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With banks practically shutting their doors on consumers with bad credit, pawn shops have become such hot items these days; as increasing number of desperate borrowers seem to flock in that direction. Unlike those bygone movies, pawn shops are not just lurking in the shadows; they are actually beckoning from the shadows – an enticing alternative to obtain money by pawning valuables – electronics, jewelries, the next paycheck…anything, even cars – just to make ends meet and tide-over individual needs or the needs of the family. And pawn shop operators are quick to justify their existence, saying they provide essential and indispensable sustenance to those who are running out of options; claiming they’re the best alternative for survival one can have when there are very little choices left.

Touching, huh? So how could they be bad news? To fully comprehend the detriments of pawn shops, you have to familiar with how they operate.

The Basics of Pawn Shop Business

Nature of the Business. Most people have the mistaken notion that pawn brokers simply buy stuff and knick-knacks that customers bring to the pawn shops. What many don’t realize is that there’s a more lucrative side to the business; which is giving out loans against belongings that may be redeemed at some point – on or before a specific date stated in the agreement. As pawn brokers would put it, it is so designed to bail the customer out of their predicament and be done it.

Valuables as “Collaterals”. Pawn shops lend money in exchange for items of value, which could be jewelries (especially gold and diamond), household items, tools, musical instruments, audio/video equipment, tech-gadgets – you name it! If it’s anything of monetary worth, you’re good to go. Apart from their intrinsic value, these items are easy to store for a certain span of time.

Amount of Loan. Loans are typically small and short-term. Depending on the appraised value of the collateral, it can range from a minimum of $20 to a high of several thousand dollars.

Customer Qualifications/Requirements. Because all borrowers are required to put up collaterals, the necessity to distinguish between high risk and low risk borrowers is eliminated outright. A credit check is not a pre-requisite either; so it doesn’t have any impact on credit scores.  Pawn shop owners/brokers simply eyeball the goods that customers bring in and make an offer for a loan amount straight off.

Interest Rates/Terms and Conditions. Although every state has diverse terms and rates, a 30-day loan period is quite typical. On the other hand, interest depends largely on loan amount; but ranges from a low of 3% to a high of 20%. (Some states are quite particular about putting interest rate caps on pawn shop rates; In New York City, for example, the cap is pegged at 4% per month.) Storage and insurance fees may also apply.

Foreclosure Agreement/Procedure. What happens to the collateral if the customer defaults and does not repay the loan? When the loan becomes overdue (after a specified amount of time – usually one to three months) the owner/borrower is given final notice to redeem the item within the stipulated grace period or completely lose/relinquish ownership; in which case, collateral becomes the property of the pawnshop to be disposed as they see fit.

About 70% to 80% of borrowers opt to repay their loans; which, more often than not also become the pawn shop’s regular/repeat customers in the long run. It’s not uncommon for a vast majority of pawn shop customers to ask for loans against the same item/s several times over.  Approximately 15% – 20% choose to default, however; and these are considered “bad debts” that the pawn brokers are forced to turn into retail items (for sale) in an auction, for them to recoup some of the loaned amount as well as recover other costs incurred.

The pawn shop loan process is pretty much the same as that of other lending institution with the principal difference being that the amount you loan can only be commensurate to a certain percentage of the merchandise value you bring in as collateral. And of course there’s the thing about pawn shops holding on to the item/s pending repayment of the loan (or the corresponding due interest, if you decide to extend the loan) or until the expiration of the loan period.

The Bad News Is…

The way pawnshops are thriving and feeding on the desperate needs of those without that many recourse is a cause for alarm and concern; consumer advocates claim. The exorbitant interest that can be as high 20% per month translates to an astonishing 240% per year! At the outset, one would expect pawn shop interest rates to be comparatively lower since the loan is “secured” by the collateral item. That should make the transaction virtually risk-free; the merchandise/goods remains in the pawn shop owner’s custody so that in case of default in payment, the pawn shop owner can still get back a portion – if not the whole amount – of the loan by selling the item/s.

Borrowing from pawn shops can get consumers hooked into a loop of never-ending debt. Many of those who live on tight means have a tendency to ask for extensions of the loan – several times, mind you – if their financial circumstances don’t show any sign of improvement. Despite the perception that pawn loans are easier to repay because of their smaller amounts, the borrower often ends up paying more for the interest every tie the loan is extended; unless there’s a complete default in payment and the collateral item is given up for gone – then the transaction is over.

As you can very well see; pawn shop is apparently not the best place to borrow money.

You may never know that you have a bad credit score, until you try to get a loan. Then, all of a sudden, that house you’ve been saving for is way out of reach, because you can’t get approved for a mortgage. Who knew that credit card you had in college could ruin your dreams, 6 years later?

If you are anticipating taking out a loan, say for a car or a house, it might be a good idea to check your credit score, first. You can get a free credit report at several sites. When you do this, you have the chance to clean up and update your credit report before potential lenders look at it. You can make sure that, as your debts have been sold, no one has entered a new DOLA, or Date of Last Activity. For one thing, this makes it look like the debt is newer than it actually is. You can also make sure that all of the debts on your credit report are actually yours. With a little pre-planning, you can have your credit report cleaned up and in good shape before a lender ever looks at it.

But, what if you didn’t do that? What if you have already applied for a loan and been turned down? You get your free credit report just like anybody else does – you ask for it. There are 3 credit bureaus in the U.S., and you can get a free report from all three. You can get 1 free credit report a year. This is guaranteed by the Fair and Accurate Credit Transactions Act, otherwise called the FACT Act. AnnualCreditReport.com is the agency set up to assure consumers that they get their free credit reports. Since you can get one free report a year from each of the 3 agencies, it’s a pretty good idea to get one from a different agency every 4 months, or so.

The free credit report will list all credits and debits. It won’t however, contain your actual credit score. They charge for that. However, with your credit report, you can keep track of claims collectors have made, and if you see something suspicious, you can challenge it in a timely manner. This can also be a valuable tool to prevent identity theft.

Often, people pay a small monthly fee to a credit repair agency. These agencies can scrutinize your credit report for questionable items. Even if it is a valid debt, the credit repair agency can contact the creditor or collection agency, often succeeding in having the item removed from your credit report. This dispute process can be intricate and frustrating, but the credit repair company is well familiar with tactics that credit card companies and collection agencies use to keep their names on your credit report.

So, if you’ve been turned down for credit, you can still get your free credit report. Just ask for one!

When you are in the middle of a divorce, your future credit rating is probably way down on your list of worries. However, before the divorce is final, there are several steps you can take to protect your credit rating.

Determine Your Liabilities

You’ll need to know everything that has your name on it, such as bank loans and accounts, credit cards, and mortgages. In some cases, the two people have already decided who gets what. You need to make sure your name is not part of your spouse’s share of the debts and assets.

Document, Dissolve, and Divvy Up

Before the divorce is final, make sure that all of your debts and accounts have been divvied up. Put each one in one name or the other. For instance, since your bank accounts, both savings and checking, are probably in both names, you need to split up the money. Close the accounts, and open your own account in your name only. If you leave your name on the joint account, your credit report will reflect bounced checks your ex-spouse writes. Have your name removed from the car title of the car your spouse keeps, and remove the spouse’s name from the title of your car. If the cars have both names on the loans, either sell the cars or refinance each under the appropriate name. Do the same thing with the house. In many divorces, one spouse agrees to let the other have the house as part of the settlement.

However, if the mortgage stays in both names, the non-resident is still liable for mortgage payments. You need to either refinance the home in one name, or sell it and split the profits. Credit cards must be shared, too. In the case of shared credit card debt, contact the credit card company and ask them to split the balance between two new accounts – one for you and one for your spouse. Then, have the company cancel your joint account. Make sure they label the cancellation as by your request rather than bank request. Also, have the utilities split up and put in one name, rather than two. Make sure, too, that you have everything in writing. As the court processes your divorce, you’ll be able to produce court documentation of responsibilities, so that you can protect your credit.

After the Fact

If your divorce is already final, then you may have to involve an attorney to accomplish these goals. Hopefully you’ll be able to sit down with your ex-spouse to decide how debts and property should be dealt with. Just as your marriage has been dissolved, so must your financial ties, as much as possible. Once you have canceled, sold, or reassigned each account, call your creditors, and send them a letter, too. Tell them that you are no longer bound to your ex-spouse’s debts.

While divorce is hard to endure, you can spare yourself the trouble of a poor credit score. Then, you can move on.

Credit checks are an inevitable part of moving forward economically. You must purchase a car, own or rent a home, and put down deposits on utilities. Any time you want to borrow someone else’s money or use their services, they’ll probably do a credit check on you. What do they look for on a credit check?

The Good and the Bad

The “good” on your credit report will shine forth. This is the list of payments you have made on time and credit card payoffs you’ve made. By the same token, the “bad” is just as obvious. These are the hot checks you may have written and an obvious history of late payments. There is also, however, a large area in between which will have a big impact on your credit rating and on the landlord, bank, or employer running the credit check.

Too Many Inquiries

You can check your own credit rating all you want to (see hard and soft inquiries). But, if your credit report shows a period of time in where there were a lot of inquiries from third parties, it’s a red flag to the person running the credit check. It usually signals that you were shopping around for credit. This signifies two things: that you may have been in financial trouble, and were looking for a way out, or that you were willing to take on more debt than you could pay back on a reasonable timeline. Your credit report will list these inquiries for 2 years.

On strategy you can incorporate to prevent this is to accept estimates. Mortgage lenders and auto sales can give you an estimate. Don’t let every one of them run a credit check on you, because it will show up on your credit report. Give them your credit score, and go from there. Once you have a handful of estimates, let the lender of your choice run a credit check and adjust his rates accordingly.

Too Much Good Credit

How much is too much? A lot of room on big-limit credit cards is too much. While you may think that several high limit cards makes you look trustworthy, to lenders it just signals that you could easily get in over your head. What would happen if they gave you a loan, and then you charged up all those credit cards?

A good strategy may be to choose one card to keep, and close the other ones. HOWEVER, make sure that the card company records that it was by your request. Otherwise, it would look like the bank close your account, which looks really bad on your credit report.

On Time Payments

Your credit report doesn’t have to be perfect to be good. There is some space for “huh-ohs”. For instance you’re usually allowed as many as 2 late credit card payments – up to 30 days late. You can also get away with 1 late installment payment on, say, your car or student loans. However, there is not much mercy with home or rent payments.

If you know what credit checks look for, you can be more proactive in your own credit ratings.

Do you know that you can fix your own credit? There are several ways on how to attack these credit score and credit history problems. One method can be by no longer allowing any more negative factors to impact your credit report. If you chose to use this approach you must be responsible enough to catch up on your late accounts payment in addition to your current credit bills and have these bad credits deleted from your report. Taking matters into your own hands so to speak is your lowest cost option. Repairing your credit may give you a migraine if you don’t know where to start but it can be done.

In accordance with the laws, do you know that old accounts should be removed from your credit history when they reached their maturity? This will help lower your credit scores. It is also better to close a few of your credit cards in case you have many of these. Don’t apply though for new credit cards or loans since this will defeat your purpose. Make sure also to ask for your credit limits to be lowered in case you are tempted to splurge. Creating a budget is the best way to figure how you can track of your income and expenses. From this you can gauge how much money you can save each month to pay your debts.

Taking a portion of your saved money can help you pay your bills on time. Paying on time takes about around six payments in a row to help lower your interest rates. A good suggestion would be to make a twice a month minimum payment in order for your bills to get smaller this may be a big sacrifice to make since you will really try to go for ways on saving with your other monthly expenses but it will be worth seeing that it produces a good result.

If after doing all of these and you still feel that this is something that you cannot handle on your own then you can work with a credit repair company but before doing so be sure to check out the company’s reputation before getting their services or signing any contract with them. Some of them may offer money back guarantee if they cannot deliver the service that they said they can. The best way to check for a good credit repair service company would be through the Better Business Bureau, consumer/ financial forums and financial reviews. If you are thinking of a support for dealing with your bad credit you can turn to consumer credit counseling which can assist you on how to manage your debts wisely.

As a consumer you know the importance of establishing good credit rating with your creditors. Whether you will shop for a new car or home, or looking for the best deals on a summer holiday, credit worthiness will be judged by credit score or credit rating.
Bad credit history or habits will put “black marks” on your credit profile. These things include late payments, having your account assigned to a collection agency, and well, bankruptcy.
As you establish good credit habits and hence a good credit score, you will improve credit worthiness. This will reflect in potential lenders offering considerably lower interest rates and better deals on upcoming credit offers.

Here are 4 tips in creating a shining credit profile:

1) Pay Bills Promptly
Creditors only have your past payment history on which they will decide the kind of credit risk you will be. How you previously paid off your debts indicates how you will pay off your next debts.

2) Don’t Use So Many or So Few Credit Cards
How much do you think is too much? And how little is too little? Some financial planners and credit experts say two to four cards is just right.

3) Pay at Least the Minimum Due
Always strive to pay at least your minimum due payment, but not less. But remember, paying just the minimum means you will take years – which you wouldn’t like– to pay off your credit.

For example, you can pay off a $2,000 credit payment at 18% APR with minimum monthly payment of 2% or $40 dollars or less, but see, this will take you 30 years to pay it off including  interest.

4) Evaluate Your Credit Report Periodically
Make sure you monitor your credit report from the three major credit bureaus – Equifax, Experian, and TransUnion, regularly. Check your credit profile at least every year. Make sure that any past mistakes or dispute s have been corrected by reviewing carefully.

If you notice a listed account that you know you haven’t opened yourself, contact the creditor and the credit bureaus right away. This could be a sign your identity might have been stolen. Request to have a fraud alert placed on your account and profile to protect yourself and your credit. Identity theft is among the fastest growing consumer crimes these days, with some one million people victimized each year.  Establish good credit habits early and reap the benefits of your good credit rating.

A young age is not an excuse to ignore your credit report. The younger you are the more appropriate for you to learn the rules at play when it comes to your credit report.   Know that you would need a good credit score at a time when you have decided to get yourself a car, a house or any premium item. The score would help you predict if your application would earn an approval or not. A good score would also help you get a good interest rate.

If you don’t do much business, then checking your credit report once a year would be good enough. Always get yourself acquainted with the entries on your report. Examine your credit report for even the smallest inaccuracy may have damaging effects. Some inaccurate information such as a sudden change in address or new accounts unscrupulously opened under your name is an indication of fraud or identity theft. If you are seeing unauthorized activities marked on your credit report, contact authorities immediately. Lesson one: Staying on top of your credit report helps you avert fraud and identity theft.

Another bad habit that most people are fond of doing is to check on just one credit report. If they are satisfied with the content, they won’t bother checking the other two. Remember that there are three major credit bureaus. The fact is they don’t get updated all at the same time. If one credit report has inaccurate information, and that happens to be what your creditor decided to check, then your application may not give you the best terms. The rule is to check your Experian, Equifax and TransUnion credit reports.

If you’ve seen your credit report lately and it’s not what you expect it to be at, you can get additional credit lines and use them well. It is also good to read more resources and find out what factors affect your score. By knowing them, you’d be able to strategize efforts to undertake that would help increase your score. The last alternative is to get the assistance of a credit consulting service. There are scammers out there so be careful in hiring. Better check the background of the firm through the better business bureau. If they check out, then you are safe that they won’t rip you off.

When it comes to credit report, information is power. It is therefore advised to get all three credit report. Credit reports are easily downloaded from websites powered by the three major credit bureaus.  An Example is truecredit.com,  The first few issues of your credit report might be free then after a specified time period may charge fees.  Hence, if you are undecided to get a monthly subscription, check for how many days your fee access is good for and cancel your account online or call their help line before the time lapse.

Establishing a good credit history is one of the most significant things you can do for your own future. Credit history follows you the rest of your life, and affects future loans, insurance premiums, as well as job opportunities.

People with good credit ratings are given lower interest rates, easier repayment terms, and also more easily approved for loans. With poor credit history, however, it becomes much harder to find loans, you are subject to higher interest rates, and need to pay higher insurance premiums.

You can look at credit history as your track record in loaning. It tells the creditor whether you repaid your loans on time or not—and if you can now. As soon as you apply for a loan, the lender contacts one of three major credit reporting bureaus: Experian, Equifax, or TransUnion. Each agency has a record of your credit history, which your previous lenders have supplied them. A credit report shows how much you have borrowed, when, and how faithful you have been paying.

So begin by creating a good credit history. This is easily done whether you haven’t borrowed money before, or if you’re trying to fix a poor credit history. You need time, persistence, and intelligent decisions to establish credit rating again. The key is to begin with good credit. If you don’t do this, it takes a long time to re-establish your credit.

Open a Checking Account

A good banking history is the first step in learning how to manage your money. See, you’re building a relationship with a bank to help you secure credit in the future. Think about how you will manage your account prudently, staying away from overdrafts.

Take Out a Secured Credit Card

For new borrowers, secured credit cards are recommended. Here, you are given a credit card in return for a deposit amounting to the credit limit. Your deposit is your collateral for the credit. The bank uses your deposit to pay for your debt if you fail to pay according to the card repayment terms.

A secured card is used the same way as a regular card. Pay off the full balance monthly, or make minimum payments, but be sure to make payments on time. Delayed payments will raise your interest rate, and also cost you in late fees — damaging your credit history.

Use a Store or Gasoline Credit Card

Easier to acquire than regular credit cards, a lot of gasoline cards don’t allow you to have a balance from one month to the next. This makes them a good option for beginners. You can also take a store credit card to use at particular retail stores. Gas and store cards often have higher interest rates, but they are a good step in building a credit history.

Co-Sign on a Loan

You can establish credit by co-signing on a loan. If, for example, your parents need a car loan, they may allow you to co-sign with them. This gives you the opportunity to build a credit history, not being subject to high interest rates. But be very cautious when co-signing on any loan, because by doing so, you are just as responsible for the loan. Nonpayment by the lender will appear as late payment on your credit history.

Use Credit Wisely

Never haphazardly apply for credit cards and loans. Make decisions based on terms and interest rates. Every time you apply for a credit, an inquiry is noted in your credit history. If there are too many inquiries, creditors become suspicious.

The secret to establishing good credit history is to pay all bills and loans promptly. Every late payment counts against you. Bank account overdrafts, unpaid medical bills, and utilities can also harmfully impact your credit report.

Creditors and credit bureaus are greatly interested in your capability in repaying your loans. Take the effort to create a good credit history, which will help shape your financial future.

You can do an internet search to locate poor credit cards and find hundreds of results. There are so many varied options that it’s difficult to comprehend what a consumer is actually agreeing to.

Many credit card companies offer assurance of acceptance regardless of the credit. But consumers must read through the pages of agreement, to locate the information they really need to know about.

Here are some information to help make out one kind of “credit card with poor credit”credit card offer from other companies. Every company has its own small print, of course, but let us clarify some common terms used for credit cards.

Pre-Approved and Acceptance Guaranteed*

Cards for poor credit offers which contain the terms pre-approved or acceptance guaranteed are almost always followed by an asterisk (*); this means the terms and conditions will state that the card holder has to meet certain subsequent conditions.

Familiar qualifying conditions include income, period of employment, residency, and credit rating; the exact amount will differ by credit card, but most will call for a minimum of $12,000 annual income, with six months of continuous employment.

When residency is an issue, the card company may also require at least six months at your address. Most companies charge a higher annual percentage charge the lower credit rating the applicant has. The company will accept any credit, but they will charge the applicant with poor credit higher fees annually, higher percentage rate, and probably require a deposit too.

Secured Credit Cards

Secured credit cards for poor credit applicants may charge a higher percentage rate annually like the unsecured kind; the major difference is that there’s less qualifying information because the “credit” obtainable on the card is pre-paid fully by the card holder.

This kind of card for poor credit applicants works much like a debit card to a savings or checking account, except that balances left on the card are charged a fee monthly based on an annual percentage rate; the balances are also subject to minimum finance charges.

Pre-Paid Credit Cards

Pre-paid credit cards are rather different from secured credit cards because a pre-paid card has no annual fee; it is like a gift card with a Master Card or Visa logo than a true credit card. 

These credit cards for poor credit applicants look like a good option because the company doesn’t check employment history or credit; but because this is not a true credit card, it will not improve any credit rating or good spending, so payment habits are not reported to credit companies. 

Why Get a Credit Card
Credit cards for poor credit applicants are a good tool to turn poor credit around in time; the technique is to get a credit card with a small limit to begin, and try to pay off new debt monthly instead of carrying a balance.

Credit experts differ in their advice, as some say to carry a balance, paying a little more than the minimum to build credit. But others advise paying off your balance every month.

Poor credit applicants should pay off their poor credit cards monthly if possible, as this lessens the danger of getting into further financial dilemma. It establishes a good payment pattern for you, and shows potential creditors on timely, regular payments; numerous creditors look for regular on time payments when considering offering credit.

Why Cash is the New Plastic

Consumers are changing in their penchant for using credit cards, gone are the days when people dine, shop and swipe with their credit cards for almost all of their shopping needs. People are beginning to show a strong preference for paying in cash but credit card companies are feeling the effects of this financial shift from using credit cards to money. The primary reason why people are becoming leery of credit cards is that they do not want to fall into debt. Possessing a credit card can sometimes tempt you to go beyond your ability to pay for certain items, which by the way most of the time you really don’t need.

There are some signs that the preference of using cash is making a comeback like seeing people losing interest on giving out gift cards. Shoppers have discovered the pitfalls of expiration dates and inactivity fees for these gift cards so most of these companies who sell them are beginning to offer them for very low prices. A clause in the financial reform bill allows merchants to offer discount items for shoppers who pay in cash. If you are a wise consumer you can take advantage of these so called discount items since when you add the discounts that you have this can add to quite a sum of savings for you that you can spend on other things or save for your future needs.

There are drawbacks to the use of credit cards:

• They encourage you to spend more than what you have. It is time to reconsider whether your budget can handle the extra strain
• Allows you to buy more items than what you need

One country in particular, Canada will soon start to join a list of countries that offer the use of polymer based plastic instead of paper for its cash. The new plastic bills will be rolled out in phases. Having these plastic cash can enhance security, longer life span of the bills even if it frequently change hands and a cleaner money since this money is resistant to water, oil, sweat and dust. Australia has already started using them more than a decade ago to reduce the incidence of counterfeit bills.

The material use for making this money is recyclable so you don’t waste on materials since old plastic bills can be made into plumbing fittings, compost bins and other household items. This can be a factor that can add to the attraction of paying in cash since you just use what you have as oppose to credit cards that gives you the liberty to make cash advances. You can control your over spending habit too since as we mention you only use what you have.

People often ask the question “Will paying off my credit card debt help my credit?”  The answer is a resounding YES! Credit score also known as FICO (Fair Isaac Corp.) score which can be anywhere from 300 to 850. As of 2010, scores above 700 are rated “good” to “excellent” while scores under 680 are “fair” and scores below 620 are “poor”.  Your FICO score is based on these categories:

• Payment history. This consists of your payment records and list of any judgments, accounts sent to collection or bankruptcies. 35% of your credit score comes from this.
• Amounts Owed. This is the amount that you owe and the amount of available credit that you have used. This accounts for 30% of your credit score. This is the reason why it is better to pay your debts. Often referred to as debt to credit ratio.
• Length of Credit History. Average time that you open your account. Accounts for 15% of your credit score.
• Types of Credit Used. Mix of credit products that you have. Accounts for 10% of your credit score.
• New Accounts. This refers to new accounts that you have open. Accounts for the final 10% of your credit score.

It pays to pay your credit card debts to improve your credit score. Lowering your credit card balance has a positive effect on your debt to credit ratio. Remember that when you were issued credit, your creditor gave you a maximum credit line also known as credit limit.

Most experts advise you to use only 30% of your credit line in order to achieve your best credit score. If you have gone beyond 30% then it is wiser to pay off your debts to help your credit score.

How much Can You Pay? If you have a monthly budget use the information that you have to know how much excess money you can spare to pay for your credit card debts. There are two methods of paying your credit cards:

• Highest interest rate first. This is especially true if the highest interest rate credit card is also the card with the highest balance. Do not lose hope even if you think it is taking a long time for you to pay your debts.
• Lowest balance first. It is quicker to pay off this balance aside from giving you the feeling that you have accomplished something towards your goal of paying all of your debts.

Pick the method that you are more comfortable with. Then write down your debts in the order that you will pay them. Write down the interest rates, balance and minimum payment that you can make. Allocate your excess money set aside just for the payment of your credit card debts by paying off the credit card on the top of your list. Once you have repaid the first one on your list cross it off and focus on the next card and so on and so forth.

While paying off debt seems like an arduous process it is your chance to improve your financial situation. You also have the benefit of paying less in interest if you pay off your debt faster. A good credit score is achievable if you place your mind in it.