Welcome to our new blog regarding credit and credit repair. Before getting to some general ‘food for thought’ regarding the cost of credit, it is important to point out that a few years ago 680 was considered and excellent credit score and afforded the consumer unlimited choices with the best pricing and interest rates. Yesterday’s score of 680 is now considered by the authorities on the subject to be equivalent to at least 750 since November of 2014. A credit score of 680 in 2015 is considered to be the division between fair and poor credit. While those with poor and bad credit should have their credit professionally analyzed, most with anything other than excellent credit (at least 750 FICO score) should get their credit checked as well.
There are 3 essential segments of the credit industry: ID theft, credit monitoring and credit repair. Incorrect ID information on a credit report is obvious to a true professional credit report analyst and should be checked at least on an annual basis given the amount of incorrect information on credit reports. A 60 minutes episode revealed well over 40 million mistakes each year (20% of all credit reports are affected). On the subject of credit repair (as opposed to monitoring), inaccurate and aging items having a negative impact on your score are fixable (or not) all at the same time. True credit repair should have a life cycle of 60 days or less 100% of the time. Credit monitoring only delays and prolongs what can and should be addressed immediately.
If you truly want to stay on top of your credit report accuracy and credit worthiness, have your credit report reviewed and repaired by a true professional credit report analyst. Most should also go the extra mile by committing to a quality ID theft protection plan. Monitoring should be avoided at all cost as it is simply unnecessary (not illegal or fraudulent….simply an unnecessary process that costs consumers an average of more than $2,500 over the life of the average credit monitoring cycle).
So, on with some ‘food for thought’ regarding items related to the cost of credit.
Auto Loan Interest Rate
Auto loan interest rates are extremely credit sensitive. Partly because many auto dealers participate in the profits from the loan, though primarily because an automobile does not have inherent value like real estate (barring a few exotic cars perhaps). Auto loan interest rates range from 0% to more than 20% if you are forced to borrower from a private finance company due to poor credit. The difference between Excellent (750+ credit score) credit and fair (650-699 credit score) credit could mean thousands of extra dollars each year on your car payment alone.
Car Insurance Premium
If you thought car insurance companies kept tabs only on your driving record to determine how much you’ll pay for coverage, you’d be wrong. Insurers check your credit report — and poor credit drives up your premium.
Mortgage Interest Rate
If you’re in the market for a home loan and your credit is spotty, you’ll likely pay tens of thousands of dollars more in finance charges. According to FICO, the credit scoring company, an individual with a FICO score ranging from 760 to 850 would pay $1,426 a month for a $300,000 home loan based on a rate of 3.965 percent. A borrower with a lower score, from 620 to 639, would pay nearly $300 more each month — $1,714 for a 5.554 percent loan. Over a 30-year term, that lower credit rating is costing you an extra $103,444 in interest charges.
Just as car insurance companies review your credit rating, so do companies that provide homeowners insurance. The National Association of Insurance Commissioners reports that 95 percent of auto insurers and 85 percent of home insurers use credit-based insurance scores in states where it’s deemed an underwriting or risk classification factor. So if your credit nosedives, your homeowners insurance premium may head north.
Your Job Prospects
Poor credit could cost you a job opportunity. A 2012 study from the Society for Human Resources Management found that nearly half of U.S. employers use credit checks on some or all of their job applicants. So if your credit history isn’t so great, that could scare away potential employers and make it harder to find work. A growing number of states are passing laws to curb these credit screenings, although many states allow employers to use them as part of the hiring process.
Enlisted personnel and certain federal workers need to maintain good credit in order to obtain various government clearances. Having bad credit could derail military members or government employees who are seeking promotions or career advancement opportunities.
Your Love Life
No one likes to be rejected by potential suitors, whether it’s due to a lack of chemistry, your appearance or some other reason — like your credit history. A staggering 75 percent of women, and 57 percent of men, say credit scores play into their dating decisions, according to a survey of 100,000 single adults. Most respondents said money management skills were just as important as looks in deciding if someone was worth pursuing.
Your Physical Health
Financial stress can lead to headaches, sleepless nights, muscle tension, hormone imbalance and other maladies. Researchers have even discovered that fretting over financial matters negatively affects people’s brains, partially because such mental distractions make you lose focus.
Student Loan Rates
If you’re considering college for the first time or going back to school to boost your marketability and have a poor credit rating, your student loan interest rates could soar into the double digits. Big student loan obligations could leave you with very little cash to invest in your retirement funds and in many cases to simply make ends meet.
Credit Card Options
Applying for a credit card almost always requires a credit check. If your credit is somewhat blemished, a bank may offer you a credit card with an above-average interest rate. If your credit is worse than that, you may be offered a credit card with an interest rate of 20 percent or more. For people who’ve suffered through a bankruptcy, foreclosure or other credit catastrophe, a “secured” credit card may be your only option. Secured cards require you to put up a cash deposit as a way to assure a lender that you’ll pay your bills.
Your Good Name and Reputation
It’s one thing to have bad credit with traditional lenders like banks, credit unions and other financial institutions. But if your repayment track record is seriously tarnished, you may even have a bad reputation with family and friends. Perhaps you’ve borrowed money and not repaid it, or you took far longer than agreed to make good on a loan. If that describes you, your good name has been sullied. Such financial lapses will make it far more difficult to convince relatives to come to your rescue if a true financial emergency arises.
Yes….this is a lengthy first blog entry! But important. Consumer spending makes up over 70% of the national GDP and credit directly affects the cost of that spending to each and every consumer. Credit affects the cost of all instances of lending and borrowing, cost of credit cards and so much more.
Hopefully this is a helpful start in providing more awareness regarding credit and credit repair. If you need help or have credit concerns, follow this link and we will be happy to speak with you.