MONEY Tech

Should You Get a Loan to Pay for Your Cellphone?

536989139
Cultura/Chad Springer—Getty Images

As 2-year contracts fade away, new loan and leasing options are popping up.

The next time you buy a cellphone, things will probably be very different. And better, for the most part. Cellphone contracts look to be going the way of the flip phone, replaced by what are essentially no-interest phone loans. Here’s why that matters.

Comparison shopping is the consumer’s best tactic, and most big companies’ biggest headache. So for years, consumers have had to contend with complicated phone subsidies, early termination fees, family plans and data overage charges.

Now, half those headaches are on the verge of extinction. When Verizon announced earlier this month that it was doing away with phone subsidies and two-year contracts, it marked the fatal blow to what has been the most confusing part of cellphone shopping. Until now, the best phone deals often required iron-clad two-year contracts with a carrier that came with hefty separation penalties — $350 early termination fees, for example. The business model was confusing: carriers subsidized the price of phones to draw in customers who would pay high monthly bills. It wasn’t all bad — some people got nice new phones on the cheap – but it had the unhealthy market effect of blurring the real price of handsets.

Now, carriers are offering a different set of choices — buy your own phone, finance the phone or lease the phone. The good news is that the price of phones should be clearer — a Galaxy S6 Edge might cost $768 or 24 payments of $32, for example. Even better: This new model should also make consumers take a new look at bring-your-own discount plans offered by off-brands like Total Wireless (which is operated by TracPhone, but runs on the Verizon network).

But don’t think you are getting away that easy. While annual contracts are gone, and with them early termination fees, other terms and conditions have taken their place. Many consumers will end up with a new “monthly device payment” instead. Leaving a carrier before two years have passed will be a little less painful, but not painless. Consumers will have to pay off the phone loan somehow, by either paying the remaining balance, or paying part of it and returning the gadget, or both. Thanks to Sprint, there’s an option to “lease” phones, which is a little cheaper, but as you might expect from the name, requires consumers to return the gadget after two years.

And the saddest news of all: the bottom line from the big four carriers is that, no matter how they stack their fees on top of each other, all four end up charging consumers about the same for a newish smartphone with a good-enough data plan. Your individual needs might vary, and you might get a little better family plan here or a little newer phone there, but in the end, the prices are strikingly similar.

A Look at the Big Four Plans

When I priced them this week, here’s what I found. (These calculations exclude activation fees and taxes).

  • At Verizon, a Galaxy S6 Edge costs $32 a month for 24 months. Then, 3 GBs of data costs $45 a month. Then, users must pay a $20 monthly access charge for each phone. Total cost/month = $97
  • At Sprint, that phone costs $30 a month to lease or $33 a month to own for 24 months, plus $60 for “unlimited” monthly data, with strings attached. Total cost/month = $93
  • At T-Mobile, the Galaxy costs $32.50 a month for 24 months, plus $60 for 3 GBs. Total cost/month = $92.
  • At AT&T Wireless, a Galaxy 6 Edge costs $24 for 30 months – (see how that works there? Cheaper — but not, because of the longer term). Then 2 GBs a month cost $55. Total cost/month = $79, but with longer payment terms.

One very positive thing to note about these changes: All these firms are essentially lending you money for free to finance your new cellphone. Nothing wrong with free financing, as long as you understand the commitment you are making. Paying off a phone loan balance can be a fair way to deal with a cellphone divorce than an arbitrary early termination fee.

What Does it Mean for You?

Here’s how to compare phones: calculate the true two-year cost of your gadget, all add-on fees considered. That means total phone cost plus 24 monthly bills (if that’s your commitment) plus the value of what you’ll have at the end (a working smartphone? A phone you can’t wait to ditch? You’ll have to decide).

If you are the type to want the latest gadget at all times, (there are many of you — Recon Analytics says that 49% of Americans replace their device every year now), this new structure adds more flexibility. For example, Sprint is offering a “new iPhone for life” plan, which lets customers trade up to the newest iPhone once every year if they are on a leasing plan and turn in their old, working iPhone.

The phone loan programs should make Americans more aware of their gadget costs, and the fact that they usually own them after two years. Hopefully, that will make off-brand providers like Straight Talk ($45 a month for 5 GBs) worth a second look. And don’t forget, the traditional carriers all have their own sub-brands that offer cheaper, bring-your-own phone plans.

But note that all these changes come with a very important caveat. Now that cellphone companies are acting like lenders, they will….act like lenders. Many of these deals will only be available to consumers with good or excellent credit. So add “before I shop for a cellphone” to the list of times when it’s important to get a copy of your credit report and credit score. You can get your free annual credit reports at AnnualCreditReport.com.

More from Credit.com:

MONEY student debt

Is Student Debt Really Keeping Millennials from Growing Up?

Skateboarders
Getty Images/Image Source—Getty Images/Image Source

Evidence is mixed, but a new survey indicates it's having greater impact now than on previous generations.

Young adults with student debt are postponing life events like buying a home or car, getting married, and having babies at higher rates than other age groups did, according to a new survey.

Overall, 45% of respondents who ever had student loan debt said they had put off life events because of it. For borrowers currently between 18 and 29, that number rises to 56%, according to the survey from Bankrate.com.

On the other hand, that means that about 55% of respondents (including about 44% of millennials) haven’t delayed life events because of student debt.

Economists, too, are studying the precise effects of student loan debt on the economy and consumer behavior. The familiar headline is that student debt is a significant strain on the economy, since it reduces borrowers’ ability to access other forms of credit. And there’s certainly some evidence to back that up.

Read next: College Textbooks Cost 1041% More Than in 1977

A recent working paper from the Federal Reserve Bank of Philadelphia found that counties with higher levels of student loan debt had less small-business growth. A survey by the National Realtors Association found that 12% of all recent home buyers said they delayed their purchase because of debt, and among millennials who did so, half said it was specifically because of student loan debt. And the New York Fed also has studied home ownership trends and found that young adults with student debt were less likely to own homes than those without it.

Steve Pounds, a financial analyst with Bankrate, also points out that the number of student loan defaults and delinquencies shot up during the recession. While that involved a relatively small share of borrowers, it’s likely to affect their credit for the rest of their lives. “That has to be a drag on the auto, real estate, and stock industry,” he said. “How much of a drag? I don’t know. But it’s an side effect that has to be noted.”

At the same time, college graduates still enjoy more income and job stability. Bachelor’s degree holders had median earnings last year that were $23,000 higher than high school graduates, and their unemployment rate was almost half of the 6% rate among high school grads, according to the New York Fed.

And some studies have suggested that characterizing student loans as a crisis scenario may be a bit a melodramatic. For example, TransUnion tracked the borrowing behavior of milliennials and found that while they are buying cars and applying for mortgages at lower rates than previous generations, that’s true regardless of whether they’re paying off student debt.

Check out the new MONEY College Planner

In the Bankrate survey, two-thirds of younger borrowers said they didn’t receive enough information about the financial risks of loans. Millennials were more likely than older borrowers to say they were delaying money-related life events in four out of five categories. The odd exception? Retirement savings. Less than 20% of millennials have delayed saving for retirement, slightly below the quarter of baby boomers who said they had done the same.

Are you concerned about paying back your student loans? Read MONEY’s 8 Ways to Stop Student Loans From Ruining Your Life

You Might Also Like: The 25 Best Colleges for Merit Aid

MONEY Autos

Can I Get Someone Else to Take Over My Car Loan?

144153212
Getty Images

It all depends on your lender.

If you can’t make your car payments, can you just find someone who can? Credit.com blog reader Carlos asks:

I have had my car for 5 months my payment is $330 but I will soon be getting married and getting my own place. I have tried to advertise my car and have someone take over loan on my car and everyone is just trying to get a notarized agreement and keep the car under my name. I won’t be able to make my next payment.

It sounds like Carlos is hoping is that someone will officially take over his payments and assume his loan. But that may not be possible. “In most cases, car loans are not assumable,” says Edmunds.com Senior Consumer Advice Editor Philip Reed. “When the registration and title are transferred to a new owner, the lender needs to be notified. The lender will then step in and require a credit check to make sure the new owner can make the payments. This leads to the initiation of a new loan at the new owner’s credit level.”

Policies with regard to auto loan assumptions vary by lender. A representative from Wells Fargo said its car loans are not assumable, while a representative from Ally Financial said that it will “work with a customer to determine whether an assumption is an option for them. If the assumption is allowed, the person taking on the finance contract would need to fill out an application to see if they qualify to assume the responsibility of the vehicle and payments.” (Of course, someone who qualifies to assume a car loan can shop for a car and not worry about taking over someone else’s payments.)

That doesn’t mean Carlos couldn’t let someone else drive his car and make payments to him, so he can make the payments to his lender. But that can be risky.

If the person who is driving the car doesn’t pay on time, Carlos will have to try to get the car back; in a sense, he will be repossessing his own vehicle. And anyone who has repo’d cars for a living knows how challenging that can be. In the meantime, he could fall behind on his car loan if he isn’t receiving the funds he needs to make the payments each month. (Here’s a guide that explains what to do if you can’t make your car payments.)

Another concern is that the new driver could put a lot of miles and/or wear and tear on the vehicle. And that, in turn, could make it more difficult for him to sell it in the future.

And then there is the issue of insurance. Carlos would have to make sure the car remains fully insured while registered under his name. One way to do that would be to keep his insurance and add the new driver to his insurance policy. But “if the additional driver has a poor driving history or is young, the rate is likely to increase,” warns Laura Adams, senior insurance analyst for insuranceQuotes.com. Not all insurers will cover an unrelated driver living at a different address, so drivers attempting to do this should check with their own insurance company and shop around first.

Another option would be for the new driver to get insurance and add Carlos on “as an additional insured, so he would be notified of any changes,” says Adams, adding that “Some carriers will allow you to insure a vehicle that you don’t own, as long as you have a good reason.” But that’s also risky. One day (and one accident) without insurance could create a huge financial mess — and damaged credit scores — for Carlos.

Guarding His Own Credit

Finally, there’s the risk that the new driver could run up unpaid tolls or parking tickets that may end up in Carlos’ name since he is the registered owner of the car. One of these items could wind up on his credit reports as a collection account, and his credit scores could drop significantly. A recent settlement with the credit reporting agencies and 31 state attorneys general will change how certain fines are reported in the future. Here’s what the credit reporting settlement will do.

If Carlos has a friend or family member he trusts to take over the payments until he gets back on solid financial footing, letting them assume his car payments might work. But relying on a stranger to make payments, insure the vehicle, and take good care of it is fraught with risk. If he decides to move forward anyway, he will want to get the agreement in writing, get a deposit and make sure the car remains fully insured.

Given his precarious financial situation, though, a better strategy might be to talk with a credit counseling agency or bankruptcy attorney to explore his options for getting out of this car loan.

More from Credit.com:

MONEY credit cards

When No Credit Is Worse Than Bad Credit

528904329
Jetta Productions—Getty Images

A blank credit history could hurt you in the long run.

Although we’re constantly hearing about how much student loan and credit card debt we collectively carry, there are a few of us who don’t have any loans to our names or balances on our cards. Some people even avoid credit cards altogether, assuming it’s better to be completely free of financial products that could potentially lead to trouble.

That’s not a bad way of thinking, but it’s not accurate to say that avoiding credit is better than carrying a dinged-up score. In fact, if you ever face the decision to finance a major purchase (such as when you fill out a mortgage application to buy a home) or need to use your score to prove your ability to pay a monthly bill (like signing the lease on an apartment or setting up some utilities) having no credit at all may causemore problems than having a bad credit score.

What’s wrong with no credit?

When you don’t have any credit, it means you haven’t done anything to establish a credit history. That means you haven’t taken out any loans or lines of credit — again, a good thing considering that means you have no debt either!

But having no credit can hamstring you if you’re looking to get a car loan or a mortgage. A bank or other lender has nothing to go on when evaluating whether you’re likely to pay back the money you borrow. There’s no history to analyze, which turns you into a large question mark for them. Essentially, they’ll need to guess at how likely you are to repay the loan.

Most lenders simply don’t want to do a lot of guesswork when it comes to approving large financing decisions like mortgages.

Bad credit, on the other hand, does give the financial institution considering the loan something to work with — it provides them with information about your habits. Granted, it can show a lender that the borrower is more of a liability, which means that applicant will likely receive a less favorable interest rate. They may pay more in interest over the lifetime of their loan, but they can still receive approval.

When considering this from the perspective of getting approved for a loan, it may be worse to have zero credit at all.

How to responsibly build a (good!) credit history

It’s smart to plan ahead if you know you don’t have a credit history (or if you have a very short history). Give yourself some time to build something good!

Start by taking out a credit card at your bank. This will make it easy to tie your new card to your checking account, so you can view everything in one place and get in the habit of paying off your balances.

Use your credit card consistently over time — and always make sure you’re paying off whatever purchases you put on the card, on time and in full. That being said, don’t use up all your available credit each month (even if you’re paying it all off). Spending up to your credit limit will impact your debt-to-credit utilization ratio, which can hurt your credit score.

You can also become an authorized user on someone else’s credit card if you don’t want your own — but be careful. If that person fails to manage their own credit wisely, yours could be negatively impacted too.

Repairing the damage from a bad credit score

All this being said, a bad credit score isn’t ideal. Bad credit can also hurt in the form of increased costs over the lifetime of a loan — if you’re able to secure one in the first place.

You can check your credit by pulling your report for free, once a year. When it arrives, check it for errors and contact any or all of the three credit bureaus if you find a mistake. If everything looks good, move to step two: Get your credit score by going to a site like Credit Karma or Credit.com.

Is your credit in rough shape? Start repairing the damage by taking the following actions:

  • Make all loan and credit card payments on time and in full.
  • Don’t close old accounts — doing so can affect the average age of your credit history, and the longer you have established lines of credit, the better for your overall score.
  • Keep a low debt-to-credit utilization ratio.
  • Don’t open lots of new accounts at once or incur multiple new hard inquiries on your credit over the span of a few weeks.

It takes some time to improve bad credit, but it’ll be worth the effort. Having a good credit score — and some credit history! — will go a long way to helping you secure a loan at the best interest rate available.

More From Trulia:

MONEY Small Business

It’s the Best Time in Years to Get a Small Business Loan

77129942
Ariel Skelley—Getty Images

Approval rates at big banks are the highest they've been since 2011.

Here’s good news for entrepreneurs: Big banks are becoming a tad more generous with small-business loans.

Major banks and institutional lenders have been approving small-business loans at higher rates, while the pace is holding steady at alternative lenders, according to a report this week from Biz2Credit, an online marketplace for small-business loans.

At banks with more than $10 billion in assets and at institutional lenders — including credit funds, insurance companies and nonbank financial institutions — approval rates on small-business loan applications climbed in June, to their highest level since Biz2Credit began tracking them in 2011, the report says.

On the other hand, approval rates at alternative lenders and credit unions were mostly flat. The report was based on an analysis of 1,000 loan applications on the Biz2Credit platform.

“We’ve come a long way,” Biz2Credit Chief Executive Rohit Arora said in a statement. “These are the best numbers for big bank lending since the recession. … It is a good time for entrepreneurs in search of capital.”

This trend is significant because big banks and lenders pulled back from the small-business market during the financial crisis. Alternative lenders stepped in to fill the void in small-business financing, helping create a vibrant, growing market.

That market has started to draw the attention of traditional banks, but Sam Hodges, founder of alternative lender Funding Circle, says big financing companies are, for the most part, still wary of lending to small businesses.

“We continue to see tremendous pent-up demand from thousands of borrowers every month who aren’t able to get attention from a bank,” Hodges tells NerdWallet.

He points out that the Biz2Credit report paints a limited picture since it was based on a “very small sample size.”

“These data don’t illuminate the market as we see it,” he says. “It’s great that they’re providing these data, and they’re better than nothing, but I don’t think they tell the full story.”

Still, Molly Otter, chief investment officer at Lighter Capital, another alternative lender, says the Biz2Credit report paints an upbeat picture.

“Banks becoming more aggressive in their approvals — I think that is great for business owners,” she tells NerdWallet. “The more options they have, the better off their business is going to be, and banks are currently the cheapest form of debt there is.”

Some key takeaways from the Biz2Credit report:

  • Big banks approved 22.1% of small-business loan requests in June, up slightly from May and the eighth consecutive monthly increase. By comparison, at the lowest point in June 2011, big banks approved only 8.9% of small-business loan applications.
  • Institutional lenders approved 61.4% of small-business loan applications, which is slightly higher than the rate at alternative lenders. Arora says institutional lenders are now mainstream players in small-business loans and are replacing cash advance companies, whose interest rates he calls “simply too high.”
  • Credit unions approved 43% of small-business loans applications, flat from the previous month. While considered a good option for lower-cost loans, credit unions “continue to lag in small business lending,” Arora says.

More From NerdWallet:

MONEY consumer psychology

5 Foolish Money Myths You Can Stop Believing Right Now

114895696
lina aidukaite—Getty Images

Drink your latte.

Whether you think of yourself as money-savvy or you’re acutely aware of where your personal-finance knowledge is lacking, it’s always good to make sure you aren’t managing your money on assumptions that are faulty to begin with.

Here are a few common money myths to kick to the curb.

Myth No. 1: Credit cards are evil

With the average credit card debt sitting at just over $15,000 per household, it’s easy to think that plastic is the irresponsible way to pay. Not so fast.

It’s not the method of payment that’s the problem; in fact, having credit cards can actually help your credit score. A full 10% of your credit score depends upon having a mix of credit types — installment credit, like a car loan, and revolving credit, like credit cards.

In addition, credit cards offer more security than any other form of payment, allowing you to dispute fraudulent activity without footing the bill.

Myth No. 2: Skipping your morning coffee will make you rich

Cutting back on small expenses might offer some breathing room in your budget over the long term, but money not spent doesn’t necessarily equal money saved. To grow that money, it would need to be put into a place where growth can occur — like an investment account or, at the bare minimum, a savings account.

You may think cutting out a daily expenditure is putting you on a path to financial independence, but that’s only step one.

Myth No. 3: It’s too risky to invest your money

The truth opposing this myth is simple — it’s too risky to not invest your money.

If you’re already diligent about socking away money each month, that’s a great start. But with interest rates sitting so low, money put into a savings account will likely lose more to inflation than it can make up in growth. That’s where investing comes in.

Through the power of compounding, a single $500 investment made at the age of 20 earning a conservative 5% return would be $4,492.50 at the age of 65. Imagine that scenario with ongoing contributions and larger returns. It would put any savings account to shame.

Myth No. 4: All debt should be paid before saving

Unfortunately, emergencies and unexpected expenses occur at all stages of life — even when you’re working to pay off student loans or crawl out from underneath credit card debt.

A study recently released by Bankrate found that 60% of Americans wouldn’t have the funds available to cover even small hiccups — like a $500 medical bill or car repair. Think about how many of those expenses you’ve run into in the last six to 12 months; probably at least one.

If you want to avoid incurring more debt as a result of life’s curveballs, work to save while paying off debt. This will give you a better chance of smooth sailing to the finish line.

Myth No. 5: You should borrow the most money offered to you

Wondering how much house you can afford? Don’t let the loan amount offered by the bank be your guiding light.

Those in the business of making loans are incentivized to offer the biggest loan possible that you’ll be approved for. So while they may be checking out your debt-to-income ratio, this simple equation doesn’t always offer an accurate snapshot of what you can actually manage to pay each month.

The same goes for credit card limits — having a $20,000 limit doesn’t mean your finances can easily handle paying back $20,000 worth of purchases.

More From Trulia:

MONEY College

The Right Way to Borrow for Your Kid’s College

mother embracing daughter moving off to college
Xi Xin Xing—Shutterstock

Follow these 3 rules.

With the August start of the school season right around the corner, parents of college-bound kids may have one more financial hurdle to clear: finding a loan to fill the gap between the savings you’ve earmarked for college, your child’s financial aid and student loans, and the big bill that’s coming up fast.

The most popular options are federal parent PLUS loans, private student loans, and a home-equity line of credit. The best one for you comes down to several factors, including how long you need to pay off the loan and your credit history. Here’s how to weigh your choices.

For Flexibility, Pick a PLUS

A federal parent PLUS loan has, well, pluses and minuses. The current interest rate, 6.8%, is high compared to other options, and you’ll owe an origination fee of more than 4%. If you plan to retire the debt in less than a year, the more than $400 you’d pay to take out a $10,000 loan would essentially raise your rate to 11%.

Still, the application process is simple, and the credit requirements are looser than for other loans—your income and credit score aren’t factors. You can take up to 30 years to pay back the loan (though 10 years is standard), and you automatically qualify for repayment breaks if you run into a financial hardship, like a lost job.

For a Low Rate, Go Private

With a private student loan from a bank or credit union, you can beat a PLUS loan’s high rate and avoid origination fees. Traditionally your student takes out this loan, with you as a co-signer. But increasingly many banks, including Wells Fargo and Citizens, are offering private loans directly to parents. Lender SoFi has a borrowing program for parents of students attending one of 2,200 schools.

Variable rates on private loans run from 3% to more than 10%, depending on your creditworthiness, while fixed rates range from 4.5% to double digits. You can deduct up to $2,500 in student loan interest a year on your taxes, as long as your income is below the cap ($160,000 for a married couple filing jointly in 2015).

For Ready Cash, Tap Your Home

Another way to get a low rate is to borrow against your home equity. On average you’ll pay a 4.75% variable rate on a HELOC today, reports Bankrate.com, and just a few hundred dollars upfront.

Trouble is, you’ll pay more for your HELOC once the Federal Reserve starts hiking interest rates. That makes them best if you can pay off the loan quickly. Or lock in. With many lenders, you can convert the outstanding portion of your HELOC to a fixed loan (rates average 6%), leaving the rest of your line available for future costs.

Finally, trust your instincts. “What keeps parents up at night varies,” says Leonard Wright, a California certified public accountant and personal financial specialist. “For some a HELOC takes away the peace of mind of having a paid-off or nearly paid-off home loan. For others there’s peace of mind in having the guaranteed options for payment breaks from a federal loan.”

MONEY

I Can’t Get a Loan Because I’m ‘Dead’

view from inside a grave to the sky
Alan Thornton—Getty Images

But I'm not dead yet.

There are countless ways your credit report can get messed up, all of which can seem pretty annoying to fix. Perhaps one of the most unsettling problems you might find with your credit report is if it says you’re dead, when you’re most certainly alive. It’s not unheard of for consumers to apply for credit and be rejected because their reports incorrectly list them as deceased. But just like all credit reporting errors, it can be disputed and fixed. Unfortunately, it’s not always a simple process.

Why Your Credit Report Says You’re Dead When You’re Not

There are generally three reasons your credit report might incorrectly say you’re dead, said Robert Brennan, a consumer protection lawyer in Southern California. You’re probably dealing with a mixed file, identity theft or a simple mistake, and your course of action will vary slightly depending on the cause of the problem. Either way, you’re going to need to dispute the error with the credit bureaus.

How to Confirm You’re Not Dead

Obviously, having a credit report that incorrectly marks its subject as deceased can be really problematic for the consumer. Not only is a credit report one of the main documents consulted during lending decisions, it’s also something that may be reviewed by employers, insurance companies, landlords and other service providers, as they decide whether or not to work with you. As a result, you want to fix any credit report errors as soon as you find them. That’s why it’s a good idea to check your credit reports and credit scores as frequently as possible.

Once you realize your credit report says you’re deceased, talk to the credit reporting agencies. The dispute process for each of the three major credit bureaus (Equifax, Experian and TransUnion) is outlined on their websites. Keep in mind that the bureaus do not share information, so you need to check each report for accuracy and dispute issues separately. Brennan said to dispute the error in writing and send it through Certified Mail.

“Provide them with current identification (driver’s license, recent tax return, recent utility bill) and tell them to correct the status to ‘living,’” Brennan said, via email. “If the bureau fails or refuses, then the consumer has rights under the Fair Credit Reporting Act which would include his/her damages plus his or her attorney’s fees.”

What to Do If the Problem Persists

If the error is a result of identity theft, you’ll have more to do than file a dispute with the credit reporting agencies. Victims of identity theft should file police reports, check if fraudulent accounts were opened in their names (and terminate them), put fraud alerts on their credit reports, report the incident to the Federal Trade Commission and contact the IRS for an identity theft PIN to avoid problems during tax season.

It’s important to keep meticulous records throughout the process, because even if you resolve the issue, it could come up again, and you’ll want to be able to prove it’s an error — that will be a lot easier if you don’t have to start from scratch.

More From Credit.com:

MONEY credit cards

A Good Credit Score Isn’t Enough to Get You a Loan

Getty Images/David Young-Wolff

Not even a stellar credit rating can make up for these big no-nos

When it comes to getting loans, having good credit is crucial. A good credit score shows potential lenders that you’re a reliable consumer who pays bills on time and keeps your debt balances at a reasonably low level, so they have good reason to believe you’ll do the same if they extend you credit.

While a great credit score will carry you far in a loan or credit card application, you can’t rely on good credit alone. There are a few situations in which you still might not get a loan or credit card you apply for, even though you have good or excellent credit.

1. If You Don’t Have Enough Income

You don’t necessarily need to have a job to get a loan or credit card, but you generally have to show some sort of ability to repay, whether that’s claiming household income, getting a co-signer or something else. Even if you have income, the lender may determine it isn’t enough to grant you approval for the loan you’re requesting.

The more you’re requesting to borrow, the more your income matters. With credit cards, that information is factored into how high your credit limit will be. If you’re applying for a mortgage, you have to meticulously document your income and get transcripts from the IRS backing that up as part of the loan-application process. Even if you have a good credit history, the main thing that may hold you back from getting a loan is your income.

2. If You Have Too Much Debt

Having too much debt can negatively affect your chances at getting a loan, particularly if you’re applying for a mortgage. When calculating your ability to repay, mortgage lenders look at your debt obligations, including child support, alimony and tax debt, and they subtract that from your income. In some cases, you may have great credit and a high income level, but you have too many debt obligations to take on another loan.

3. If You Already Have a Lot of Unused Credit

Having a lot of unused available credit is good for your credit utilization rate, which has a large impact on your credit score, but in some cases, that’s not something lenders like to see. If a lender sees you have a large amount of available credit when he or she reviews your credit report, it may be cause for rejecting your request for a loan.

Before applying for any new credit, you need to have a good understanding of your finances and what makes up your credit standing. You can do that by regularly reviewing your free annual credit reports, but you can also do more frequent credit checkups.

More From Credit.com

MONEY Debt

Millennials Aren’t Buying Homes, but Not for the Reason You Think

couple looking at house
Troels Graugaard—Getty Images

As student debt has exploded, young consumers are taking out fewer mortgages and auto loans. But are student loans really to blame?

There’s a familiar narrative that the burden of student loans is forcing young borrowers out of the auto and housing markets, crippling their ability to take the same financial steps into adulthood as previous generations.

Think again. A new study from TransUnion says that fears about how much student loan obligations are hindering young borrowers are overblown.

The study looked at consumers aged 18 to 29 who had student loans alongside those who did not, grouped by age and credit score, then tracked their performance on other types of loans in the two years after they started paying off their student debt.

The bottom line: While student loans are way up since the end of the recession, the study found no evidence that such loans are causing young adults to stop opening credit cards, buying new cars, or applying for mortgages. Sure, today’s millennials are doing less of all three than 20- to 29-year-olds did a decade ago—but that’s true whether they’re paying off student loans or not.

According to TransUnion data, the percentage of consumers in their 20s with student debt has jumped from 32% in 2005 to 52% in 2014. The share of student loans in relation to other debt held by young consumers has skyrocketed, too, increasing from 12.9% to 36.8% over the past decade. At the same time, their share of mortgage debt dropped from 63.2% to 42.9%.

But current conventional wisdom about the ripple effect of student debt on other types of borrowing is correlation, not causation, says Charlie Wise, vice president of TransUnion’s Innovative Solutions Group and co-author of the study.

“What we’re trying to do here is cut through the hype and say, ‘what’s the reality?’” Wise says.

The study tracked groups entering repayment at three different times—2005, 2009, and 2012—in an attempt to determine whether performance differed before the recession, immediately following the recession, and more recently as the economy has recovered.

In 2005, a smaller percentage of consumers with student debt had auto loans or mortgages relative to their peers without student loans. But after two years the gap narrowed, and in the case of auto loans, disappeared.

A similar pattern exists for the 2009 and 2012 groups, suggesting that borrowing trends in which individuals with student debt catch up to their peers over a period of a few years have remained steady.

So if student loan debt isn’t causing mortgage and auto loan participation to drop, what is?

Wise points out that about 50% of people aged 18 to 29 have credit scores that qualify them as nonprime borrowers—a percentage that has also held steady since 2005. What has changed, he says, is lending standards, which became stricter in the aftermath of the recession.

The study also shows that young consumers with student debt actually performed slightly better on their new accounts than their peers without student loans.

For example, consumers who started repaying their student loans at the end of 2012 had a 60-day delinquency rate on new auto loans that was 15% lower by the end of 2014 than their peers without a student loan.

The report counters research from a year ago by the Federal Reserve Bank of New York that found home ownership rates dropped more quickly among people aged 27 to 30 who had student debts compared with those who didn’t.

But TransUnion’s findings don’t come entirely out of the blue. A recent Wall Street Journal analysis of data from LoanDepot.com found that loan applicants with student loans aren’t any more likely than those without debt to be turned down for first-time home loans.

And some economists, such as Beth Akers, a fellow at Brookings Institute’s Brown Center of Education Policy, have pointed out that lower participation in the housing market among individuals with student debt is within the historical norm.

Akers says TransUnion’s report that student debt isn’t dooming young borrowers isn’t particularly surprising. “Given the fact that financial returns on investment for higher education are positive and large, the notion that debt is harmful to students is a little puzzling,” she says.

Getting clear answers to the question of how debt affects individuals is challenging, though.

Akers points out that you can’t randomly assign debt to people, and since there are significant differences between the backgrounds and demographics of households with student debt and those without, you can’t expect their behaviors around buying homes or cars to be the same.

Student loan debt may not be overburdening young consumers on a macroeconomic level, she says, but what’s still unknown is the emotional and social cost of carrying such debt.

TransUnion’s Wise describes the study’s findings as encouraging news. For soon-to-be college graduates, there’s evidence that they can stay above water with their loans, and for lenders, there are “credit hungry” millennials who are able to keep up with payments.

Wise’s major takeaway for both groups: don’t despair.

 

More on Managing Student Debt:

The 25 Most Affordable Colleges from MONEY’s Best Colleges
Why You Might Want to Take Student Loans Before Using Up College Savings
8 Ways to Stop Student Loans From Ruining Your Life

Your browser is out of date. Please update your browser at http://update.microsoft.com