What Smart Homeowners Do to Control Debt
How well you manage your existing mortgage, line of credit, or credit card accounts has an enormous influence on your credit rating. Your payment history, in fact, accounts for about 35% of your overall credit score. That’s why homeowners should take steps to keep debt under control.
How Debt Affects Your Credit Rating
Your success in managing loans and other debt is the main item credit bureaus use to calculate your credit score.
Any time you need a new personal finance loan – or you’re looking for mortgage refinancing or a second mortgage – banks will examine your credit score and credit history to see how well you manage your payments.
Institutional lenders are typically looking to see if you make your payments on time, and if you’ve ever:
- paid off debts in full,
- deferred or missed payments,
- had payments in collections,
- filed for bankruptcy, or had liens filed against you
Both new and existing loans have the potential to help or hurt your credit rating. Late or non-payments for example can cause your credit score to drop quickly, making it harder to get new credit from a bank when you need it.
Smart Debt Control Tips for Homeowners
The more recent your payment history, the more it impacts your credit score. So it’s never too late as a homeowner to get and keep debt under control. Here are 3 key ways to approach debt management that will reflect positively on your credit rating.
1. Make Your Loan Payments on Time Every Month
Whether it’s a mortgage loan, home equity loan, or HELOC, making your payments on time every month is critical for controlling your debt. Late fees not only make it harder to pay down your loans, finance charges and interest rates can increase if you miss too many payments in a row.
Use a calendar or digital notification system to alert you in advance when monthly loan payments are coming due. And if you are late with a payment, don’t just skip it and wait for the next due date. Making up missed payments as soon as possible helps prevent those oversights from being reported to credit bureaus.
2. Do Your Best to Cover Minimum Payments
If you’re strapped for cash when it’s time to make your credit card loan payments, finding the funds to at least cover the minimum amounts due will keep your accounts in good standing. Meeting your minimum payments every month may have little impact on paying off your overall debt, but it will help prevent that debt from escalating faster than it otherwise would.
3. Figure Out Which Debts You Should Pay Off First
Homeowners often find themselves supporting a variety of debt – from education loans for their children, to self-employed loans for themselves. So how do you know which debts you should focus on paying off first?
Paying off your credit card balances will often provide you with the greatest financial benefit since they commonly have higher interest rates than most bank or private lender loans. The higher the interest rate, the more a loan is probably costing you every month – and the larger the debt it represents.
Everyone bumps up against financial challenges from time to time. But smart homeowners know that if they’re having trouble keeping up with debt, they have options.
A home equity loan from Alpine Credits, for example, makes it easy to consolidate your debt and protect your credit rating. And your application can usually be approved within 24 hours – regardless of your age, income, or credit history.
Talk to us at Alpine Credits where Homeowners get Approved.