Archive for The Credit Challenged Life
How to Avoid a Car Repossession
Posted by: | CommentsOk, so in my last post, I wrote about some of the evils of having a car repossessed. In case you haven’t read that post, you can find it here:
What’s Worse than a Car Repossession?
As you can see, it’s much worse than just not having a car anymore (as if that’s not bad enough).
Now, as I pointed out in my last article, most lenders really don’t want to repossess your car. It just doesn’t make financial sense. And in the end, lenders are more concerned with running a profitable business than punishing you for making your payments late.
That said, there comes a time when lenders will decide to hire a third-party repo agent to come get your car. Technically, a lender can do that when you’re one day late on your payment, but that’s not too likely. Get close to 30 days late, though, and it’s time for you to start worrying.
So if you’re running short on funds, and you’re worried about finding your driveway or garage empty in the morning, how do you stop a car repossession?
Well, you can’t stop it forever, but here are some simple do’s and don’ts to maximize your chances of keeping your car:
- Do: Call your lender right away (even if you’re not late on a payment, but you know you won’t have the money when the payment is due). Calling a creditor to tell them you’ll be late on a payment is not a pleasant thought, I know. But lenders tend to be a lot more lenient with borrowers who let them know what’s going on.
- Do: Expect a bit of hassle from your lender, especially if you’re getting close to 30 days late. A representative will probably ask prying questions about why you can’t make your payment on time, and may ask you if you can borrow the money from friends or family members. It’s not personal – it’s just business. “Asset management” reps are there to bring money in the door.
- Do: Ask about special options, particularly if you’re near/at/past the 30 day mark. Some lenders will renegotiate your loan terms without the hassle of refinancing. I know of several lenders who will take your past due balance and stick it on the end of your loan. They might charge a fee for this (depending on your state’s laws), and you’ll either have a longer loan or a “balloon payment” at the end… but that’s still better than a car repossession.
- Don’t: Be rude or defensive when talking to your lender. Yeah, they ask pointed questions. Yeah, they may talk down to you (although this is becoming less common). But in the end, a rep is more likely to work with you if you are polite and friendly.
- Don’t: Make arrangements you can’t keep. Telling a lender you can make a payment next Friday may be enough to keep your car from being repossessed, but make sure that payment is in your lender’s hands when next Friday rolls around. If it’s not, your lender will likely view the agreement as a stall tactic, and might assume that you have no intention of making your payment.
- And above all, don’t: Avoid the situation. Your late payment isn’t going to magically disappear from your lender’s radar. If you avoid your lender’s calls and throw away their letters unread, you’re most certainly setting yourself up for a car repossession.
What’s Worse than a Car Repossession?
Posted by: | Comments
Aside from a home foreclosure, a car repossession is about the worst thing that can happen to you when you’re dealing with financial stress. You probably need your car to get to work, get groceries and pick the kids up from school. Unless you live in a very pedestrian-friendly city, having your car repossessed makes an already stressful situation far worse. You can end up losing your job if you can’t get to work. And then there’s the hassle of catching a bus or the expense of hiring a taxi every time you need to run an errand…
As if living without a car isn’t bad enough, it gets worse. Lenders use third-party agencies (read: repo men) to find your car and tow it away when you’re not looking. Who’s on the hook for the repo man’s fees? You are. Depending on what state you live in, these fees can be $600 or more.
Then, there’s the storage fees. The lender pays to have your car stored while waiting for your car to go to an auction. $100 a day for storage isn’t uncommon, although your state’s laws may limit these fees.
And then…
Your lender sells the car at an auction. Now, the attractive thing about auctions (for buyers, anyway) is that vehicles can be had for 50 to 75% of their market value. So if your repossessed car is worth $10,000, an auction buyer may only pay $5,000 to $10,000 for your vehicle.
Now let’s say a buyer nabs your car for $7,500, but you still owe $10,000 on your loan. Does your lender accept a $2,500 loss?
Nope. They bill you for it (and the repo and storage fees). And if you don’t pay, they can sue you for it.
Mind you, the lender is under no obligation to get top dollar for your car at an auction. They’ll get as much as they can, of course, but since they know they can take it out of your financial hide, they don’t feel as much pressure to hold out for a higher bidder.
Now let’s say your lender pays $600 to repo your car, holds it for 20 days (at $100 a day) while waiting for the next auction, and then sells it for $2,500 less than you owe.
Happy day… you’re on the hook for $5,100! For a car you don’t even have anymore!
Can I Avoid a Car Repossession?
In many cases, yes. Although a lender can technically take your car if you are even a day late, most lenders don’t want to do that. They still incur administrative expenses, such as paying personnel to coordinate repossession activities with third parties, auction fees, etc. Plus, lenders generally like to keep customers, and they know you’ll never do business with them if they send someone to snatch your car in the middle of the night.
And then there’s all the charges I talked about earlier. A lender can bill you for them… and even take you to court over them… but lenders know that if you can’t make your car payment, you likely don’t have the money to pay some outrageous repo bill. So they either have to write the money off as a business loss, or o to the trouble and expense of filing a civil suit, garnishing your wages, locating your bank accounts, etc.
So avoiding a car repossession is generally easier than you think. In the next post, I’ll explain the steps you should take if you think you’re in danger of having your car repossessed. You can find that post here:
How to Avoid a Car Repossession
Image Attribution: TheTruthAbout via Flikr
Renting a Car without a Credit Card
Posted by: | CommentsLife with bad credit is full of surprises. Some of them are good – like knowing that you can use multiple income streams to pay for unexpected expenses or to build a safety net.
Others, unfortunately, are not so pleasant. When your efforts toward financial independence finally allow you to take a vacation, you will probably be happy knowing that you can book airfare and a hotel room with a debit card or pre-paid debit card. Just about any online travel site, such as Travelocity, Expedia or TripRes will let you do this.
Reserving a rental car for your trip, however, can be a serious pain in the ass.
I recently traveled to New Orleans to meet with a business client. Aside from wi-fi aggravations (I still can’t believe some airports try to charge for internet access), the trip was pretty uneventful… until I arrived at the car rental desk. Although I had paid for the rental with a debit card, the rental company told me I couldn’t use that card for the “hold fees” – that is, the charges I might or might not rack up if I trashed the car.
I escalated the matter to the supervisor, and then the manager. Each time, the story was the same. Although I had paid them for the rental, I couldn’t pick up the car without a debt-trapping, soul-stealing, honest-to-goodness credit card.
After a solid hour of hell-raising, I got them to reverse the charges on my debit card. And a rather colorful taxi driver took me to my hotel.
At this point, I’m not sure of the answer. I called a dozen car rental agencies when I got back home. Some required credit cards; others were fine with debit cards or pre-paid cards. Out of curiosity, I called some places in my own city, and got similarly mixed reactions.
My suggestion: Book your rental car separately, and call to make your reservation. Specifically ask if a debit or pre-paid card is acceptable for hold charges. And if it is, have a few hundred extra dollars in the account before your show up at the car rental desk. Surprises suck when you’re traveling, and making a few phone calls ahead of time can help save you a whole lot of aggravation.
How to Get an Apartment with Bad Credit
Posted by: | CommentsHere’s one thing that most people don’t think about when dealing with bad credit – if you have to move, and you’re not in the position to buy a home, you’ll probably have to rent an apartment. (Well, that or move in with the in-laws. *shudder*) Unfortunately, credit is usually an important factor in whether a landlord accepts your application or uses it to start a wiener roast. Renting an apartment with bad credit is often more difficult than people expect.
It makes sense, if you look at it from the landlord’s viewpoint. Who wants the expense and hassle of renting an apartment to somebody who might not pay the rent on time (or at all)? I have a friend who got a job in another city about 4 hours away, and had to move out of a house he still had a mortgage on. It was a pretty hasty move, so he rented it out instead of putting it on the market. A year later, his tenants moved out in the middle of the night, owing him four months rent. Guess who had to shell out those four mortgage payments.
Anyway, I’m assuming you’re not the kind of person who would pull a stunt like that, so here are some tips on renting an apartment with bad credit:
Rent an Apartment with Bad Credit by Avoiding Credit Checks
This is the most obvious tactic, but it’s one that people often don’t think of. Some property owners, like my friend, only own one or two apartments or houses, and don’t want the expense of hiring a property management company. In some cases, they also don’t want the hassles and expenses of running credit reports.
Craigslist is a good place to find these types of property owners. The local newspaper (remember those?) is another. You might even find a lead or two on the bulletin board in your neighborhood coffee shop.
The biggest problem I’ve found with this is that these kinds of people don’t have the time to be full-time landlords. They usually have jobs and other obligations, and renting out an apartment or house is just a side income stream. Nothing against these people – it’s just different than having a rental management company to complain to when the toilet explodes. If you’re a high-maintenance type who can’t change a light bulb yourself, both you and your landlord are probably going to be rather unhappy.
Get an Apartment with Bad Credit by Bringing a Co-Signer
Doing your homework makes it possible to get an apartment, even with bad credit.
Some landlords and rental management companies will overlook an ugly credit report if you have someone with good credit co-sign the lease. Having a co-signer reassures the landlord that she will get her money every month. Legally, this puts the co-signer on the hook for the rent if you don’t pay. If your co-signer has to pick up the rent, bad blood is the likely result.
Use a Recommendation Letter to Get an Apartment with Bad Credit
You might be one of those people who is late on credit card payments, but has never missed a rent or mortgage payment. If so, get a recommendation letter from your previous landlord, or a statement from your mortgage company. After all, your prospective landlord isn’t in the retail lending business, so he probably cares a hell of a lot more about whether you paid your rent on time than whether you were late paying your Macy’s bill.
Rent an Apartment with Bad Credit by Offering Cash Up Front
As Cyndi Lauper sang back in 1983, “money changes everything.” Your bad credit score may not mean much to a landlord if you can offer six months’ rent up front. This is, of course, the most expensive route… but it’s hard for even the most conservative rental management companies to turn down an offer like that. (See, this is why you need to be building extra income streams – this lets you stockpile cash to buy your way out of bad credit problems.)
Does Ally Bank Use Chexsystems?
Posted by: | CommentsI received this question in my inbox this morning:
“Does Ally Bank run Chexsystems inquiries when you apply for a checking account? – Sylvia B.”
Great question, Sylvia. I’ve noticed Ally Bank banners popping up on several websites over the past few weeks, but I just hadn’t gotten around to checking them out yet.
Ally Bank is an internet based bank that offers checking and certificate of deposit accounts. It started in 1919 as GMAC, and primarily offered automobile loans. Later, the company added mortgage loans, insurance products and vehicle service contracts. It developed Ally Financial in 2009 to provide financial products to the internet-based market. A good solid company with strong financial backing, as near as I can tell.
Now, for the question at hand, they made my job easy for me (which happens all too rarely). They have live customer service chat 24/7 with people who actually seem to know what they’re talking about.
I chatted with Dale a few minutes ago, and here’s what I found out:
- Yes, Ally Bank uses Chexsystems to screen new applicants. Dale couldn’t tell me how Ally used the information, just that the reports are pulled during the screening process.
- Yes, Ally Bank runs credit reports. Again, he couldn’t say how the data is used. But – and here’s the difficult part to swallow – it’s considered a “hard inquiry,” like when you apply for a credit card or a mortgage loan. A few of those can make a good credit report look bad, and a bad one look even worse.
Dale did urge me to apply for an account, just to see what happens. I can’t fault him for that – it’s his job. But I’m perfectly happy with my ReadyDebit checking account and ING DIRECT Orange Savings account, so I’m not going to take a hard credit hit just for shits and grins. I mean, I love you guys, but there have to be boundaries, y’know?
So, Sylvia, looks like Ally Bank goes in the “dead end” file as far as your non-Chexsystems bank search goes. Sorry.
(Completely off topic – I know I took a detour from my series on starting your first profitable internet business. I’ll be getting back to that very soon, don’t worry. Linear thinking is not one of my more obvious traits.)
Ignoring Your Creditors Could Land You In Jail?
Posted by: | CommentsI stumbled upon an article yesterday by Amanda Miller posted on the How To Get Out of Debt blog. Apparently, some debtors in Hennepin County, Minnesota have been imprisoned because of old debts they have ignored. So ignoring your creditors really could land you in prison.
Granted, the imprisonment was for “contempt of court” in situations where the debtors failed to appear for wage garnishment hearings, not for owing the debt. Debtors prisons were abolished by the U.S. government more than 100 years ago.
Several other states, including Arizona, Arkansas and Washington have statutes that allow police to imprison people for contempt of court.
Still, it’s a wake-up call if you’re thinking about dealing with your debts by simply avoiding them. I imagine we’ll start seeing more of this as the credit industry continues its attempts to recover from the recent financial meltdown that plagued the United States.
Ignoring your creditors is not a good option. Apparently, it’s becoming an even worse idea.
Here’s the article:
Ignoring Debt Until Police Show Up – Is Jail In Your Future?
Can I Get a Savings Account While on Chexsystems?
Posted by: | CommentsIn my last post, I told you how to get a checking account on Chexsystems. If you haven’t read that post, you can find it here:
Getting a Checking Account While on Chexsystems
Now, as I mentioned, ReadyDebit isn’t a traditional checking account. But it gives you a routing and account number, and many of the other benefits of traditional checking. It’s not perfect, but if you’re on Chexsystems, it’s a pretty good solution.
For many of us, there’s still that problem of depositing checks written to us. You can go to a check cashing joint, but they’ll make you wait in line and charge exorbitant fees. Ick.
So what’s the solution?
An Orange Saving Account from ING DIRECT.
You can send them checks made out to you, and they’ll deposit them in your savings account. You can then transfer the money to your ReadyDebit account.
They don’t use Chexsystems or credit checks for the Orange Savings Account, so you shouldn’t have a problem opening an account. There’s no minimum opening deposit – I opened mine with $25. Plus, this account offers higher interest than savings accounts through most traditional banks. As of this post, it’s about 1.5%. Not enough to make you rich, but it’s still free money.
Oh, and ING DIRECT accounts are FDIC insured up to $250,000 per depositor -if you open a joint account, you can have up to $500,000 insured.
Also, once you get your debts paid down, there’s another benefit: You can link a Sharebuilder account to the savings account, so you can easily move money over to invest. Sharebuilder only charges $4 per trade, which is a lot cheaper than online brokerages like eTrade.
Now, it’s critical that you open your ReadyDebit account first. That’s because you have to link a checking account in your name before you can open your ING DIRECT savings. When you’re opening the savings account, just use the routing and account numbers Ready Debit gives you.
You can open your Orange Savings Account here:
ING DIRECT Orange Savings Account
As I said, once this account is open, you can send them paper checks for deposit.
So why not just open an ING checking account too? Well, I called them, and their customer service department told me they use both credit checks and Chexsystems for their checking accounts. NOTE: This is only for checking – they don’t run credit or Chexsystems for savings.
Is this a perfect solution? Admittedly, no. If you didn’t have entries on your Chexsystems report, you could probably open a traditional checking and savings and manage your money more quickly. But if you’re on Chexsystems, I believe this is as good as it gets.
Getting a Checking Account While on Chexsystems
Posted by: | CommentsLast time, I wrote about the horrors of trying to get a checking account on Chexsystems. If you haven’t read that post yet, you can find it here:
Crap! I Can’t Get a Checking Account!
In that post, I wrote about some possible solutions you could use if you have less serious blemishes on your Chexsystems report. If you’ve really screwed up, of you just don’t want to mess with trying to find a bank that will take you, there’s still a decent workaround.
For checking, I use ReadyDebit. They do not use Chexsystems or run credit reports. Basically, if you’re a living, breathing U.S. citizen over the age of 18, and you have a Social Security Number, you can get an account.
You get a debit card in about a week, which you can use like any other bank debit card to make purchases, pay bills, etc.
I know I’ll get some emails telling me that Ready Debit is a pre-paid debit card, not a checking account. Erm… not really. Ok, it’s not a traditional checking account. You don’t get paper checks (which I never use anyway). But in the 6 months I’ve used Ready Debit, I’ve seen several advantages over pre-paid debit cards:
- You get a routing and account number, just like with a traditional checking account. This has worked great for ACH payments when businesses won’t take debit cards (like my car insurance and mortgage companies). I also needed a checking account to link to my Paypal account, and supplying them with the routing and account numbers worked just fine.
- They offer online bill pay. Admittedly, I haven’t used this feature yet, but people who use it seem to love it.
- They do credit reporting if you use their online bill pay service. Again, I don’t really know how this works, but if you’re trying to rebuild your credit, it can’t hurt.
- The routing and account numbers work for direct deposit of your payroll or government benefits income. They give you a direct deposit form to give to your employer.
- If you have a Paypal account, you can link it just like a traditional checking account. This allows you to easily transfer money to and from Paypal to your Ready Debit account. Turnaround time on this is consistently 2 days for me.
- If you need to get money into your account in a hurry, you can withdraw it from Paypal or another source, buy a MoneyPak card, and add it to your Ready Debit account online. You can get Moneypak cards at supermarkets, pharmacies, Wal-Mart and a ton of other places. They cost $4.95, and you can load and transfer up to $1,100 on one card. When you enter the card passcode online, the money shows up in your account in under 5 minutes.
- The money you put into your Ready Debit account is FDIC insured.
- I haven’t had a problem making hotel reservations or renting a car with the Ready Debit card. You can’t do that with most pre-paid debit cards because there’s no way for them to pre-authorize the card.
- They have a customer service number, answered by real people who speak English! I’ve called a few times with “how do I do this” questions, and have been happy with the service every time.
And I would be a morally reprehensible assface if I didn’t point out the drawbacks:
- Like I said, no paper checks. If you’re like most people stuck on Chexsystems, though, paper checks are probably what got you in trouble in the first place. Personally, I think checks are a pain in the ass anyway.
- You can only have up to $10,000 in the account at one time. I’m not sure how often that would really be a problem, but still…
- ATM withdrawals are limited to $500 per day, and bank teller withdraws are limited to $2,500 per day. I haven’t gone the bank teller route yet. I don’t know of a purchase limit if you’re buying something with a debit card.
- Some payday loan outfits won’t deposit into a Ready Debit account. I’m not sure why – from what I’ve been told, that’s up to the loan company, not Ready Debit. But why are you using those anyway? Haven’t you read my series on why payday loans are a crap idea?
- Last, and most importantly, there’s no way to deposit a paper check someone has written you.
Admittedly, that last one is a pain in the ass. It took me a little while to figure out a workaround for that. But I did find it… and since this post turned out waaaay longer than I expected, I’ll tell you about it in the next post.
In the meantime, you can get your Ready Debit account here:
Stay tuned!
Crap! I Can’t Get a Checking Account!
Posted by: | Comments
Banks are not your friend if you're on Chexsystems.
I’ve been getting several emails a day from people who, for one reason or another, have messed up their chances of getting a checking account. Usually, they find out when they’re sitting across the desk from some stuffed suit, who informs them that they’ve been, in essence, blacklisted from getting an account at virtually any bank.
Yep, I’ve been there myself. It’s less of a big deal for me, since I work online and most of my income comes through PayPal anyway. But relatives and some joints like Google and Clickbank still send paper checks now and then, and without a bank account, you’re stuck with those nasty check-cashing places that charge hefty fees. And heaven forbid that someone sign a check over to you – I can tell you from experience that you’d have a better chance getting an air-conditioned cab in hell than cashing one of those suckers.
But I digress…
Usually, if you can’t get a checking account, it’s because you’re listed on Chexsystems, which is essentially like a credit report, but for banks. If you bounced a few checks, you’re probably on Chexsystems. If a bank got pissed and closed your account because you had a few overdrafts, you’re probably on Chexsystems. If you wrote checks and knew the money wouldn’t be in the account… you might be in jail, but you’re definitely on Chexsystems. You get the idea.
The numbers are a little fuzzy when it comes to figuring out how many banks use Chexsystems – depending on the source, it ranges from 80% to 90%. If you ask me, I’d say pretty damned much all of them. Anyway, if a bank pulls your report, you won’t get a bank account unless you can provide a really good excuse… and even then, your chances are slim. Even if you open your account online, the bank will probably pull your Chexsystems report later, and has the right to close your account if it doesn’t like what it sees.
The thing is, this doesn’t just apply to checking accounts. Getting a savings account can be next to impossible too! The logic of this eludes me, but that’s just how it is. Oh, and entries stay on your Chexsystems report for 5 years.
Now, for the obvious question:
How Do I Get A Checking Account While On Chexsystems?
Well, the answer is… it depends.
First, you need to know what’s on your Chexsystems report. You’re entitled to a free copy of your report if:
- You haven’t ordered your report in the past 12 months; or
- You’ve been denied an account because of a Chexsystems entry within the past 60 days.
You can go to the Chexsystems Consumer Website to order your Chexsystems report for free. It will arrive by mail in about a week – there’s currently no way to access the report immediately online.
Now, if you just have a bounced check or two, and you’ve paid your bank any amounts you owe, you might be able to go into a bank branch, act really sorry and convince the branch manager to approve an account. It helps if you wear a tie or dress and cover up that “Live to Ride” tattoo.
The Chexsystem Victims website also offers lists of non-Chexsystem banks by state. Mary, the owner of this website, was kind enough to send me a list for my state. Most of the banks do use Chexsystems, but make exceptions. I did find a couple of credit unions that specifically stated they don’t use the reporting service at all.
If you have something really bad on your Chexsystems report – say, suspected fraud or misrepresentation when opening your account, your choices are few and far between. Even most “second chance” banking programs (which offer accounts with severely restricted privileges) won’t touch those.
After several months of fumbling around, I did find a solution for getting both a checking and a savings account. Ideal? No. When you’re stuck in Chexsystems, you can’t expect to get the same privileges as somebody who has maintained an account for years with no hiccups.
In my next post, I’ll show you how I did it… and it was a lot less hassle than calling around trying to find a bank that would take me as a customer.
Image attribution: Think Panama