A low credit score will affect all financial aspects of your life from getting a loan to auto insurance rates. One of the best ways to raise your credit score is to pay down debt. In order to fix your low credit score, you first need to obtain your free credit report.
Higher Interest Rates on Loans
When you apply for a loan, it is sent out to underwriters who use a number of factors to evaluate whether to give you a loan or not, and what interest rate your loan will have. One of these factors is your credit score. If you are applying for a mortgage, the lower your credit score, the higher your interest rate. But you also may need a higher down payment. If you apply for credit cards or personal loans, these interest rates can be a lot higher if your credit score is low. It may not be possible for you to refinance an existing loan if your credit score is low. If you are trying to buy or lease a car, you will have to pay a higher interest rate with a lower credit score. You also may not be able to take advantage of special financing opportunities allowing 0% down.
Higher Rental Deposits and More Competition for Existing Rentals
Landlords can require a credit report in order to lease you an apartment. If your credit score is bad, it may be difficult to find a quality rental in a competitive market as the landlords will choose tenants with better credit. Or, they may require a higher security deposit. Utilities may require a deposit if your credit score is low. If you plan on acquiring a phone by leasing or paying it over time, you may be denied this opportunity if you have a low credit score.
Employment Issues
Employers do background checks for many jobs, from accounting positions to minimum wage retail jobs. If you have a credit score that is too low, you may be denied employment. A lower credit score implies a risk when hiring an employee who will deal with money. Any position that requires a security clearance may be hard to get since low credit scores imply a risk that someone is vulnerable to blackmail. If you are trying to start your own business, getting a business loan gets harder when you have a low credit score.
Insurance
Actuaries connect having a low credit score with being susceptible to more accidents. Therefore, insurance companies may charge higher premiums for auto insurance.
Obtaining Your Free Credit Report and Paying Off Debt: the First Step to a Higher Credit Score
Get Your Free Credit Report
The first thing you need to do is get your free credit report. You can go to Annual Credit Report to get your free credit report. This a composite report made from the three main credit reporting agencies. You can also get a free credit report from each of the three credit reporting agencies by going to Equifax, Experian, and Transunion.
Gather Up Your Debts and Your Free Credit Report
The next step is to get an overall picture of your debt. This needs to be in one place. I can be a computer spreadsheet or it can be a page in a notebook. Whichever method you are more comfortable using is the one to use but you have to use something.
Along the left hand side, make a list of all debts. Include your mortgage, home equity lines of credit or loans, car loans, appliance or furniture payments, credit cards, personal loans, and student loans. In the next column, list the name of the bank or organization to whom you make the payments. In the third column, list the total amount due on the debt. In the fourth column, list the minimum monthly payment. And in the last column, list the interest rate. Look for this information on your credit report and credit card statements. If you can’t find it, then call the bank or organization to whom you make the payments. At the bottom, total the amount owed and the monthly payments. This step is very important to begin the journey to lower debt and a higher credit score.
What Else Are You Paying Every Month
The final part of the first step of this process is to make a list of all other monthly payments: utilities, rent, medical bills, overdue bills, taxes owed, money borrowed from family and friends, etc. Include everything you owe to anyone as well as the recurring monthly bills you need to pay every month.
The Big Picture
After completing these three tasks you will have a picture of how much money needs to go out every month and where it goes. From here, you can come up with a plan to prioritize these debts. Seeing everything in one place makes it possible to begin the journey of paying them down and building up that credit score. TGUC Financial can help you with credit repair. Contact us today and let us help you raise that credit score.
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