The social company you keep on sites like Facebook and Twitter may be hurting your chances of getting a loan.
Financial experts say some start-up lending companies are looking at who you’re friends with to determine your credit worthiness.
Annalee Leonard of Mainstay Financial says when you’re looking to get a loan, your credit score is important but if you don’t have one, you may need to pay closer attention to who you’re friends with on social media sites.
No credit? Clean up Facebook
Leonard says start-up lending companies are using social media sites as a research for credit. “They’re looking at your trends, who are your friends and what are your friends doing. You might not have a credit rating but they might and they might have a bad credit rating,” Leonard said.
She said these companies are also looking at online payment accounts like Ebay and PayPal, taking into account payment history to determine creditworthiness.
Leonard says that’s one reason it’s smart to build credit but make sure you keep up with your spending.
“Keep track, keep control and keep a balance and please be careful about what you put on social media because it could come back to bite you.”
Hike your credit score:
There are some steps you can take to hike up your credit score. Leonard provided a list of five helpful tips:
1. Know your score: The most important thing is to know what your score is. I recommend my clients check their score once a year. I have a link on my website, mainstaypensacola.com to get your free credit score.
2. Dispute errors: Once you get that report, look at it closely. If there are errors like late payments, charge-offs or collections, or if your credit limits are reported as lower than they really are, it is usually worth the effort to correct it with the bureaus.
3. Watch your ratio: Your credit score depends a large part on the ratio of credit used to credit available. Ideally you want to be using less than 10% of your available credit. If you are using more, work on paying down that debt. One way to do that is to make micropayments throughout the month.
4. Use your cards lightly: Racking up big bills on your credit cards can hurt your scores- even if you pay them off each month! Try to limit your charges to 30% of a card’s limit. You can set up text or email alerts with your credit card company to help you keep track.
5. Keep cards active: You can also boost your credit score by keeping your cards active. The older your credit history, the better- so it is good to keep an older credit card active as well. If you stop using a card, the company may stop reporting it to the credit bureaus.
Different types of loans:
Ellen Dunn with New Horizons Credit Union says getting a loan can be very helpful whether you’re making a big purchase or establishing credit but what kind of loan do you need?
There are open-ended, close-ended, secured, and unsecured loans and some loans you need to avoid.
Open-ended loans or personal loans have a limit for how much you can borrow but they do allow you to borrow money several times.
“If they need more they can always apply to have that limit increase, those are open end loans,” Dunn said.
Close-ended loans are like car, mortgage and student loans which have a fixed rate. Dunn said, “You make your payments (and) your balance goes down but there is no money available to continue to borrow.”
Unsecured loans use your money as collateral.
Interest rates my be lower with unsecured loans than with secured loans in which loan officers run a credit report and base the interest rate on your credit score.
Dun advises avoiding payday and title loans because of the high interest rates.
If you need more advice for what works best for you, Dunn said loan officers are trained to talk and help you learn how to read your credit report, the importance of paying your debt on time and how to get you credit score up.
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