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3 Ways to Take Advantage of Your Rising Credit Scores

3 Ways to Take Advantage of Your Rising Credit Scores

There are many perks that come with having good credit. Not only do you get to live a life without fear of rejection from lenders and creditors, but you also get better interest rates that save you money. That’s why so many of us are consistently working to improve our credit and perhaps even atone for past mistakes

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.

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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.

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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.

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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

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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.

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Published on September 17, 2018

How Being Smart With Your Money Leads to Financial Success

How Being Smart With Your Money Leads to Financial Success

Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

1. Avoid being “penny wise but pound foolish”

It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

2. When you want something big, wait

Impulsivity can get you in trouble in most aspects of life. Finances are no different.

It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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So, you get the itch.

You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

Here’s where you have to take a step back.

Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

The impulse faded. And you just saved yourself a ton of money.

3. Live smaller than you can afford

You finally get that big raise. And you want to celebrate – and why not?

You’ve been looking forward to this forever. And after all, it was all due to your hard work.

That’s fine, splurge a little. However, make it a one-time deal and be done.

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Don’t get caught in the trap that just because you’re now making more money, you should spend more.

Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

4. Practice smart grocery shopping

Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

Create a grocery budget

Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

Make a list… and never deviate

Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

These impulse decisions will lead to overspending, which will derail your grocery budget.

Eat before going grocery shopping

It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

This makes it much easier to stick to your grocery plan.

5. Cancel your gym membership

Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

The average gym membership costs around $60 per month. That’s $720 a year.

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Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

It’s baby steps… And baby steps can start now!

I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

Featured photo credit: Unsplash via unsplash.com

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