Finance 101: Why Credit Repair is Important

Finance 101: Why Credit Repair is Important

( – Credit is your financial reputation. While a good score can extend your buying power and help you access affordable credit, a bad score can have the exact opposite effect. Scores under 600 points, the “danger zone” in which creditors consider you “high-risk,” can be particularly devastating. Credit repair can help you overcome these hiccups while also granting you access to these important benefits.

Higher Credit Limits

Banks and credit card companies will offer higher credit limits to those who pay their bills on time and have good credit. Most financial institutions will run a background check before increasing your credit limit. People with good scores are eligible for very high thresholds, while those who drop scores may even lose available credit over time.

Lower Interest Rates

The lower your credit score falls, the higher your interest rates increase for credit card bills and other financial debts. Interest is due either monthly or annually based on the type of account you have and the value of the balance you carry. Repairing your credit score can sometimes decrease your interest rate, lowering your monthly bill and making credit more affordable.

Good Mortgage Rates

Buying a home is one of the biggest reasons people seek out credit repair in the first place. It can be challenging — or even impossible — to obtain approval for a mortgage when you have black marks on your report leading to a lower score. If you have low credit when applying for a mortgage, and the bank approves you anyway, you will likely pay a very high-interest rate. Repairing your credit first could help you access better rates.

An Easier Time Renting Apartments

Applying for an apartment lease may also be tricky if you have low credit. Landlords often run background checks to determine whether prospective tenants have a history of paying rent and other bills on time or are often delinquent. They may reject anyone who has a demonstrated history of failing to pay on time. On the other hand, landlords often see a good credit score as proof of trustworthiness.

More Employment Opportunities

Most employers run background checks on new candidates before extending an offer of employment. These may include credit checks, especially if you intend to work with money or sensitive financial info. Good credit proves you are a responsible member of society who pays off debts and doesn’t overextend themselves, which can help employers feel good about trusting you to do the job right. Those who have low credit risk losing job opportunities.

Lower Insurance Rates

Good credit is vital to have low insurance rates for home insurance, auto insurance, and life insurance. Those who have poor credit often face the reality of paying higher premiums, typically because providers see them as less trustworthy or at higher default risk on payments. Improving your score by even 50 or 100 points can open up new options for more affordable insurance plans.

No Need for Cosigners

People with poor credit often won’t get approved for credit accounts, mortgages, car loans, or even financing plans for furniture. Instead, creditors may ask them to secure a cosigner before agreeing to open an account. A cosigner is an individual with a higher credit score and a higher income. This person will be responsible for paying any debt or money owed if the primary account holder doesn’t pay, which can be risky. Credit repair can help you get to a place where you don’t need a cosigner in the first place.

Credit repair is critical when suffering from a low score, but it can’t happen overnight. It’s crucial to figure out exactly why exactly you’re in the situation in the first place; then, you can make an effective plan to restore your financial reputation in the most efficient way possible. Whether you choose to engage the services of a credit repair specialist or you simply opt to tackle each debt one step at a time, addressing the problem head-on now is the first step on the path to becoming fully debt-free.

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