What You Don’t Know About Credit Scores Can Cost You

Each year, the Consumer Federation of America, or CFA, releases a report on credit scores. Specifically, this report is an analysis of credit score knowledge and what consumers do and don’t know about the impact of their score, warning signs that could lead to poor scores and more.

The good news is that the CFA’s 6th-annual report on the matter, released earlier this week, indicates that Americans have learned from their past mistakes, notably older Americans who got into trouble during the “great recession”. But the bad news is that the report indicates that consumers still have a long way to go in terms of truly understanding the impact credit scores can have and how wide-ranging this impact is.

Check the Report: What Consumers Don’t Know

The biggest misconception that consumers have when it comes to credit scores is just how significant a low score can be when it comes to purchasing. If a credit score scale goes up to 850, a low scores is usually considered 620 or less. Generally speaking, the lower the credit score, the more difficult an individual will have getting financing for any type of purchase – that is, if they’re even approved for financing at all. Typically, poor scores can add anywhere from five to 20 percent to to the total cost of the loan. The CFA report showed that about only 20 percent of all consumers truly know just how much low credit scores can hurt.

The report found that another big unknown has to do with just who can check your credit score. While most consumers know that credit checks are essential for things like mortgages and auto loans, most don’t know that landlords, would-be employers, insurance agents, cell phone carriers and utility companies can also check your credit score in an effort to determine your “risk” as a consumer.

Other unknowns include:

  • About half of all those surveyed didn’t know that lenders are required to inform consumers of their credit score during the application process, whether they’ve been approved or not.
  • About two out of every five people surveyed believed that age and marital status factor into a credit score. That’s obviously not the case.


The good news about the most recent CFA report is that about 80 percent of those surveyed knew the basics about credit scores and credit reporting. Data showed that many are well aware of the negatives that can greatly impact a credit score (i.e. foreclosures, high credit card balances, bankruptcy, missed payments, etc.). But in the case of credit scores, what you don’t know can greatly hurt you. So while the CFA report does have some positives, there’s still a long way to go in order for consumers to truly understand many of the important aspects of credit.

improve your score before retirement

Credit Score Before Retirement – Do I care?

Buying A HomeWhen you are getting ready to retire, your credit score is probably low on your list of concerns. After all, your days of borrowing are behind you. But, there are still many reasons that maintaining a high Credit Score Before Retirement can be beneficial in your retirement years.

High Credit Scores Save You Money

In retirement, you want to make every dollar go as far as it can to keep you comfortable. Having a high credit score means paying less for many services. Better mobile phone plan rates are often possible with good credit. Insurers will charge you less to insure your car or home. You can also often avoid or reduce costly deposits for utilities if you can show a proven history of paying your bills in full and on time.

Your Current Creditors May Check Your Scores

Credit card companies occasionally check their clients’ credit scores to make sure that they are still in good financial shape. If your credit card company sees that your score is slipping, it can result in a reduction in your available credit, an increase in your APR or even them declining to renew a card that you currently have. On the other hand, if creditors see your scores go up, you may be eligible for higher credit card limits or a lower rate.

You Will Have More Attractive Chances to Refinance

If you still owe money on your mortgage or an automobile loan, refinancing can save you thousands of dollars. This allows you to dedicate less of your retirement income to paying off loans and more of it to enjoyable retirement activities such as hobbies, travel and restaurant meals.

You’ll Have Better Options if You Want Credit in the Future

People are living longer than ever and staying more active in retirement. If you see a good deal on a rewards credit card, good credit will allow you to take advantage. For instance, many airline miles cards periodically offer large sign-on bonuses. Even if you have the money in the bank to pay out of pocket for airline tickets, scooping up the deal can mean saving several hundred dollars on a well-deserved vacation. Just make sure you pay all bills in full and on time to avoid costly interest charges.

How to Increase Your Credit Score

If you already have a high credit score, you won’t have to do anything different to improve your score. As the average age of your oldest accounts increases, your score will naturally go up, as well. If your credit is less than sterling, there are a few ways to improve it before retiring:

  • Pay off any installment loans. If you owe money on a car, furniture, or any other item subject to monthly payments, work to eliminate that debt. The fewer loans you have, the better your score.
  • Keep your credit card balances low. Creditors like to see a low level of utilization compared to your available revolving credit.
  • Check your credit reports regularly. Many reports contain errors that can reduce your score.
  • Don’t close old cards. The length of your credit history is a factor in your credit score.

Good credit habits can pay off for a lifetime. Need a little help getting on track? Contact Key Credit Repair for advice that can help you have a prosperous retirement. Feel free to contact our office, at 617-265-7900 or schedule a free consultation below.

Total interest you will pay !

How Much Interest Will You Pay in Your Lifetime? -Tips

Nobody likes to pay interest, but it’s a necessary evil for large purchases such as a home or a car, as well as part of the deal when you charge items with a credit card. (To really make your stomach churn about the interest that you’re paying, all you need to do is take a glance at your mortgage the next time a bill is due.)

But if we were to ask you how much total interest you pay throughout your lifetime, would you know? What would your guess be? $100,000? $200,000? Something greater?

The amount of interest you’ll pay throughout your life certainly depends on a variety of factors

your credit card limit and spending behaviors and your credit score. But according to a report on Credit.com, a site that has developed a tool to calculate how much interest you’ll pay over a lifetime based on the purchases that you’ve made, the average American can expect to pay $279,000 in interest. To put this number into perspective, consider the fact that recent estimates have stated that the cost of raising a child, from birth to 18, is $245,000. So yes, if you’re an average American, you can expect to pay more in interest than you would to raise a child.

Scary, we know. Thankfully, you can take measures to ensure that you’re more than just the “average American” when it comes to interest to curb this $279,000 number. The most obvious means is to save and pay cash for all of your purchases. After all, an additional $279,000 back in your pocket over a lifetime sounds pretty good to me, no? But that’s certainly not practical for everyone. With that in mind, here’s a look at some practical advice to reduce those lifetime interest payments:

Raise Your Credit Score

It’s worth noting that the $279,000 lifetime interest payment is based on someone with a fair credit score (620-679). So if your credit score is better than fair, you’re going to be paying less than the average American over the course of your lifetime due to your status as a more trustworthy consumer, which comes with lesser rates. Is your credit not up to par? Enact some credit repair strategies to improve it, as well as your finances:

  • Pay bills on time: Payment history accounts for 35 percent of the FICO score, the largest single category.
  • Reduce credit card debt: If your credit card debt is greater than 30 percent of your total credit allotment, your score will suffer. To boost your FICO score, pay down debts so that you owe less than 30 percent of your limit.
  • Credit history, types of credit and new credit are other factors that contribute to your score, but aren’t weighed as heavily as the two aforementioned categories.


Refinance Loans

Perhaps you took out an auto loan or bought a house when your credit score was just “fair” and now it’s “excellent” – you don’t have to continue to pay your bills with the interest rates that came with a fair score. Consider refinancing old loans if your credit status has changed to lock in lower interest rates. Check with your bank or credit union to see what interest rates are at and consider pulling the trigger and refinancing when rates are low enough. It doesn’t take long and can pay big dividends.

Credit Card Tips

The interest you’ll pay over a lifetime on credit cards come in a distant third place compared to interest on home loans and auto loans for most consumers, but it’s still a category worth focusing on. There are a number of things you can do to reduce interest payment, such as:

  • Pay on-time, in-full: Only charge what you know you can pay off.
  • Make multiple payments each month: Making more than one payment per month, even if you can’t completely pay the card off each time, can help lower your balance and thereby your interest.
  • Negotiate a lower rate: If you’re unhappy with your credit card interest rate, just a simple phone call to inquire about the possibility of getting a lower rate can work sometimes, especially if you’ve had the card for a long time.
  • Shop around: Not happy with your current interest rate? Shop other cards.

A final tip when it comes to charging is to seek alternatives for large purchases. For instance, instead of charging furniture when furnishing a home, look for a store that offers a 12- or 18-month same-as-cash payment plan. You can do the same with large medical bills – go on an interest-free plan if it’s paid off within a certain period of time.

Just because the average American pays $279,000 in interest over their lifetime, it doesn’t mean you can’t deviate from the norm. For more information on how to repair your credit score, feel free to contact our office at 617-265-7900 or schedule a Free consultation below.