Credit Repair Services and The TRUE Cost of Bad Credit
Credit Repair is often looked down upon because of the costs associated with the process, but the true expense for consumers lies in other suprising places.
There are many people that have vowed to never use credit again because of the mental and financial stress debt has put them in. There are many people that are going cash only these days either because of choice or maybe because they are not just able to get any type of credit. Even if one has vowed to go cash only, bad credit can affect you in many aspects of your life. Being in the financial industry for many years, I have personally seen the cost of having bad credit
They most obvious effect of bad credit is not being able to qualify for any type of major purchase. A home purchase for example, is out of reach for many people. In Austin Texas where the apartment occupancy rate has been as high as 98%, apartment complexes have been raising peoples rent by as much as $300. I have had many people come to me for help in purchasing a home because purchasing a home ends up being cheaper than their apartment rent. Plus, they would prefer to put their money into something that they will own rather that giving money away to their landlord. With these record low rates, it is the perfect time to buy a home and get away from renting.
Purchasing a car can be a fun and exciting time however people don’t prepare themselves credit wise before they go searching for a car. A car salesman is quick to sell you a car at whatever interest rate in order to make a sale. People with bad credit are sometimes just happy to qualify and they really don’t care about what rate they are getting and some salesman know this. This allows them to charge a much higher yield spread on the rate without the customer questioning or negotiating too much on the rate. Yield spread on the rate is where financiers make their bonus and if you don’t question them about it; it is money you are throwing away. For example, see this real client auto loan finance numbers
Loan amount Rate Term Payment Total Paid
$12,021 21.56% 61 $326 $19,886
With some banks offering as low as 1.75% rate on new or used cars, one should invest in repairing their credit. Let’s say the customer above had a good score and got a better rate.
Loan amount Rate Term Payment Total Paid
$12,021 5.0% 61 $223.58 $13,638.21
That is a total of about $6,247 savings in the life of the loan! People think credit repair is expensive, throwing away $6,247 in interest is expensive and that is in just one aspect your credit affects your finances.
Did you know that insurance companies are not required to tell you that you are paying higher insurance rates because of your credit? The reason is because of a Supreme Court decision that passed in 2007, that stated that insurance companies do not have to disclose bad credit affected their rates. The insurance companies argued that credit worthiness was a major indicator in a person’s character and driving responsibility.
These days about 60% of employers are pulling credit to consider you for employment. I have personally seen people turn down from promotions, or even military positions because of bad credit.
Restoring should be seen as an investment, not just because it will save you money in the short run but think about where else you could be putting that money. What if you could refinance your car, home or lower insurance rates? You could put that money to better use like saving for retirement or investments. I have met with many people that are now able to put hundreds of dollars a month more into their savings, retirement or investments without having to come out of pocket any more than they were before. Just by investing in their credit allowed them to save hundreds, even thousands a year.
How can credit affect so many aspects of your life? The reason is because the credit bureaus have lobbied enough to convince lawmakers that credit is a true way of measuring how responsible people are. They don’t take life into consideration, such as illness, divorce, and loss of job. Everyone needs to be vigilant with their credit and take care of any inaccuracies or derogatories.