Across the country, many consumers are struggling with the financial impacts of inflation. In June 2022, inflation rose to 9.1%. The increase marks a new 40-year high in inflation figures—the likes of which the U.S. hasn’t seen since the early 1980s.
Rising costs can put a strain on many household budgets. As a result, individuals and families are often looking for ways to save money and counteract the higher prices they’re paying across the board.
If you’re looking for ways to fight inflation in your own budget, there are plenty of options to research. Strategies like reducing spending, working from home, starting a side hustle, and even trying minimalism could all be good places to start.
However, there’s another approach you might want to consider as well. If you have a good FICO® Score, here are some ways to use it to your advantage, from myFICO.
For more loan and credit education, visit myFICO’s blog at https://www.myfico.com/credit-education/blog.
1. Qualify for Lower Interest Rates
A good FICO® Score has the potential to help you qualify for lower interest rates when you borrow money. Whether you’re taking out a personal loan, mortgage, or opening a credit card account, the lender is likely to review your FICO Score when it evaluates your financing application.
The interest rate you pay to a lender or credit card issuer can have a big impact on the overall cost of financing. You might even be able to save thousands or tens of thousands of dollars if you work to improve your FICO® Score before applying for a large loan like a mortgage or auto loan.
Tip: It’s easy to estimate the potential loan savings a good FICO® Score might be able to unlock for you. Check out the myFICO Loan Savings Calculator to crunch the numbers for yourself.
2. Refinance High-Rate Debt
Paying high interest rates can make it harder to manage your budget and get out of debt. And if you owe balances on accounts with revolving interest rates (like credit cards), the current state of the economy could put you under even more debt-related stress.
The Federal Reserve has raised the Federal Funds rate three times so far in 2022, and future interest rate hikes may be on the horizon as well. The increases are an attempt to slow inflation. But unfortunately, when the Fed raises rates, banks often follow suit and raise the interest rates they offer to borrowers as well. As a result, many credit card interest rates have been on the rise.
If you’re paying high interest rates on credit cards, loans, or other types of accounts, refinancing those debts might be beneficial. With a good FICO® Score, you might be able to qualify for a lower interest rate from a new lender or credit card issuer. It can also be wise to try to pay down your credit card debt in an effort to save money and avoid potential financial challenges in the future.
You might even be eligible for a low-rate or 0% balance transfer promotion—an offer with the potential to help you save money on a temporary basis. However, be sure to do your research before you transfer your balance to another card. It’s important to factor in any added costs (like balance transfer fees) and make sure the strategy is a good fit for your situation before you move forward.
3. Take Advantage of Rewards
Credit cards can feature a lot of perks when you use them wisely. These convenient plastic payment methods have the potential to help you build credit history. They also feature robust fraud protections that could work to your advantage if your credit card is ever lost, stolen, or used for unauthorized transactions.
With a good FICO® Score you might also be eligible to open a rewards credit card. A rewards credit card may give you the ability to earn points, miles, or cash back on the everyday (eligible) purchases you make using your account. Depending on the credit card, you might be able to redeem those rewards for statement credits, cash deposits into your account, free travel, and more.
There are many ways that credit card rewards could save you money, but it’s critical to avoid going into debt on those accounts. If you revolve an outstanding balance from one statement to the next, you will likely face high credit card interest fees that could cost you money and offset (or perhaps even negate) any rewards you earn using the account.
Plus, running up a balance on your credit card could push your credit utilization ratio upward. And when your credit utilization ratio increases, it might impact your FICO® Score in a negative way.
Bottom Line
It’s a good idea to save money wherever possible—especially when inflation and rising costs puts a strain on your budget. Thankfully, there are a number of ways you can try to save money, and having a good FICO® Score might open the door to other opportunities as well.
About myFICO
myFICO makes it easy to understand your credit with FICO® Scores, credit reports and alerts from all 3 bureaus. myFICO is the consumer division of FICO– get your FICO Scores from the people that make the FICO Scores. For more information, visit https://www.myfico.com/.
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