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6 Ways Your Credit Score Impacts Your Life

By | Credit Scores

If you’re like most people, you won’t know your credit score until you suddenly realize it’s important. Normally, this happens when you apply for a mortgage or another large loan.

You see, you might be ignoring your credit score, but banks, businesses and other lenders aren’t. For these users, your credit score is a vital snapshot of your financial well-being and trustworthiness, and it enables them to manage their risk when lending to you, hiring you or selling you their services. It’s the culmination of every large financial decision you’ve ever made — and it can have a significant impact on your future decisions.

Let’s take a look at some of the significant ways in which your credit score impacts you.

1. The Interest Rate on Your Mortgage

Your mortgage is likely to be the biggest loan you take out in your life, and your credit score plays a significant role in determining which mortgage you can get and how much it is going to cost you. Applicants with a low credit score, indicating potentially risky financial behavior, are likely to have to pay a higher interest rate on their loan and, in some cases, may be rejected outright.

A small change in the percentage of interest you pay might not seem like much, but with many mortgages stretching from 25 to 35 years, it represents thousands of dollars of extra spending.

2. Whether You Get the Rental Property You Want

Not bought a house yet? Your credit rate still affects your choice of home. After your earnings-to-rent ratio, your credit score is the most important factor in deciding whether your rental application is accepted. Given the choice of two applicants with similar earnings, the one with the higher credit score will always win — landlords know that by reducing their risk, they save money.

3. The Car You Drive

In 2017, the average auto financing loan had an APR of 4.21 percent, with most loans falling between 3 percent and 10 percent APR. The difference between a great credit score and a very poor one is even bigger: Someone with a very bad record might receive as much as 20 percent, while some users with a great record can still get zero percent APR. The difference between the two can easily amount to hundreds or even thousands of dollars per year.

4. Your Refinancing Options

As interest rates change, what seemed like a good deal a few years ago can quickly become expensive; by refinancing your mortgage or student loan, you can save a lot of money. Unfortunately, if you have poor credit your ability to do this may be limited or nonexistent.

It doesn’t matter what your credit score looked like when you first got the loan, either. Many borrowers have a good score when they get their mortgage, then fall into bad practices. When they try to refinance, their now-reduced credit score limits their options and gives them a nasty shock.

5. Your Employment Opportunities

Many employers like to credit-check job applicants before making a hire, particularly if the role comes with a large amount of financial responsibility. Although they’re not lending you money, the business is exposing themselves to risk of another kind by putting their finances and reputation in your hands. By screening out applicants with a poor credit score, businesses aim to reduce workplace theft and fraud.

6. Taking Out a Student Loan

If you’ve already borrowed the maximum federal student loan amount, it’s likely you’ll need to turn to a private loan to make up the difference to cover your tuition. These private loans (issued by a bank, credit union or school) are affected by your credit score, just like a mortgage or auto loan. This can come as a shock to students who have only dealt with federal loans before (which aren’t affected by credit score).

You’ll probably be paying off your student loan for years to come — a poor credit score could add thousands of dollars to the amount.

The Impact Can Be Positive or Negative

We’ve primarily focused on the negatives of having a poor credit score in this article, but at the other end of the spectrum are a bunch of people who get great deals on everything. Their above average credit score enables them to get better mortgages, cheaper loans, and superior work and housing opportunities. And because their interest rates are lower, maintaining their score is easier — it’s an unfortunate fact that the high interest rates those with a low score receive make it harder for them to improve that score.

Achieving Your Desired Credit Score

There’s no such thing as an irredeemable credit score; with time, effort and discipline, anyone can improve their score and access better rates. But, it doesn’t happen overnight — it takes time. Which means that the best time to improve your score is always now. You need to start preparing your credit score in advance if you want to get the best deals on a mortgage.

Unfortunately, the information on your credit profile doesn’t always tell the whole story — through no fault of your own, this information can be incomplete or even inaccurate. When that happens, your best bet it to repair your credit profile.

Ovation Credit Services helps the 79 percent of consumers whose credit reports contain a mistake of some kind. Sign up today and take the first step toward repairing your reputation!

Repair Your Credit With Your Tax Refund

By | Your Credit

Americans love to spend their tax refund on new cars or dream vacations. If your credit is in trouble, then this year you should consider using that tax refund to get your credit back in shape.

Tax Refund Credit Repair

Improving your credit score will help you get a lower interest rate on that car loan, and it can also help you get the credit you need for your dream vacation. A repaired credit score will pay for itself several times over, and all you need to do is make the right investments with your tax refund.

If you are planning any large purchases, (mortgage, car loan, home renovation loan, etc.), then it is important to repair your credit and achieve the highest credit score possible. Lenders like to see responsible borrowers who have taken the time to repair their credit and then have maintained that good credit for months or years. The sooner you get started repairing your credit, the sooner you can start reaping the rewards with lower interest rates that could save you thousands more in the long run.

Paying Down Your Account Balances

One of the biggest myths about managing credit cards is that you have to pay your balances off every month to keep a great credit score. For people new to managing credit, this idea may sound like it would cause stress and anxiety, but this is not true.

You can apply your tax refund to paying off portions of all your balances, and you will still help improve your credit score. It’s always helpful to leave a small unpaid balance on your credit cards each month to show the credit companies that you are committed to using your credit in a responsible way.

When your credit score is calculated, one of the major considerations credit reporting agencies make is how you manage your credit. The idea of maintaining a balance on your credit cards as opposed to always paying them off helps show your ability to manage your finances and regulate your spending.

Paying Off Old Accounts

While it is a good idea to leave a small balance on your active credit accounts to boost your credit score, that changes when discussing old accounts. If you have old credit accounts that have been closed but still have a balance, then you should use your tax refund to pay those balances off and get those accounts off your credit report.

The first place to start would be to contact the customer service department of the company that issued the old account. If the account is several years old, then it may have been sold to a collection agency. You can ask the account issuer if they can give you the information to contact the collection agency, or ask the issuer if they would negotiate a settlement to get the account off your credit report.

Paying off very old accounts can be tricky. The account issuer may negotiate a payoff balance with you, but they might forget to report the account as paid to the credit agencies. You should monitor your credit report every 30 days and make sure the paid off account has been removed. If it has not been removed after 30 days, then contact the issuer to get the account removed. Be sure to ask for everything in writing, and make notes of the calls you make to the issuer.

Buying a Car

Your bad credit is hurting you in many ways, especially when it comes to trying to buy a car. When you get your tax refund, you can use that extra money to get a better deal on a car, even with your bad credit.

With bad credit, you will have to pay a higher interest rate and possibly some extra fees to get a car loan. When you offer a larger down payment, you can get a better interest rate and offset many of those extra fees the finance companies will want to add.

Starting a Savings Account

A savings account, in and of itself, is not going to have a significant effect on repairing your credit. However, maintaining your credit account balances is critically important when you are trying to improve your overall credit score. Instead of spending that tax refund this year, it would be better to put it into an interest-bearing savings account and use it to help pay down your balances each month.

Credit card companies like consistency when it comes to paying your monthly bills. This means you need to pay your bills on time each month, and you need to make no less than the minimum payments. When you have a tax refund growing in an interest-bearing savings account, you have the financial reserves you need to make your payments. Over time, this will significantly improve your credit score and repair your credit profile.

You work hard all year and you look forward to enjoying your tax refund each year, which is a perfectly normal expectation. But if your credit profile needs repair, then you should consider investing this year’s tax refund into improving your credit. There are simple steps you can take yourself that will help get your credit back on track and raise your score.

Another investment you can make with your tax refund is to utilize the professional credit repair services of an organization such as Ovation Credit Services. With these kinds of services, you have access to the comprehensive and personalized advice you need to get your credit back on track.

 

Sources:

https://www.bankrate.com/finance/debt/7-simple-ways-improve-credit-score-1.aspx

https://www.thebalance.com/buying-car-bad-credit-960978

http://time.com/money/4143677/paying-my-credit-card-in-full-hurts-credit-score/

www.thebillfold.com/2013/11/i-need-to-pay-off-a-balance-on-a-closed-account-and-repair-my-credit-help-me-please/

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