We will discuss second chance banks near me and banking options for individuals with bad credit or with no credit. In addition, we will explain how credit works, improve your credit score and better understand money.
In the modern banking era, it is easy for individuals to fall behind or make mistakes with money. For example, if a person misses a payment on a loan or over-drafts their bank account, there can be serious consequences. Furthermore, your credit and ability to borrow money can be damaged. As a result, it is important to understand how to avoid the negative consequences that lead to using a second chance banks near me.
However, for those that need a helping hand to get back on their fiscal feet, many banks and lenders have become a second chance bank. Historically, lenders were hesitant to work with individuals who had bad credit or a history of bad financial decisions, like charge offs or loan defaults. However, today the financial world is changing rapidly. Furthermore, lending is becoming less decentralized and more competitive. As a result, bank customers who are searching for a second chance banks near me have more options.
What is a Second Chance Bank?
Offering credit and banking options to those who may have made some financial mistakes in the past is what second chance banks near me is all about. If your credit is bad or you have bankruptcy in your past, a second chance bank is an option for you. Moreover, if you are willing to do the work, second chance banks near me may be an opportunity to improve your credit and move up in life.
Lenders and Borrowers Have Different Ideas of How Much to Borrow; Easy Credit and Low Interest Rates Have Made Borrowing Easy
Often, families struggle to pay off debt or even make minimum payments on their debt. People lose jobs, get divorced or encounter other financial hardships that make it difficult to continue debt payments. Not being able to make payments can make you feel like you are drowning in debt. However, second chance banks near me may be an option for you in this situation.
When a person initially borrows money for a house or a car, they make an estimation of what they can afford. For example, if you make $35,000/year and you have other bills, you know that you probably shouldn’t borrow $120,000 for a new Ferrari sports car. This amount of debt would be beyond your ability to re-pay.
However, in the 21st century, lenders have made borrowing larger sums of money much simpler and easier. Record low interest rates and low barriers to credit have made borrowing money a dicey game. On the one hand, sales people who work for lenders frequently benefit from making more loans to clients, whether the client can re-pay the debt or not. Yet, clients may be unaware of the difficulty of repaying the loans because of the loan terms or changing circumstances.
Potential Second Chance Banks Near Me List:
- OneUnited Bank
- GoBank Online Checking
- Bank of America
- Wells Fargo
- First American Bank
- Radius Bank
- Fifth Third Express Banking
- Aspire Federal Credit Union
Many of the banks on the second chance banks near me offer reasonable fees, free perks and more. However, keep in mind that some of them have drawbacks, like high overdraft fees and monthly service charges. Do your research before signing up for an account.
Regarding second chance banks near me, it is important to note that you still may have difficulty for some time if your credit is bad or you have a bankruptcy. Bad credit history tends to follow people around for years. In addition, second chance banks near me won’t magically fix your problems; however, what a second chance bank can do is give you the opportunity to make better financial decisions. Also, if you are responsible and make payments on time while paying down debt, your credit score will improve.
How Credit Cards Work
A credit card looks just like a normal debit card. It is a thin, rectangular piece of plastic that has “Visa” or “Mastercard” stamped on it. It is normally embossed with your credit card number. The number is usually approximately 16-digits. In addition, it also has an expiration date and a 3-digit verification number on the back of the card. Furthermore, your credit card can have a PIN number assigned to it for purchases, or it can simply be swiped. Clearly, when you learn about credit you should understand the power of the credit card. If you lose it or it is stolen, someone else can pretty easily use it, so guard it when you can.
Also, it is important to know that using a credit card to spend is easy and fun. However, paying the bill at the end of the month is not necessarily easy or fun. Furthermore, it is also important to understand that each time you swipe your credit card, you are borrowing money from the bank. If you understand debt and credit, then you understand that you must pay the money back to the bank, with interest. If you damage your credit significantly, you may not be eligible for second chance banks near me.
What is Credit?
Credit is simply a loan from a bank. It is easy to forget that you are borrowing money when all you have to do is swipe your card and purchase items. However, a credit card is just a line of credit extended to a credit card user for a loan. Moreover, in CREDIT you learn that credit card companies are in business to make money by collecting interest on your purchases. Finally, credit card companies love it when you have a revolving balance because you pay them interest each month, year after year.
Interest Rates and Compounding Interest
The second thing to know about CREDIT is that banks that issue credit cards make money from users by charging the users an interest rate. In addition, credit card users carry a revolving balance on their cards each month. Furthermore, this is simply the amount of money that users owe the bank at any given time during the month. The credit card issuer uses this revolving balance value to calculate your minimum payment. It also helps them determine how much interest you will pay. Finally, your interest rate determines exactly how much you are charged each month on the balance owed.
For this CREDIT example, let us say that you spent $100 on a credit card shopping spree. To simplify the example, we will assume that the interest rate charged on the card is 15%. Specifically, after the purchase, you will receive a bill from the credit card company indicating that your balance is $115 ($100 + $15 in interest). Obviously, this is an over-simplified example. But you get the picture.
Thirdly, another important concept to get when thinking about CREDIT is compounding interest. Consequently, compounding interest is when the interest on a balance begins to snowball and grow faster and faster over time. For example, in the above example, you accrued $15 in interest in the first month. In contrast, if you didn’t pay toward the balance, then in month number two, you would owe $115 plus 15% more interest ($115 + $17.25 = $132.25). Again, this is over-simplified to help you understand interest rates. If you miss a payment, there would also be a late fee and your interest rate might increase as well!
Monthly Payments, Minimum Payments and Fees
The third thing to know regarding CREDIT is payments and fees on credit cards. Each month, credit card users must make a payment to their credit card balance if they have a revolving balance. Moreover, this means that if you purchased something last month using your credit card, then you must pay towards that balance using real money from your bank account. Normally, the credit card company asks you to make a minimum payment. The minimum payment is usually around 2% of the revolving balance. However, in many cases, if your revolving balance is low, then a baseline minimum payment will apply. Normally, this is $25-45 each month.
When considering the basics of CREDIT, consider that fees usually apply to credit cards. It is common for some credit cards to charge an annual fee, especially if the card advertises member benefits, such as frequent flyer miles or cash back. In addition, there are fees to penalize you for not making payments, or being late on payments. As a result, getting late payment fees can really add up and hurt you by increasing your balance, driving up your interest rate and freezing your credit line.
Credit Scores and Ratings
When discussing credit scores, there is a numerical range that most creditors use to rank borrowers. Moreover, the numerical range of credit scores is typically between 300 to 850. Specifically, a score of 300 is the lowest score and 850 is the highest credit score. Otherwise, if you have no credit history than you will not have a score. The FICO Credit Scoring model is the most common scoring system used by lenders. Obviously, if your score is low, then you will need the help of second chance banks near me.
Where do Credit Scores Come From?
One thing to know when learning CREDIT is where credit scores come from. Namely, there are three primary credit bureaus that track credit information. The credit bureaus are Equifax, Experian and TransUnion. Consequently, these credit bureaus consolidate your credit information, such as each debt you have and the amount of money you owe. As a result, lenders use one or more of these credit bureaus to determine whether to lend money to borrowers.
There are 3 major things that you need to remember when learning how to build credit:
- Always make payments on time
- Never use more than approximately 30% of your available credit
- Monitor your credit score closely each month
Always Make Loan Payments on Time
One of the most powerful things that you can do learning CREDIT is to make payments on time. The credit reporting agencies track whether each payment you make on your loans, credit card, etc. are on time. If your payments are reported as late to the credit reporting bureaus it can hurt your credit score significantly. So, always make payments on time. One simple trick to make sure that payments are made on time is to have the payments automatically drafted from your bank account each month.
Never Use More Than Approximately 30% of Your Available Credit
Second, when learning CREDIT, you should never utilize more than 30% of your available credit. For example, if you have a credit card with a $1,000 limit, then you should never allow the credit card balance to exceed $300. The credit reporting bureaus like to know that you have credit but you are not using too much. In many cases, if a person utilizes all or the majority of the credit limit that is allowed, it can be difficult to pay back. In addition, remember that you are trying to build a positive credit history. To do this requires discipline and will power.
Monitor Your Credit Score
Finally, throughout the process of learning CREDIT, you must monitor your personal credit score. There are businesses and credit cards that will provide this information for free. Moreover, there are also companies that specialize in monitoring and protecting your credit. In addition, the Federal Trade Commission (a government agency that regulated credit) can help you obtain resources for monitoring your credit.
How to Build Credit
When it comes to credit scores, you should know that building credit is slow. Accordingly, there are several things you should know about credit scores. First, you should know that it takes time to build good credit. Getting good credit can take many years. In addition, achieving an 800 or greater credit score typically takes many years.
Here are some additional tips for how to build and improve your credit along the way.
Establish a Credit History
Unfortunately, to have credit you must establish credit. When you have little or no money and you are just starting out, most lenders don’t want to lend to you. However, there are some options for you to consider. Specifically, here are some suggestions for how to build credit.
Get Started Building Credit with Small Debt like Credit Cards or Borrowing with a Cosigner
First, to start establishing a credit history you can have a friend or family member cosign a loan for you. Namely, a cosigner is someone who already has good credit and who will sign a lending contract with you. Moreover, the cosigner acts as a sort of backup or a supporter for you in the lending contract. Banks and lenders like cosigners because they have an established track record for borrowing. In addition, the lender will assess the cosigner’s credit prior to lending to you both. If, for some reason, you are unable to re-pay the loan to the lender, the cosigner is responsible for paying the remainder of the loan.
Second, you can apply for a credit card. Furthermore, many credit card companies will lend to those who have little or no credit history. Specifically, credit card companies are willing to take the risk of lending to new borrowers because the interest rates for these credit cards are typically pretty high. Of course, high credit card interest rates make lending very profitable for banks and credit card companies.
Although your first credit through a credit card or other debt will be minimal, you will have the opportunity to begin building your credit score. For example, your first debt will be like planting a seed; you must water it and take care of it for it to grow into something bigger.
Credit Card Hack: Authorized User
Another option is to become an authorized user on someone else’s credit card. For example, if you father, mother, sister, brother or other family member has a credit card, you can request for them to add you as an authorized user on the card. Most credit cards will report each month’s activity to the credit reporting bureaus. In turn, this reporting will include your name and begin establishing a positive credit history for you. However, it is important that if you become an authorized user on someone else’s card, that you choose someone with good credit and who will make on time payments. Otherwise, their bad behavior will negatively affect your credit history.
Finally, you may be able to secure a student loan if you are attending college. Some loans may allow you to sign for the loan by yourself. Other loans may require you to have a co-signer or co-borrower. If you are able to secure student loan debt it can boost your credit score in the long run and help you build up your credit. However, keep in mind that student loans must be paid back. Laws have changed in recent years and most student loans cannot be discharged in bankruptcy. As a result, you will pay back the loan whether you like it or not.
Take on Healthy Levels of Debt
Most people know that when you borrow money, there is a limit to how much you can borrow. Moreover, lenders make the decision to lend to a borrower based on credit score, credit history earning power (income) and debt-to-income ratio. However, one little secret that many people don’t know is that not only can you have too much debt, but you can also have too little debt!
When you are trying to achieve a tier 1 credit score, many creditors like to see that you have some debt. In addition, creditors want to see that you are consistently making payments towards that debt. The financial industry has the expectation that most people will carry debt. People buy homes, cars and even have credit card debt. However, if you pay your debt off two quickly, it may hurt your credit score.
Maintain Revolving Credit
When considering paying off debt completely, think again. Paying off debt is an admirable goal. However, consider that your credit score may go down if you pay off all your debt. In contrast, one option for you when debt is paid is to maintain revolving credit. For example, you can use a credit card each month for purchases. Furthermore, you can use the credit card to pay for normal expenses like groceries and gas. Then, at the end of each month, pay the balance owed. As a result, your credit report should respond positively to consistent, timely payments. And you will have the satisfaction of knowing you are staying debt free.
Pay Bills Consistently
As stated before, when you are figuring out how to build credit, you will need to consistently pay down debt over the length of the loan. For example, if you have a car payment set up for 60 months, then be sure to pay at least the minimum payment on time each month for the majority of the loan. Furthermore, don’t miss payments and be consistent. Finally, if you decide to pay off your loan a little early, that is ok too.
A Word of Warning
There are Inherent Risks with Borrowing and Debt Must be Repaid
It’s important to understand the potential repercussions of credit cards. In fact, borrowing money is always risky business, whether it’s through a credit card, loan or line of credit. Sometimes accepting the money seems harmless. Furthermore, you may be exacerbating your financial problems by taking on more debt. In short, heed the warning that debt must be paid back, including interest on a time schedule.
In addition, understand that borrowing money can place pressure on your assets with liens or other legal instruments. Consequently, in the event that you are unable to make your payments, the lender can take your asset, such as a home or car. When you borrow more money, you also take on more financial risk and stress.
Second Chance Banks Near Me Wrap Up
Hopefully this article has helped you appreciate that second chance banks near me may be an option for you. In addition, we have laid out some information about personal finance, banking and credit. Partnering with the right second chance bank can help you get back on the right financial track if you have the discipline to follow through.
It is important to note that Piggy Bank Coins does not provide financial advice. We do not endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals, and some equities.
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