Improving your credit can take time and you might have to really pay attention to the choices you’re making to see a big payoff. If you’re diligent about reducing your debts and paying your bills on time, attaining a credit score in the 750 or higher range can be an achievable goal. Once your credit hits that mark, it can open the door to some new possibilities.
If your credit has gotten a serious boost and you’ve managed to hit the “excellent” range, here are three ways to make the most of it.
1. Refinance Your Mortgage
Now could be a great time to lock in a lower interest rate on your mortgage and you’re in an even better position to save if your credit score has improved dramatically since you first bought your home. Knocking a point or two off your rate can save you a tremendous amount of money on interest and you can potentially accelerate your loan payoff in the process.
For instance, let’s say you owe $200,000 on your mortgage at a rate of 6% and you’re five years into the loan. If you refinanced into a 20-year loan with a rate of 4%, you could shave about $53 a month off your payments and save more than $47,000 over the life of the loan.
Keep in mind that shortening your loan term would mean increasing your payments. If you want to make sure your great credit stays that way, it’s best to stick with the repayment term that’s most manageable for your budget so you don’t end up in danger of falling behind.
2. Get a Better Rate on Your Debts
If you’re carrying around credit card debt or a nagging student loan balance, it may be time to put your great credit score to work to try and get a better deal on the interest. Shopping around for a 0% interest balance transfer offer could be a no-brainer if you want to consolidate your credit cards and spend less on interest in the process (just be sure to watch out for the fees!). The same could be true if you owe private student loans.
Private loans can be refinanced like any other debt. But unlike federal loans, your credit plays a part in determining whether your application is approved. If you’re paying a mixture of fixed and variable rates on your loans, refinancing them once your credit score climbs could be a good move.
If you had to get a co-signer to borrow the first time around, you can also ask your lender to release them from the debt based on your credit.
3. Lower Your Insurance Premiums
Any time you apply for car insurance or homeowners insurance, the insurance company’s going to take a peek at your credit file to see how fiscally responsible you are. If you’ve got a history of late payments or collection actions, your premiums may reflect those bad choices since you look like more of a risk.
On the other hand, if you’re in the 750 to 850 range, your insurer might be willing to cut you a deal on your coverage. That can add up to a lot of extra money that you’re saving in the long run.
According to one recent survey, drivers who maintain a score above 750 from age 25 to 65 save an average of nearly $23,000 over the course of their lives. It could definitely be worth it to make a few phone calls and find out if your good credit makes you eligible for smaller premiums.
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