So what happens after you’ve managed to turn things around and bring your credit scores up to a respectable level? Great question! There are a few ways you can welcome yourself to the good life and take advantage of your newly-improved credit. Here are three such examples:
Apply for a rewards credit card and/or do a balance transfer
One of the biggest advantages to having good credit is that credit card companies actually offer you incentives to use their card. Depending on what appeals most to you, this could mean savings on airfare, hotel stays, or just straight-up cash back. When used wisely, and perhaps even a bit creatively, these rewards can save you money, while also helping to further improve your credit scores. Speaking of continuing to raise your scores, paying off your debt is a great way to do just that. Once again, as counterintuitive as it may sound, this is where getting approved for a new credit card can actually help. In some cases, credit cards will offer 0% interest for a set period of time. If that’s the case, you can transfer your existing balances from other cards over, allowing you to save on interest. A word to the wise: just be sure to pay off the balance before the introductory offer expires. Without any new interest accruing, your entire monthly payment will go towards paying off the balance. This makes paying off the debt before the introductory period not only a wise goal but a realistic one as well.
Refinance your car loan
Seeing as cars and other personal vehicles are the preferred method of transportation for most Americans, there’s a good chance you own one. There’s also a strong likelihood that the interest rate you got stuck with when purchasing your car back in your poor credit days is costing you more than it should. While it’s not (yet?) possible to go back in time and get a better deal, it’s not too late to get a lower interest rate. Auto refinancing is a fairly straightforward process that in recent years has been growing in popularity. Part of the reason for that is auto loan terms have swelled over the years. In fact, while auto loans once averaged 60 months (5 years) in length, the availability of 6 and even 7 year financing terms have skewed that average upwards. As a result more lenders have stepped in to offer customers the opportunity to pay off their current loan and take out a new one with a better rate. Overall this is great news for first-time car buyers who may have been forced to overpay for a loan or anyone else who has recently turned their finances around. A new twist on auto refinancing is peer to peer loans. Lending Club recently introduced a new auto refinancing program where borrowers get funds directly from individual investors instead of a bank. If the program proves popular, it’s likely other peer to peer lenders will enter the market. More competition will likely result in lower interest rates for consumers.
Reshuffle your debt by refinancing your mortgage
This one can get a little complicated, but stay with me. First, if you have a home, you’re aware that a mortgage can typically last for 30 years. That’s a long time to stay at the same interest rate you were given when your credit wasn’t so hot. Similar to your car loan, you can also refinance your mortgage in order to secure a better rate. However, this also gives the option of doing what’s called debt reshuffling, meaning you can take your other outstanding debts and bill them into your mortgage payment instead. One of the most common uses of this technique is to wipe out the dreaded student debt cloud that hangs over many Millennials. Why would you bother doing this? Generally speaking, mortgage interest rates tend to be lower than those of other debt types, including student loans. Additionally, mortgage holders are entitled to tax deductions that other types of debt aren’t, making this a double win in some cases. All that being said, debt reshuffling might not be right for everyone, so you’ll want to do some extra research before pulling the trigger. Get Your Finances in Order Getting your finances in order and raising your credit scores is not easy. Now is the time to take advantage of some of the perks that come with having good credit that you’ve missed out on over the past few years. In fact, by getting yourself a new rewards credit card and refinancing your current loans, you will save yourself some extra cash for some new adventures.
