A poor financial situation sometimes leads to many of us cutting corners when it comes to our spending habits. Very often it’s because we’re spending too much money each month to pay off our debts. Interest rates for those with poor credit scores versus those with high ones can mean the difference of hundreds of dollars in monthly payments.
Buying a car in Delaware for example; a difference of about 100 points in your credit scores can mean paying interest at an APR rate under 5.5% compared to over 21.6% for those with the lower score. On a $25,000, 36-month auto loan, the difference in monthly payments is almost $200, and over the life of the loan it’s $7,061.
Your credit score is extremely important when it comes to the amount you’ll be paying each month. That’s why making sure you have the best possible score before you get a loan, or even a credit card, is vital.
The Vicious Cycle of Credit
Too many people believe that there’s nothing they can do about their credit scores. Usually because they’re not properly educated about credit, debt and their effects on credit scores. When you first sign up for a credit card, no one sends you a pamphlet on how to use it to boost your scores. The credit card companies just hope you use it as much as possible.
As a result most of us don’t have a concrete plan when it comes to using credit. Either that or the plan is to use it when we “need” it. The problem with that is that most of the time we don’t really need it. We just figure that the money’s there so we might as well spend it.
So now, we’ve maxed out our credit, piled up the debt and lowered our credit score in the process. If we haven’t learned our lesson yet we go get another credit card to keep up with the lifestyle that we’ve grown accustomed to. Now we’re borrowing from Peter to pay Paul, at a significantly higher interest rate, and the bills never seem to stop coming.
Where We Cut Corners
If you’re not using your credit properly, at some point you’re going to be forced to make some changes to your spending habits. Unfortunately, since you’re dependant on your credit cards, you find other ways to trim the fat.
First it might be that morning cup of coffee that you love so much. Then the grocery budget gets smaller and you’re also not eating out nearly as much. At some point you cancel your health care because it’s simply too much out of your paycheck each month. So when does the cycle end?
This post actually stems from a report I saw last night on the San Diego 6 news about a woman who went down to Tijuana, Mexico to have liposuction surgery and died during the procedure. Living in San Diego everyone here knows a handful of people that head down to Mexico for dental or medical work. Why? Because it’s significantly cheaper and only a half hour away. But are these the corners you want to be cutting financially? Most of these procedures can be financed today as long as your credit’s in order.
Why it’s Important to Avoid the Dangers of Credit
Having a strong or weak credit profile influences the way we make decisions in all aspects of our life. If we’ve been responsible with our credit we know that we have the ability to borrow when necessary and have the benefit of paying the lowest interest rates in the industry. But for many people it’s already too late for that advice, they need to fix their credit before they can build it back up.
For those that find themselves stuck in the vicious cycle that is credit misuse and mounting debt, it’s hard to get out. Sometimes credit repair can get you back in charge of your finances and credit score within a couple of months. It’s an option that could ultimately save you thousands of dollars a year. When you realize that you can be putting that money into savings instead of paying off high interest fees, repairing bad credit seems like a no-brainer.
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