How Credit Repair Now Can Save You A Lot Of Money Later.
Posted: April 11th, 2011 | Author: Joe | Filed under: Credit | Tags: Borrowing, Credit, Credit score, Debt, Guest Post, loans | No Comments »Credit repair is a hot topic these days – largely because it is a crucial element of overall financial health. Without maintaining good credit, you are not only likely at the mercy of lenders should you ever need financing, you are also guaranteed to spend more money than a consumer who maintains a good credit record and solid credit scores.
Why Credit Should Matter Now
Many consumers make the mistake of waiting until the last moment to do something about their credit scores and only make the attempts when they need to secure financing. But waiting until the last minute these days is a measure in ‘too little, too late’. It is important to do something about your credit score now regardless of your timeline or need for financing.
Here is an overview of situations where a bad credit score will cost you big bucks:
Mortgages
Mortgage lenders are scrutinizing credit histories and scores harder than ever thanks to the near-meltdown of the industry a few years ago. There are now stricter lending laws being imposed and borrowers need to come to the table with really good credit in order to have the most opportunities for an affordable home loan. Those without good credit scores will have a tougher time getting lender approval and for loans that are approved the interest rate of the loan will be higher, meaning you’ll spend a lot more money over the life of the loan than if you were eligible for a lower interest rate. Your loan terms and conditions may also be stricter such as requiring more than the typical 20% down payment on your loan.
Auto Loans
Like mortgage lenders, auto loan financing may be impossible for those with bad credit or the interest rate you pay on the loan may be much higher than for other buyers. As a result, you will pay more for the vehicle over the life of the loan, which is essentially a price you can’t make up in the value of the vehicle since most vehicles depreciate as soon as you drive them off of the sales lot.
Auto/Home Insurance
It is not just financing companies that are looking closely at credit scores. Insurance providers are pulling credit scores on customers in order to gauge their potential for claims being filed. Insurance providers use a theory that credit history is relative to claim potential, meaning that those with lower scores are more apt to file an insurance claim. If you have a low score, you will have to pay a higher premium on your auto and home insurance than consumers who have better credit backgrounds.
Utilities/Consumer Services
There are many regular service providers who will pull credit scores before approving service applications. If customers have low credit scores, most providers will require a hefty down payment or prepayment on accounts to prevent risk of the bill not getting paid. For instance, with a low credit score, you may have to put up several hundred dollars on your mobile phone account or if you open a new account with the electric company, a deposit might be necessary to start services. Such deposits are often held for up to a year to gauge prompt payments each month and only then will you receive a credit.
Credit Card APRs
If you are looking to apply for a new credit card but have a poor credit score, your options will be seriously limited. In some cases, you will only be eligible for secured cards, which means you need to send several hundred dollars as a prepayment. Secured cards will also require you to keep up with timely payments to keep the account loaded and change significant fees for transactions and penalties for late payments or over-the-limit charges.
While credit repair is possible by anyone, what is important to remember is that it is a time-intensive process that should begin as soon as possible. Even if you are not anticipating a need for a loan in the near future, there are too many other resources relying on credit scores for you to ignore the importance of your credit standing. Over time and with good financial management practices, you can improve your credit score to where it should be. Today, lenders are looking for borrowers with a credit score of 730 or higher in order to afford the best deals and the most options.
