How to choose a deductible for your auto insurance

By Sabrina Karl

Many drivers find that one of the toughest decisions when buying auto insurance is choosing a deductible amount. That’s because there isn’t one best answer for everyone.

A deductible is the payment you have to make yourself whenever you file a claim for coverage on an incident. For instance, if you’re at fault in an accident and have a $500 deductible, you’ll need to cover $500 of the repair bill before your insurance company will pay the rest.

But $500 is just one option you can choose, with deductibles typically ranging from $0 to $1,000, or even $2,500. The reason insurers give you a choice is so that you can opt how to balance the cost of monthly premiums with how much you’ll pay in the case of a claim.

In short, if you want a very low deductible (little out-of-pocket expense if you file a claim), you’ll have to pay for that privilege with higher monthly premiums. On the flip side, you can save significant money on your premiums every month by taking on the risk of owing a higher amount should you file a claim.

A good way to decide is to ask insurers to quote different deductible amounts, so you can see where you’ll gain the most bang for your buck. For instance, moving from a $100 deductible to $500 may cut your premium by almost half, and moving to $1,000 could reduce premiums to almost a third. Meanwhile, the gains by going to a $2,000 deductible could be quite minimal.

A good strategy is to calculate the annual cost for premiums plus one claim for different deductible quotes, as well as your annual costs for premiums with no claims. Comparing these numbers for different deductibles can help you decide what feels like your own best choice.

Where to look for the best personal loan

By Sabrina Karl

Personal loans have become increasingly available to those in need of extra cash. But if you’ve never used one, you may wonder where to find the best options.

Of course, it’s best to question whether a personal loan is a good idea at all. They can be smart when they allow you to pay off existing debt at a lower cost. For instance, consolidating multiple card balances into one personal loan with a lower rate is wise.

Less wise is using a personal loan for something discretionary, like a big vacation, or a more lavish wedding than you can afford. Though rates on personal loans are often lower than credit cards, they can still be hefty, and using a personal loan to spend more than your budget can handle could land you in a cycle of debt.

If you decide a personal loan is indeed smart or necessary for your situation, one of the first places to look is online. Personal loans from online lenders have the advantage of being simple and quick. But be wary of the offered rates, as some are quite high.

It’s useful to compare what you find online with what banks and credit unions are offering. The bank you already use is a good place to look, as they may offer better rates to existing customers. And the rates on bank loans tend to be competitive for those with good credit.

Credit unions also offer some of the best rates, and can be particularly competitive for those with less than stellar credit. You’ll need to be a member of the credit union, but joining is often fast and simple.

The bottom line, as usual, is that it’s important to do your homework comparing the rates and terms available from a variety of lenders.

Improve your credit score with this easy “hands-off” move

By Sabrina Karl

For anyone not super knowledgeable about how credit scores are calculated, it would be easy to assume that having fewer credit cards on your record is better than having a lot of open cards. But that’s not always the case.

In fact, one of the best ways to maximize your credit score is to leave some of your cards open rather than closing them. In particular, the card you’ve owned the longest could be your most valuable credit score asset.

While many people are aware of the most obvious factors influencing a credit score, like making your payments on time every month and not using all of the credit extended to you, another important factor is the age of your credit history.

The longer your credit history goes back, the more data you have feeding your score calculation. Individuals who are young and just getting started with credit have less of a track record on which to assess credit worthiness, and this is indicated by the age of their credit history.

In contrast, an older individual who has been using credit for decades will have a much longer history. But there’s a catch… The age of credit history is calculated by averaging how long you have had each of your currently open accounts. This means any card accounts you close will get removed from the equation.

For this reason, it’s smart to keep your longest-running credit card open, even if you aren’t using it. Just be sure it isn’t charging you an annual fee to do so. If it is, call your card issuer and ask to transfer your existing account to a different card that carries no fee. Most of the major card issuers have options for making this type of card change while keeping your original account.

Smart money-saving moves before applying for that auto loan

By Sabrina Karl

If you need to buy a vehicle and don’t have ample savings to buy it outright, you’ll need financing. Fortunately, there are steps you can take beforehand to improve the auto loan rate you can get.

The first step before making any expensive major purchase is to decide ahead of time how much you can afford to spend. Deciding this based on the state of your finances, rather than the vehicle you’d like to own, is smart move number one.

Next, you’ll want to inspect your credit report and score. The higher your score, the lower the interest rates lenders will offer you. So it’s worth spending time on this well ahead of car shopping. If you see errors on your report, you can request they be corrected or removed, which may raise your score.

If you can swing it, it’s also wise to pay down balances on other loans or credit cards before applying for the new auto loan. How much debt you currently hold, as compared to your income, is an important determinant of your credit score, so the smaller your total debt, the better auto loan terms you’ll be offered.

Once you feel your credit report and score are as boosted as you can manage before needing to buy a vehicle, it’s equally critical to diligently shop around. Auto loan rates vary wildly across lenders, but researching them is not difficult online. Oftentimes, credit unions offer the lowest rates, but you may unearth a better rate from a bank or an online lender.

It’s true this homework will take you a little bit of time. But maximizing your credit score and then choosing the best rate from a number of options can save you hundreds or even thousands of dollars for just a few hours’ work.

Secured credit cards offer a solution to poor credit

By Sabrina Karl

For anyone with a very low credit score, or the inability to even qualify for a credit card, it can seem difficult to solve this problem. In order to show you’re creditworthy, you have to use credit responsibly. Yet, without an existing track record, no one will offer you a card.

Secured credit cards offer one solution. By combining the benefits of a credit card with the concept of a security deposit, those otherwise denied credit can get a card that can put them on a road to better future options.

Here’s how it works. If approved for a secured credit card, you’ll be asked to pay a security deposit to the card company. This deposit works the same way as a security deposit when renting an apartment. It is held for you and if all goes well, you’ll get that deposit back later.

The deposits on secured credit cards can vary, depending on how much credit limit is being offered. For instance, some secured cards extend a $200 credit line with a $200 security deposit, while some may offer $200 of credit for a $100 deposit.

While a $200 credit line is small, using the credit responsibly over a period of time can lead to being rewarded with increased limits over time. Also, making repeated on-time payments on the secured card can ultimately lead to qualifying for a conventional credit card with a higher limit. Remember: making late payments is the number one biggest hit to a credit score, so it’s crucial to pay at least the minimum amount on time, every time.

Lastly, confirm that the secured card you’re applying for indicates it will report your payment history to one or more credit bureaus. Without that, you won’t get the benefit of building up your credit score.

The smart ways to consolidate your credit card debt

By Sabrina Karl

Almost anyone carrying multiple credit card balances is a good candidate for debt consolidation, which will make repayment easier and less expensive, helping you get out from under the burden of debt more quickly and in better financial shape when you get there.

The two best ways to consolidate card debts are with a no-interest balance transfer card or with a personal loan. If your credit score is good, you’ll probably qualify for a balance transfer card offering 0% interest for 12, 15, or 18 months. If you’re currently paying 18%, 20%, or more on your card balances, it’s easy to see that moving to 0% will deliver significant savings.

What’s important to assess is whether the 0% time period you’re offered is sufficient for you to pay off the balance you transfer. That’s because any transferred balance not fully paid off when the promo period ends will be assessed an interest rate usually above 20%, and it will be retroactive to the initial date of the transfer.

If the length of repayment from a balance transfer card is insufficient for the debts you want to transfer, the next best option is a personal loan. These can be obtained with worse credit, though the better your score, the more attractive the APR you’ll be offered.

Personal loans also allow you to consolidate more than just credit card debts. How you spend money from a personal loan is up to you, so rolling in an auto loan, large medical bill, or other debt is possible.

A personal loan will also establish a clear end in sight, but with terms that are usually 2-5 years. So with this method, you can determine at the outset what your fixed monthly payment will be and the exact date you’ll have paid off the balance.

What is a VantageScore and do you have one?

By Sabrina Karl

Anytime you apply for a mortgage, an auto loan, a credit card, or any other kind of credit, the potential lender uses a scoring system to determine how safe or risky a bet you appear to be.

 For decades, FICO scores have been the dominant credit scoring system. And though they still command the lion’s share of the credit scoring market, a competitor called the VantageScore entered the scene about 15 years ago.

 VantageScore was created in 2006 as a joint venture among the three credit bureaus: Equifax, Experian, and TransUnion. In contrast, FICO scores are the product of an independent company called FICO, originally called Fair, Isaac and Company.

 As far as most consumers are concerned, the difference between these two scoring models is not significant, and virtually everyone has both types. Like FICO, VantageScores consider a number of characteristics of your credit use and history, and weigh each with different importance. While not identical, the weighting of factors is fairly similar between the models.

 The highest impact factor in both cases is your on-time payment history. In a VantageScore, this accounts for 40% of your calculation. Next most important is a mix of how much you owe and how much credit line you still have left, making up about 35% of your score.

 The remaining considerations are your “credit depth” (age of your credit history and the diversity of credit types), which contributes 20% of your score, and how recently you’ve applied for new credit, providing the last 5% impact.

 One notable difference between the models is that it takes just a single account with as little as a month of history to be assigned a VantageScore, while FICO scores typically require a six-month history. So VantageScores more quickly provide a score for those new to credit.

Beware of skyrocketing gift card scams

By Sabrina Karl

Think that credit and debit cards are the number one target of scammers? Think again. The most frequently reported payment method tapped by fraudsters is gift cards, and according to the Federal Trade Commission, cases surged in 2021.

Gift cards are a scammer favorite because they are easy and familiar for people to buy, exceptionally easy to transfer to another person, and subject to fewer buyer protections.

The way it generally works is with a phone call from someone impersonating a government agency, utility company, or well-known business that many individuals have a relationship with. Calls reportedly from the Social Security Administration (SSA) are common, but so are calls pretending to be from Amazon or Apple.

The claim is often that there’s a security problem with the call recipient’s account, and that buying and transferring gift cards will alleviate the problem and allow the account to stay open and accessible. Fraudsters purporting to be from the SSA may even say the gift card transfer is necessary to avoid the victim being arrested.

Typically, the caller instructs the victim to buy multiple gift cards from a specified merchant. Target is the most common card request, followed by Google Play, Apple, eBay, and Walmart. Once the cards are secured, the scammer then instructs the victim to tell them the card’s numbers or send a photo of the back of the card.

According to the FTC, whenever someone demands to be paid with a gift card, that’s a scam. It’s that simple. If someone convinces you to buy gift cards and transfer the numbers, hang onto the card and your receipt, and report it to the card issuer right away. You’ll find contact information for some major gift cards at ftc.gov/giftcards. Then additionally report your experience to the FTC at ReportFraud.ftc.gov.

Secured vs. unsecured loans… What’s the difference?

By Sabrina Karl

If you’ve heard the term “unsecured loan”, or perhaps “secured credit card”, you might be wondering what these terms mean. Fortunately, it’s pretty straightforward.

Loans, including lines of credit, come in two flavors: secured and unsecured. A secured loan involves designating an asset of yours as collateral, which the lender can take possession of should you fail to pay off the loan.

The most common types of secured loans are mortgages and auto loans, in which the house, property, or vehicle becomes part of your obligation to repay. Because any failure to repay enables the lender to take ownership of the collateral, these loans provide more “security” to the lender, and as a result, generally carry lower interest rates than unsecured loans.

In contrast, an unsecured loan is just what it sounds like: a loan agreement with no security collateral. Credit cards, personal loans, and student loans are all unsecured in that your approval for the loan or line of credit is based on your creditworthiness. The better your credit rating, the lower the interest rate you’ll receive, and vice versa.

As you’d expect, lenders charge more for loans that are unsecured, as they have less recourse should you fail to repay the debt. That’s why the rates on credit cards and personal loans are typically much higher than what you see for mortgages and auto loans.

One hybrid product is a secured credit card, which can be useful for those with poor credit. Unlike a conventional card account that extends a line of credit and trusts you’ll pay back what you charge, a secured card requires making an upfront cash deposit, which serves as collateral. Like a security deposit on an apartment, if you close the secured card account on good terms, the cash deposit will be refunded to you.

Four steps to finding your lowest auto loan rate

By Sabrina Karl

If you want advice on the financially perfect way to pay for a car, it’s to save up and pay in cash. But if you’re like most Americans, you’ll need help financing the purchase.

Not all auto loans are the same, however, and it pays to spend time finding the best deal you can. While you may think that means finding the lowest rate or smallest monthly payment, the most important steps start with you.

First, consider your credit score. What auto lenders find in your credit report will impact the rate they offer you. So if your score could stand some improvement, consider delaying your car purchase a few months while you make some score-improving moves, such as paying off a card balance. Also avoid applying for any new loans or cards in the six months before wanting an auto loan.

Second, use an auto loan calculator to determine how much car you can afford, as well as the shortest term you can swing. Shorter loans offer lower interest rates, so while you may be enticed by the smaller monthly payment of a longer loan, you’ll ultimately pay much less with a shorter term.

Also play around with how your down payment will affect your payments. The more you can scrape together to pay upfront, the lower your loan amount and potentially the lower the rate offer you’ll receive.

Third, shop around. While it’s fine to inquire with your primary bank, it’s more important to research rates online, as well as check with local credit unions. From this research, create a short list of 3-4 lenders.

Lastly, request actual quotes from these sources, including asking for quotes that show different loan term options and different down payment amounts, so you can choose the best option for your budget.

Store cards from these one-stop-shop giants offer great value

By Sabrina Karl

Opening a store credit card often isn’t a great idea. While the cashier will tempt you with an attractive discount that day, the card may end up costing you more than it saves you, given the never-ending hooks they’ll send to lure you into spending more at their store.

There are four store cards, however, that offer much better odds of benefiting you overall (assuming you pay off your balance every month), and those stores are Target, Amazon, Walmart, and Costco.

These behemoth retailers each offer a card that provides discounts as high as 5%. And since these are places you likely stock up on groceries and household supplies, you’re saving on everyday purchases, not just discretionary purchases you get tempted into.

Target’s RedCard is arguably the most consumer-friendly, as it provides a 5% discount right at the register, both in-store and online. No need to accumulate rewards and redeem them later (which is how the three cards below operate). The RedCard also extends your return window and provides free shipping from Target.com.

Amazon has two store cards, both offering 5% off Amazon purchases. One card can only be used at Amazon and also offers a “buy now, pay later” option, while the other card works everywhere, with 5% also earned at Whole Foods, 2% at restaurants, gas stations, and drugstores, and 1% elsewhere.

Walmart’s card also offers 5% cash back—at Walmart.com always, and in-store for the first year. In Year 2, the in-store cash back percentage changes to 2%, which is also what you’ll earn on dining and travel. Everything else earns 1%.

Lastly, Costco’s card is great for gasoline. While in-store and online Costco purchases earn 2% cash back, you’ll earn 4% at almost any U.S. gas station, with restaurants and travel earning 3%, and everything else 1%.

Choosing your own best credit card rewards

By Sabrina Karl

Anyone still using a credit card that doesn’t pay back rewards is leaving money on the table, since there are more than a hundred different credit cards on the market that will return points, cash, or travel miles to you.

But deciding the type of rewards you want is a personal choice. And can feel overwhelming. So here are some helpful ways to think about it.

Many experts advise that cash rewards are best, as they’re entirely versatile. You can still apply it to travel, if you like, but you won’t be restricted to that — you can use the cash on anything you like.

With cash rewards you can also redeem more regularly. You can still leave them to accumulate in your card account until redeeming them all at once. But you can also redeem them monthly, to regularly trim your budget.

Still, some prefer travel rewards because they like the idea of making their next vacation more affordable. Here again, though, one strain of advice is to choose the most versatile option. For instance, a card that offers statement credits for any travel expense can be more useful than one that only allows you to book flights or hotel rooms with a certain airline or hotel chain.

Another rewards option is a card that pays points, which can be redeemed not just for travel, but potentially for gift cards or online purchases. If the redemption calculation is standard, you might still be better off choosing cash rewards. But some cards offer a bonus bump on gift cards and online shopping paid for with earnedpoints.

What you ultimately choose is up to personal preference, but one bit of advice holds true throughout: be sure to check out the various options, so you can make your own best choice.

Create a personalized debt reduction plan in just 3 steps

By Sabrina Karl

If you have multiple debts, creating a plan to eliminate them is one of the most effective moves for improving your financial life. And drafting a personalized plan may be easier than you think, taking just three steps.

First, inventory the debts you have. Record every debt you want to eliminate, listing the amount currently owed, the interest rate you’re paying, and the minimum monthly payment you must make.

Step two is deciding if it’s worth consolidating any of these debts. For instance, if you have multiple credit card debts with double-digit interest rates, you might want to apply for a 0% balance transfer credit card to consolidate multiple card balances into one. Another option is consolidating debts into a personal loan.

In both cases, be careful to understand what you’d be taking on. For instance, a balance transfer card offering 0% interest for 15 months is an excellent deal IF you can pay the balance off within 15 months, but not at all a good idea if you don’t. In contrast, a personal loan will commit you to a fixed monthly payment, so it needs to be one you can reliably make every month.

After any consolidating, step three is deciding between the debt avalanche and debt snowball methods for one-by-one debt elimination. A debt avalanche tackles debts by starting with the one charging the most expensive interest rate. This method will mathematically save you the most money. However, the debt snowball method, in which you pay off the debt with the smallest balance first, can be psychologically more rewarding and therefore easier to stick with.

Sitting down to draft any debt reduction plan will significantly increase your odds of success, as it allows you to set a strategy and then just follow the steps every month.

What credit score do you need to get a personal loan?

By Sabrina Karl

Personal loans have become popular for consumers wanting to consolidate debts, pay off medical bills, or finance a large one-time expense. Though their rates are higher than other borrowing options, their flexibility makes them a good choice in some situations.

But how hard is it to qualify for one of these loans? It depends, because every lender sets its own approval guidelines. In general, the higher your credit score, the better the selection of loans and interest rates you’ll be offered.

Though there is no industry standard for a minimum credit score, those with poor credit, defined as a FICO score of 579 or lower, will have a hard time qualifying for most personal loans. And any that they are offered will have exorbitant rates. Those in this situation would be wise to raise their score to 580+ before applying.

In the fair credit range of 580-669, more loans will be available, but rates will still be high. If you must take a personal loan while in this credit tier, pay it off as quickly as you can to minimize your sizable interest expense.

Good credit begins at 670, and here your options for a reasonable personal loan go up considerably. Though it’s not a hard and fast minimum, 670 is a good rule of thumb for the minimum score you’d want before applying for a personal loan.

Meanwhile, anyone with excellent credit, defined as 740+, should be able to qualify for a personal loan from almost any lender, and with rates in the best range they offer.

Keep in mind, however, that your credit score only measures your reliability to pay back the loan. Lenders will also want to see your ability to repay, so information on your income, savings, and debts will also be requested and considered.

Improve your credit score with this easy “hands-off” move

By Sabrina Karl

For anyone not super knowledgeable about how credit scores are calculated, it would be easy to assume that having fewer credit cards on your record is better than having a lot of open cards. But that’s not always the case.

In fact, one of the best ways to maximize your credit score is to leave some of your cards open rather than closing them. In particular, the card you’ve owned the longest could be your most valuable credit score asset.

While many people are aware of the most obvious factors influencing a credit score, like making your payments on time every month and not using all of the credit extended to you, another important factor is the age of your credit history.

The longer your credit history goes back, the more data you have feeding your score calculation. Individuals who are young and just getting started with credit have less of a track record on which to assess credit worthiness, and this is indicated by the age of their credit history.

In contrast, an older individual who has been using credit for decades will have a much longer history. But there’s a catch… The age of credit history is calculated by averaging how long you have had each of your currently open accounts. This means any card accounts you close will get removed from the equation.

For this reason, it’s smart to keep your longest-running credit card open, even if you aren’t using it. Just be sure it isn’t charging you an annual fee to do so. If it is, call your card issuer and ask to transfer your existing account to a different card that carries no fee. Most of the major card issuers have options for making this type of card change while keeping your original account.

What’s the difference between a hard and soft credit check?

By Sabrina Karl

Checking your credit report has never been easier. But as Americans begin to review this information more regularly, questions pop up about what they see there, and a common surprise is that the mere application for credit can ding your score.

Credit inquiries come in two flavors: hard pulls and soft pulls. Only hard inquiries are recorded in your report, and are therefore the only ones you need to worry about. They’re generally performed by financial institutions when you request credit, such as applying for a mortgage, any type of loan (auto, student, personal), or a credit card. Applying to rent an apartment can also appear as a hard pull.

A single hard inquiry on your report will typically have little to no impact. Though they stay on your report for two years, their impact fades over time, and having only one is generally considered negligible.

But an issue arises if you apply for credit multiple times within a short period, such as applying for multiple credit cards at once, or applying for a card close to the same time as applying for a loan. Accumulating multiple hard checks signals that you might be a higher credit risk, and your score could drop as a result.

Meanwhile, other companies are checking your report, too. But since they aren’t extending credit, their checks are classified as soft inquiries, which don’t show up on your report or affect your score. Soft inquiries are most commonly made by credit card companies looking to extend a card offer, insurance companies preparing a quote, or even a prospective employer or someone running a background check.

If you’re ever unsure if an application you’re submitting will trigger a hard pull, simply ask the company involved to indicate the type of inquiry they’ll be making.

What first? Pay down debt or build an emergency fund?

By Sabrina Karl

According to the Federal Reserve, more than a third of U.S. households report that if faced with a $400 emergency, like a surprise car repair or medical expense, they would have difficulty covering it or would not be able to pay it at all.

Of course, some emergencies cost much more than $400. If the Fed’s survey question instead asked about an unexpected $1,000 or $2,000 expense, you can imagine how many American households would be unprepared.

That’s why having an emergency fund is smart. By holding some funds in reserve, an unexpected expense won’t send shock waves through your ability to make ends meet.

But what if you also have debts? Paying down expensive loans and credit card balances is also wise advice. So for someone with no emergency fund and substantial debt, what should you prioritize?

Although there isn’t a “one size fits all” answer — as each person’s debt profile is different, as is the predictability and reliability of their income — one thing is certainly recommended: Always make the minimum required payment on all debts on time. That is priority No.1 so you don’t incur extra fees, increased rates, and hits to your credit score.

After that, a smart second priority is to build up a minimal emergency fund. Though the standard advice is for adults to hold 3-6 months’ worth of expenses in reserve, that can be a tall order that takes some time to achieve.

So start instead with smaller goals, like socking away $500, then maybe $1,000. Though you’ll ultimately want to build up much more than this, creating at least a minimal safety net is a good initial move before shifting your focus to paying down debt, and can help you avoid taking on further debt if a surprise expense hits.

Why it’s (usually) a bad idea to say yes to a store credit card

By Sabrina Karl

We’ve almost all experienced it: a store check-out clerk asking if we want to save 10, 15, or even 20 percent off our purchase by simply signing up for a store credit card.

It can be tempting, especially if your cart is full that day. But the impacts of saying yes last much longer than simply scoring the discount that day — to the point that for many consumers, signing up for the card will quickly become a losing proposition.

To be fair, store cards can make sense in a few scenarios, but all of them involve paying off your full card balance every month. That’s because retail cards tend to charge interest rates averaging 5% more than standard bank cards. So carrying a store card balance is definitely something to avoid.

Other strikes against saying yes to that store card is that it will impact your credit report. If you have very good credit, adding a store card and managing it well won’t have a huge impact. But the credit pull will cause a slight ding to your score.

In addition, having the store card may cause you to spend more. Temptation comes in the form of adding more to your purchase on the day of your initial discount, and being enticed to spend when you get teased with special “member discounts” in the mail.

True, if you have limited or bad credit, store cards can be easier to open than bank cards and could help you build better credit. But again, all of this hinges on managing the card very responsibly and not carrying a balance.

The top advice is to decide on store cards away from the checkout. Do your homework in advance, including whether a general cash rewards card may be a better move.

What are interest rates like on personal loans?

By Sabrina Karl

Although personal loans aren’t a new financing option, they’ve dramatically risen in availability and popularity in recent years. You may be seeing teasers for loans splashed on your bank or credit card login page, or may be getting personal loan offers in the mail.

Personal loans are a sort of hybrid between credit cards and mortgages or auto loans. Like a credit card’s line of credit, you can use a personal loan for whatever you like. And it’s unsecured by any collateral.

But personal loans are structured like auto loans and mortgages. You apply for a certain sum, and if approved, you get the funds in a lump sum. You’ll then have a set repayment schedule of equal monthly payments.

So what do interest rates look like for personal loans? Here again, rates are often between auto and home loan rates and credit card rates. Though they’re unsecured, the fixed amount, term, and payments of personal loans make them slightly less risky than a free-reign spending limit on a credit card. So rates tend to be better than card rates.

The very best rates on personal loans currently run around 6%. Note, however, that personal loan rates are heavily dependent on your credit score. If you only have a mediocre credit rating, you likely won’t get a rate in the single digits. The length of the term also matters. Personal loan terms are generally 1 to 7 years, and the longer the term, the higher the rate.

Beware that some personal loans will offer rates above 20%, or even 30% or more. At any interest rate, and especially at these very high ones, it’s critical you thoroughly investigate your other options to make sure a personal loan at that cost is your best move.

The most important factor influencing your credit score

By Sabrina Karl

Credit scores are an important tool used by lenders, credit card companies, and insurance providers. The higher your score, the less interest you’ll pay, the better card features you’ll be offered, and the more affordable your insurance premiums will be.

But the idea that we all have one credit score is far from true. First, there are two primary models of scoring, the FICO Score and the VantageScore. Second, there are numerous variations on those two base models, tweaked to prioritize certain factors above others depending on what the lender or institution finds most important. There are also three credit bureaus, who each decide which score to use.

As a result, there isn’t one singular answer to the question of which factor is most important. But, there is an answer to what has the biggest influence most of the time. And that answer is an on-time payment history.

The older and more established FICO score is used in an estimated 9 out of 10 lending decisions, with the VantageScore being much newer, established in 2006. So for any institution reviewing your FICO score — in other words, most of them — the factor that matters most is how often you’ve made your payments on time.

In fact, it accounts for more than a third of your score, at 35%.

Note that your score’s measure of on-time payments doesn’t include how much you’ve paid. It only measures how many months in the past you’ve made your required payments on time, whether that’s a fixed loan payment or the minimum payment required on your credit card.

Though you will suffer other financial costs for making only your minimum card payment, making every single payment, every month and never late, is critical to building a solid credit score.