There are so many money-making ideas that involve maximizing income. While this is a great way to change your financial status and pay off student loans, there are more fundamental steps to improving your financial life. One of the most important is to improve your credit – a concept that is poorly understood by many people who would benefit from it. We’ll cover the reasons why credit repair is vital for financial health, as well as some of the best ways to accomplish it.
Why Does Good Credit Save You Money?
Credit is the borrowing of money to spend on things for which you don’t have the available cash. Credit history is exactly what it sounds like – a record of all of the ways you’ve used credit in the past. There are three different companies that keep track of this information for every consumer. They are called Credit Reporting Agencies, and they each assign you a three digit credit score. The credit score is what lenders look at when they are deciding whether or not to grant you a loan.
This is where it gets interesting. If you have a bad credit score, you’ll likely be denied your loan request. That’s because the lender thinks it’s too risky to lend you money. You might not pay it back. For people with mediocre credit however, a loan will likely be issued, but with very high interest. Interest is the way a lender accounts for the possibility that you will not pay back their money. By collecting interest from lots of borrowers, they have the extra money in the bank when a borrower does default on a loan. The lower your score, the more you’ll pay in interest and fees. For large loans like mortgages, you may pay tens of hundreds of thousands of dollars more during the life of your loan, than would someone with a great credit score.
How to Improve Credit Scores
There are good companies that will repair your credit for you. Credit repair service reviews are available. However, it’s also possible to do some of this work yourself. First you need to access your credit report, from one or more of the three credit reporting agencies. If you have bad credit history, you’ll likely see negative items on these reports. Each of these is a record of some time when you didn’t pay a bill on time, borrowed too much money in a single credit card, or otherwise used credit irresponsibly.
You can pay off the debts in question if you are able to afford that. You can then dispute the negative marks on your credit report. When you do this, it is the job of the lender who issued the complaint to recreate the transaction history of the debt. This requires a lot of homework on their part. If you have indeed resolved the issue, they will have to remove the item. But even if you don’t remove the item, they may just remove it because it is not worth their time to review the necessary documentation.
Whatever you do, get your credit score up. It’ll allow you to keep more of your income for your entire career.