Is your Net Worth Dwindling from Bad Financial Decisions?
Have you ever evaluated your net worth? The way you handle your finances can have a negative impact on your personal net worth. It may not affect your credit score directly, but it can leave an indirect impact on your credit history.
Individuals with a higher net worth tend to have a higher credit scores. For instance, if you apply for a home mortgage loan, a bank will likely ask you to provide a list of your assets and liabilities to calculate your net worth along with your credit score. Depending these variables, the bank will decide if they should approve your loan and at what rate. If the bank perceives you as having low net worth and bad credit score, you may not get the loan at all. Or, even if you do, you may end up paying a much higher interest rate than someone with better credit and a more promising net worth.
Factors that Affect your Net Worth
There are a number factors that affect your net worth that you may not even be aware of. Many people inadvertently minimize their net worth by focusing on short-term goals. Here are just a few examples:
Renting vs Buying a Home
Buying a house is probably one of the most essential investment decisions you will make in your life. Your property over time can increase your net worth as it builds equity based on market value and what you own on your mortgage. Rather than making monthly payments to someone else’s net worth by renting, mortgage payments can improve your net worth over time.
Large, unpaid student loan debt is a net worth no no, creating a situation where your liabilities may be greater than your assets. Student loans not only put a dent in your monthly savings, they can bring down your net worth years after you took out the loan. If you have student loans, consider working with a provider who can help you consolidate and pay them off as quickly as possible. Needless to say, defaulting on your student loans can damage your credit scores.
Credit Card Debt
Zero or low interest credit cards can lure you to invest on lavish consumer items or plan an exotic vacation. But if you are unable to repay the balance before the end of the promotional period, your card’s interest rates may jump up 18-20%, leaving you with significant, growing debt. Avoid credit card debt at all costs. If unpaid, you will damage your credit score and net worth.
At RepairMyCreditNow, we can help you understand the impact that your financial decisions have on your credit score and net worth. We are experts in helping consumers improve their lives through education and credit repair. Contact us today to get started.