy also applies to bank accounts, investment accounts and credit cards. I have worked with couples who have (and frequently use) dozens of bank accounts and credit cards. As the accounts pile up, it becomes more and more difficult to keep track of their spending and saving habits. It’s also easy to overdraft a checking account or forget about a credit card payment.

Some clients have investment accounts with more than one custodian. All of these accounts add unnecessary complexity to your life and make managing your finances even more difficult. While there is no one-size-fits-all solution for managing accounts, I recommend that you take a look at your accounts to see how you can consolidate and simplify your life. Also, think twice before opening a new account.

Initially, many of my clients don’t like to hear my top three tips. However, after following my advice and seeing the results over time, they become believers. The road to financial independence is not rocket science. Watching your spending, getting rich slowly, and keeping it simple can help you get there sooner than you think.



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Denied a personal loan? How To Improve Your Credit Score Now, Money News


Credit Bureau Singapore (CBS) and Moneylenders Credit Bureau (MLCB) collect and manage consumer credit data. They give every Singaporean consumer a credit score that indicates the likelihood of you going into default. Your credit score is important and will follow you throughout your life, playing a vital role in a lender’s decision to offer or sometimes deny you credit.

You can find your credit score for free by going to Credit Bureau Singapore and requesting a report on your credit history. The score will be between 1000 and 2000 and will be accompanied by a score (ie AA or HH). Those who fall below 1,723 are placed in the lowest category and are considered to have a bad credit score.

Credit score Risk level Probability of default
1911-2000 AA Min 0.00%, Max 0.27%
1844-1910 BB Min 0.27 percent, Max 0.67 percent
1825-1843 CC Min 0.67%, Max 0.88%
1813-1824 not a word Min 0.88 percent, Max 1.03 percent
1782-1812 EE Min 1.03 percent, Max 1.58 percent
1755-1781 FF Min 1.58 percent, Max 2.28 percent
1724-1754 GG Min 2.28 percent, Max 3.46 percent
1000-1723 HH Min 3.46 percent, Max 100.00 percent

If you have bad credit or are looking to improve your credit score for a future loan, here are five tips you need to know.

1. Build a credit history and pay on time

Lenders will generally decline a credit card or loan application when there is little or no credit history. It is difficult to analyze a candidate when there is no background to examine. In contrast, a consumer with a long credit history is generally considered to be a more reliable borrower (in the absence of meaningful data on delinquency).

If you find yourself in this camp, the first thing to do is open a line of credit. There are many great credit card options available in Singapore to help you build your credit. You will quickly see your credit score improve when you use your credit card responsibly and pay your bills on time.

2. Avoid default at all costs and pay your debts on time

Delinquency data or late payment indicators in your credit history will penalize your score. That being said, defaulting on a loan can be one of the most damaging actions for your credit score. The impact of a single default on your credit score can make or break a lender’s decision to offer you a credit card, personal loan, or home loan. Not only that, you may be subject to higher interest rates on existing debt as well as any other fine print. So try to make payments on time.

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If you are unable to pay off your debt, don’t ignore it. Enlist the help of a credit counselor to work with you to avoid making this serious mistake. You may be able to restructure your debt using a debt consolidation plan or a loan with balance transfer to avoid defaulting on a loan.

3. Try not to have too many or too few credit facilities open.

If you have little or no credit history, we suggest that you start applying for a credit card. However, try not to have too many credit facilities open at the same time. It is difficult to keep track of and manage many different credit cards in your wallet. So to avoid payment default and mismanagement of your payment deadlines, aim for 4 to 5 bank cards maximum. You should also consider closing unused credit cards, starting with the cards with the highest interest rates and annual fees.

4. Survey data

One way to penalize your credit score is to take out multiple loans over a short period of time. This behavior signals to lenders that you are in desperate need of credit and that you may be in a bad financial situation. Essentially, every time you apply for a new loan, a bank or financial institution requests a copy of your credit report. This creates a new investigation into your credit history. Having too many inquiries at once tells lenders that you are trying to get into debt fast. This behavior will lower your credit score and may even prevent you from being approved for a loan in the future. Instead, lay out your loan applications and wait a few months before applying for additional credit cards or loans.

5. Don’t use credit cards to the max

Your credit usage pattern is basically a ratio of your total amount due / total available credit on a recurring basis. Most credit cards have a credit limit, but that doesn’t mean you need to regularly maximize what you have. Avoid using more than 30% of your available limit to indicate a healthy credit usage pattern.

Conversely, if you regularly maximize your credit limit and use high credit usage, you will quickly see your credit score drop. Using credit plays a bigger role than you might have guessed when determining your credit score. If you end up with unfavorable usage patterns and your credit score suffers, adjusting your monthly spending habits can be a quick way to improve your credit score.



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7 things to know about international travel this summer


When it comes to international travel right now, the world isn’t exactly just anyone’s oyster, but it could be your shrimp cocktail. In other words, many countries are still closed to tourists, but many beautiful destinations are finally opening their doors.

Indeed, even the European Union recently decided to unlock the doors for many tourists, including vaccinated Americans. And, even better, many countries have waived (or will waive soon) these pesky quarantine requirements. This means that you no longer need to include an additional 10 days of travel without travel in your plans.

At the same time, things are not exactly the way they used to be. The post-COVID travel world has its fair share of complications, many of which will lead to additional planning and expense. Here are some things to know before you cash in your travel rewards this summer.

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1. You will probably need to get the vaccine

Of course, not all countries that allow American tourists will require you to be vaccinated, but most European countries certainly will. You will need to show your proof of vaccination before you are allowed to enter your destination. Your CDC card should be sufficient in most cases. Without it, you could be turned away before you even set foot on foreign soil.

Even if you’re heading to a country that doesn’t require travelers to be vaccinated, unvaccinated travelers will likely have to overcome many hurdles. Some countries will require unvaccinated travelers to be quarantined upon arrival (and, yes, you will pay for that yourself). At the very least, you will likely need to take multiple COVID-19 tests if you don’t have the proper vaccination documents.

2. Testing is common – and at your expense

Speaking of testing, be prepared to show a negative COVID-19 test result before you travel. In fact, many countries will require a negative test before you arrive, even if you are vaccinated. Most countries require that the test be taken no later than 72 hours before your arrival.

In some cases, you won’t just need to test before you arrive – you will also need to test after you’ve been there for a few days. Some places require a negative test two to three days after your arrival, and other countries may require a third test after five to ten days. And, just like quarantines, these tests are not paid for by the places you visit; the cost comes from your poached. So make sure your personal finance budget is prepared.

3. Country skipping may not be possible

If you are looking forward to a trip to multiple countries, you may need to think again. While some countries will be open to visitors regardless of where they have been, most countries will want to know where you have been in the past 10-14 days. And if they don’t like your answer, they might not let you in. This is especially true if you are spending time in a country with a high number of coronavirus cases. Be sure to check the entry / exit requirements for each country on your sightseeing list.

4. Masks are still mandatory in most countries

Although the United States has decided to throw the masks in the wind, most other countries are not so relaxed about letting your aerosols fly freely. Many countries still have sturdy mask mandates for public transport and in public buildings. And unlike the United States, many other countries will impose stiff fines if you are caught without a mask in public. So make sure you bring enough clean masks for your entire trip – just in case.

5. Be prepared for curfews, closures and capacity limits

A number of countries are still subject to various forms of foreclosure, even though they are open to tourists. In some places, this means strict curfews on travel after dark. It could also mean that some businesses are still closed, in whole or in part. For example, restaurants may be open for take out, but will not allow you to sit inside and eat.

Another thing to expect is capacity limits, especially at popular tourist stops. Plan to be flexible about where and when you can go to certain attractions.

6. Travel health insurance is compulsory in many countries.

It is always a good idea to purchase health insurance when traveling. You never know what might happen overseas, and most U.S. insurance policies won’t cover you outside the country. And, of course, that will double to travel amid a global pandemic that has already killed millions of people. But while you can risk it without insurance, your destination country may not. Some countries will require you to have proof of sufficient medical coverage to cover coronavirus care before you are allowed to enter the country.

7. You will need a negative test to go home.

While restrictions in the United States have all but evaporated in many areas, we are not that lax at the border. If you leave the country and travel abroad, you will need to present a negative COVID-19 test before you can return. The test result should not be older than 72 hours. Conveniently, multiple home COVID-19 tests are accepted, so consider packing a few before you go to make sure you have what you need to come back.

Plan, plan and plan – then plan even more

Traveling abroad is rarely easy, even in the absence of a global pandemic. But it’s much more complicated right now, even in countries with few restrictions. Make sure you plan your trip well, including researching all the destinations on your agenda. And don’t forget the local restrictions. It is good to familiarize yourself with the national rules, but local towns or villages may also have additional requirements that you should be aware of.



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How to report income on your credit card application – Forbes Advisor

Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but this does not affect the opinions or ratings of our editors.

If you are applying for a credit card, you will be asked for your income. For some people, such as a single person who has only one paid job, this is a simple question. However, for a lot of people it gets more complicated. Income can take many forms: salary, wages, tips, dividends, or payments from others. In addition, many people do not work outside the home or depend on the income of a spouse or partner. What do they have to report as income?

If answering the income question in a credit application is a source of anxiety, read on to learn more about why banks ask this question, how much income can count, and general guidelines to consider. account when applying for credit.

What banks count as income

The source of truth about what banks may consider income for the purposes of credit card applications can be found in the Consumer Financial Protection Bureau’s official interpretation of 12 CFR Part 1026, particularly in its commentary for 1026.51 Ability To Pay .

The regulations set out requirements for how banks should consider income and assets when issuing credit cards or credit card increases and give specific examples of the types of income that can be taken. taken into account when granting credit.

What this means for banks is that they must take into account a consumer’s ability to make minimum payments when granting credit and that this ability to make minimum payments can be based on the current or reasonably expected income. The CFPB recognizes that income comes in many forms and takes this into account when advising banks on what to expect.

Payments that matter

Most of the payments you receive directly can be considered income. This includes employment income, including full-time, part-time, seasonal, temporary, military and self-employed income. It also includes income from things like investments, annuities, or retirement benefits. Here are some examples of payments that count as income:

  • Salary and salary
  • Payment premium
  • Tips
  • Commissions
  • Interest and dividends
  • Retirement benefits
  • Public assistance
  • Separate alimony, child support and maintenance payments

In addition, banks are able to take into account both current income and reasonably expected income. For example, if you were recently laid off but plan to return to work, you can report your past earnings if you have a reasonable expectation that this number represents your future earnings.

Alimony and child support income

Many banks have language in credit card applications such as “Alimony, child support, or separate maintenance income need not be disclosed if you do not want it to be considered a basis for repayment of this obligation. “

This language means that you can choose not to include these payments. The intention is to allow credit card applicants to exclude income that may already be allocated to a person’s basic support. If your reported income decreases because these types of payments are not included, you may be eligible for a lower line of credit.

Payments that don’t count

While most of the payments you receive can be counted as income, the exception to this rule is if you receive payments that you do not have access to. For example, if you entered wages for student loan debts, tax debts, child support, or alimony, these would not be included in income.

Money you can access can count

In addition to your direct income, the CFPB allows credit card issuers to take into account third party income to which an applicant has access. This rule aims to allow people who do not work outside the home, in particular spouses at home and spouses who depend on the income of a working spouse or partner, to access credit. If you have access to another person’s income, in some cases you can count that person’s salary as income for the purposes of a credit application.

For example, if you share a joint account with another person and that person’s salary is regularly deposited into that joint account, you may consider those deposits to be part of your income. Additionally, if a state or local law grants you a stake in another person’s income, you can usually use that person’s income when reporting income on a credit card application.

Also, if someone else gives you periodic payments or pays your expenses regularly, you can count those amounts as income on credit applications. For example, if you have a sublet roommate from you who makes direct payments to your landlord against your rental obligation, you can consider those payments as income on your loan application.

Special rules for children under 21

The Consumer Financial Protection Bureau imposes special limits for banks issuing loans to people under the age of 21. According to the bureau’s rules, borrowers under 21 must have the independent ability to make the required minimum payments or have a co-signer who is 21 or older. and who agrees to become responsible for the debt on the account.

This usually means that a person under the age of 21 cannot count the income of other people to whom they may have access when reporting income on a credit card application.

The credit card application will guide you

It is important to note that the regulations covering the types of income that can be taken into account when granting credit are regulations that apply to banks, not to individual consumers.

When you apply for a loan, the bank will tell you what income to declare on the application. Here’s an example from a Citibank credit card app:

Total annual income:

Examples: Salary, salary, interest, dividends, rental income, pension benefits. If you are 21 or older, you can include other people’s income that you can reasonably access to pay your bills.

You are not required to include alimony, child support, or separate maintenance income if you do not want it to be seen as a basis for repaying this obligation.

As long as you make a good faith effort to report your income accurately according to the bank’s guidelines, you will be fine.

Consequences of incorrect income declaration

It can be tempting to over-report your income. After all, a lot of income can mean a bigger line of credit. However, this is a bad idea and can have serious consequences. The bank that issued your credit card uses your income information to estimate your ability to pay and only give you the amount of credit it thinks it can repay. Having the ability to spend far beyond your means can cause financial problems for many people.

Additionally, if a credit card issuer finds that there is something unusual about your spending habits, they may ask you to undergo a financial review. A financial review often involves submitting documents, such as recent pay stubs or a tax transcript, so that a lender can verify your reported income. If you decline to participate in a financial review or if your financial review reveals that your income was significantly different from what you stated, the credit card issuer can use it as a basis for reducing your lines of credit, you deny future credit or close your accounts.

While rare, lying about your income can have consequences beyond closed accounts. This could include civil penalties and adverse actions if you file for bankruptcy and seek discharge from your debts. In the most extreme cases, lying about your income could land you in jail.

Final result

When reporting your income on the credit card application, the best advice is to follow the instructions given on the credit card application and remember these three rules:

  • Be honest. Remember that false income tax returns can have consequences ranging from adverse actions like lowering credit limits to criminal penalties.
  • Declare the income to which you have access. Report your salary and payment income and report your spouse’s or partner’s income if it is deposited into a joint account to which you have access.
  • Don’t overthink it. No one is asking you to indicate exactly on which line your adjusted gross income will appear on next year’s tax return. All that the credit card application takes is your best estimate of your current income or what you expect from your income.

Making a good faith effort to accurately show your income on a credit card application will ensure that your bank is able to properly assess your application and that you will receive a line of credit that matches your ability to pay.


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How to report income on your credit card application – Forbes Advisor

Editorial Note: Forbes Advisor may earn a commission on sales made from partner links on this page, but this does not affect the opinions or ratings of our editors.

If you are applying for a credit card, you will be asked for your income. For some people, such as a single person who has only one paid job, this is a simple question. However, for a lot of people it gets more complicated. Income can take many forms: salary, wages, tips, dividends, or payments from others. In addition, many people do not work outside the home or depend on the income of a spouse or partner. What do they have to report as income?

If answering the income question on a loan application is a source of anxiety, read on to learn more about why banks ask this question, what income can count, and general guidelines to consider. account when applying for credit.

What banks count as income

The source of truth about what banks may consider income for the purposes of credit card applications can be found in the Consumer Financial Protection Bureau’s official interpretation of 12 CFR Part 1026, particularly in its commentary for 1026.51 Ability To Pay .

The regulations set out requirements for how banks should consider income and assets when issuing credit cards or credit card increases and give specific examples of the types of income that can be taken. taken into account when granting credit.

What this means for banks is that they must take into account a consumer’s ability to make minimum payments when granting credit and that this ability to make minimum payments can be based on the current or reasonably expected income. The CFPB recognizes that income comes in many forms and takes this into account when advising banks on what to expect.

Payments that matter

Most of the payments you receive directly can be considered income. This includes employment income, including full-time, part-time, seasonal, temporary, military and self-employed income. It also includes income from things like investments, annuities, or retirement benefits. Here are some examples of payments that count as income:

  • Salary and salary
  • Payment premium
  • Tips
  • Commissions
  • Interest and dividends
  • Retirement benefits
  • Public assistance
  • Separate alimony, child support and maintenance payments

In addition, banks are able to take into account both current income and reasonably expected income. For example, if you were recently laid off but plan to return to work, you can report your past earnings if you have a reasonable expectation that this number represents your future earnings.

Alimony and child support income

Many banks have language in credit card applications such as “Alimony, child support, or separate maintenance income need not be disclosed if you do not want it to be considered a basis for repayment of this obligation. “

This language means that you can choose not to include these payments. The intention is to allow credit card applicants to exclude income that may already be allocated to a person’s basic support. If your reported income decreases because these types of payments are not included, you may be eligible for a lower line of credit.

Payments that don’t count

While most of the payments you receive can be counted as income, the exception to this rule is if you receive payments that you do not have access to. For example, if you entered wages for student loan debts, tax debts, child support, or alimony, these would not be included in income.

Money you can access can count

In addition to your direct income, the CFPB allows credit card issuers to take into account third party income to which an applicant has access. This rule is intended to allow people who do not work outside the home, in particular home spouses and spouses who depend on the income of a spouse or working spouse, to access credit. If you have access to another person’s income, in some cases you can count that person’s salary as income for the purposes of a credit application.

For example, if you share a joint account with another person and that person’s salary is regularly deposited into that joint account, you may consider those deposits to be part of your income. Additionally, if a state or local law grants you a property right over another person’s income, you can usually use that person’s income when reporting income on a credit card application.

Also, if someone else gives you periodic payments or pays your expenses regularly, you can count those amounts as income on credit applications. For example, if you have a sublet roommate from you who makes direct payments to your landlord against your rental obligation, you can consider those payments as income on your loan application.

Special rules for children under 21

The Consumer Financial Protection Bureau imposes special limits for banks issuing loans to people under the age of 21. According to office rules, borrowers under 21 must have the independent ability to make required minimum payments or have a co-signer who is 21 or older. and who agrees to become responsible for the debt on the account.

This usually means that a person under the age of 21 cannot count the income of other people to whom they may have access when reporting income on a credit card application.

The credit card application will guide you

It is important to note that the regulations covering the types of income that can be taken into account when granting credit are regulations that apply to banks, not to individual consumers.

When you apply for a loan, the bank will tell you what income to declare on the application. Here is an example from a Citibank credit card application:

Total annual income:

Examples: Salary, salary, interest, dividends, rental income, pension benefits. If you are 21 or older, you can include other people’s income that you can reasonably access to pay your bills.

You are not required to include alimony, child support, or separate maintenance income if you do not want it to be seen as a basis for repaying this obligation.

As long as you make a good faith effort to report your income accurately according to the bank’s guidelines, you will be fine.

Consequences of incorrect income declaration

It can be tempting to over-report your income. After all, a lot of income can mean a bigger line of credit. However, this is a bad idea and can have serious consequences. The bank that issued your credit card uses your income information to estimate your ability to pay and only give you the amount of credit it thinks it can repay. Having the ability to spend far beyond your means can cause financial problems for many people.

Additionally, if a credit card issuer finds that there is something unusual about your spending habits, they may ask you to undergo a financial review. A financial review often involves submitting documents, such as recent pay stubs or a tax transcript, so that a lender can verify your reported income. If you decline to participate in a financial review or if your financial review reveals that your income was significantly different from what you stated, the credit card issuer can use it as a basis for reducing your lines of credit, you deny future credit or close your accounts.

While rare, lying about your income can have consequences beyond closed accounts. This could include civil penalties and adverse actions if you file for bankruptcy and seek discharge from your debts. In the most extreme cases, lying about your income could land you in jail.

Final result

When reporting your income on the credit card application, the best advice is to follow the instructions given on the credit card application and remember these three rules:

  • Be honest. Remember that false income tax returns can have consequences ranging from adverse actions like lowering credit limits to criminal penalties.
  • Declare the income to which you have access. Report your salary and payment income and report your spouse’s or partner’s income if it is deposited into a joint account to which you have access.
  • Don’t overthink it. No one is asking you to indicate exactly on which line your adjusted gross income will appear on next year’s tax return. All that the credit card application takes is your best estimate of your current income or what you expect from your income.

Making a good faith effort to accurately report your income on a credit card application will ensure that your bank is able to properly assess your application and that you will receive a line of credit that matches your ability to pay.


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Your credit card application may be rejected for these 5 reasons

Credit card application: The credit card has become a part of everyday man’s life today. The advantages of a credit card are numerous. You can pay for your purchases or other bills up to a certain limit using a credit card. Your credit score improves every time you pay your credit card bills on time. This allows you to easily get a loan from the bank. Thanks to this, you can also buy any item on EMI.

There are a few things to keep in mind if you are applying for a credit card. Banks take a lot of things into account before accepting or rejecting a credit card application. Know the reasons why a credit card application may be rejected.

If you change jobs quickly

  • Changing jobs frequently is seen as a sign of an unstable career. Therefore, it is not suitable for your credit card application.
  • Giving credit cards to people who change jobs frequently is considered a bit risky.

Small salary

  • The bank examines the applicant’s repayment capacity before issuing the credit card.
  • The bank can ask the applicant for Form 16 or the payslip to verify it.
  • If the applicant’s annual income does not fall within the limit set by the bank, the application may be canceled.

Limit exceeded

  • If this is your first time taking a card, don’t get caught up in the excessive limit cycle. This may result in the cancellation of your request.
  • For the first time using a basic card, no annual fee, the credit card will suit you.
  • Create a good credit history with your first card, then apply for a premium card.

Bad credit rating

  • A bad credit rating is also a major reason for rejecting credit card applications.
  • If you’ve defaulted on one of your loans or are frequently late paying off IMEs, your credit score is ruined.

Don’t apply too many times

  • Banks or non-bank financial institutions (NBFCs) can check the applicant’s credit history.
  • Even if you have applied for multiple cards at multiple banks, your application tends to be rejected.


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