Your Credit Score: How it affects your budget

This is a guest post from Clover Mortgage.

If you’re watching your dollars and budgeting carefully, you probably don’t want to use any credit, but at some point it can become unavoidable.

You may find yourself needing a new car, or your employment could demand a move to a new city where you’ll need to purchase or rent a home. Or worse, something unexpected could happen and give you no choice but to use a credit card. While we should have an emergency fund in place, few of us actually budget for items such as the transmission going out of the car when we’re on vacation 200 miles from home, or the furnace blowing up when the mercury is reading ten above zero. Some large expenditures simply cannot be delayed.

If you’ve kept your credit scores up and carry a low-interest credit card, you can recover quickly. Your payments will go toward paying down the debt rather than paying high interest charges.

If you’ve had to use a high interest credit card for an emergency expenditure, get that balanced transferred immediately. (Kelly’s note: Do the math, some credit card companies charge large fees for transferring balances) Compare credit card offerings and choose one with no annual fee and an introductory rate of 0% for the first 6-9 months. Then budget to pay off the balance before the interest rate resets.

Unfortunately, many who watch their money conscientiously are carrying low scores in spite of their good habits. People who always pay cash fall into this category, as do those whose credit reports contain errors. According to credit industry executives, over 70% of all credit reports do contain errors. Finally, careful spenders with high credit scores can become prime targets for identity theft, and not realize it until extensive damage has been done.

That’s why, after meeting countless conscientious consumers whose poor credit scores prevented them from getting good home loans, Clover Mortgage created the website www.CreditScoreQuick.com. Here individuals can browse through hundreds of articles on how to create, maintain and protect good credit scores; can learn what criteria the credit bureaus use to determine their scores; can learn the steps for correcting credit report errors; and can order a free copy of their own credit report with scores.

Kelly’s notes: Despite not using our credit often I do carefully monitor our credit score and report. You can use AnnualCreditReport.com to get free credit reports, and CreditKarma.com for a free score based on TransUnion’s score.

My husband and I recently learned firsthand that credit scores can vary hugely between the 3 agencies. While applying for our car loan the dealership had us a full 50 points lower than our credit union who we had pre-approved us. The difference in interest rates was huge. Our car loan rate would have been 4-5% higher based on that number! That’s thousands of dollars over the course of our loan.

We don’t currently use a pay service to monitor our credit scores/reports, do you?

Disclosure: This is a sponsored post. For more details, please visit my disclosure page.

photo credit: me and the sysop

About Kelly

Kelly Whalen is the founder and editor of the Centsible Life. She started the blog in 2008 as her family faced a mountain of debt and the fixer upper they purchased became a FIXER UPPER. The website was born out of her desire to share what was working (and what was not) on her family's journey to financial security. Kelly lives in Minneapolis with her family.

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