Credit Fix May Be Need if You Move to Area With High Cost of Living

Americans relocate all the time for a wide variety of reasons, and when they do, they might not always consider the ways in which the place to which they are moving might affect their finances going forward. For this reason, it might be important for these people to consider the benefits that seeking out credit repair might have for them.

One of the problems with moving that some people might not reflect upon before making a decision is the cost of living in their new homes as opposed to their old ones. For instance, someone moving from Virginia to New York City might find that, while their rent is likely far more expensive, so too is many other things they have to pay for in their everyday lives. Those who fail to properly plan for this change — and even some of those who are fully prepared — might consequently have financial difficulties. However, one way to help make all borrowers more ready and able to handle such a transition is by going through the efforts to improve their credit ratings.

Why a better credit score can help
There are several reasons that borrowers might be in a better financial position to afford a higher cost of living in the event of a move after they go through the credit repair process. For instance, one of the biggest aspects of credit scores is the amount of debt borrowers carry versus the total amount they are allowed to borrow at any one time, viewed as a percentage. For instance, people with $5,000 in credit card debts across two or three accounts with a total combined maximum of $10,000 are utilizing 50 percent of their available credit.

When considering this "credit utilization ratio," lenders prefer to see borrowers carrying debts totaling about 30 percent of their credit limits, and thus taking the time to reduce their balances to that level ahead of a move will necessarily improve their scores. But moreover, doing so will also help to put them in a far better financial position because doing so will reduce the amount of interest charges they rack up for carrying such a balance over time. The closer they get to zero, the more prepared they will be to cover the higher cost of living in their new areas; lower balances also means lower minimums, which makes money contributed every month go farther, as federal law requires anything paid over the minimum must go toward the principal, rather than interest charges.

In addition, borrowers with improved credit scores may find greater affordability in other ways. For instance, while many consumers may know that their improved credit scores can help them obtain accounts with better perks, they may not know that in many cases, those improved lines of credit also come with more beneficial terms. That can include lower interest rates and fewer fees which, in turn, mean that the amount they'll end up paying for carrying a balance in general will likely come down, in some cases substantially. And that doesn't apply only to new accounts, because a better credit score can also be used to obtain more affordable terms on existing ones as well; some credit card lenders will allow their more reliable customers to renegotiate the terms on their accounts, and borrowers who have auto loans in their names may also be able to refinance those lines of credit with their lenders.

Keeping scores high during the moving process
Of course, when consumers are packing up their lives and moving to a new part of the country, some things can slip through the cracks that might end up doing major damage to their credit ratings in general. For instance, any missed due dates will likely lower their credit ratings by a large amount because payment history makes up 35 percent of one's score. That in turn could lead to many consumers undoing months or potentially even years of work to improve and maintain a strong rating.

In addition, it may be wise for those moving to another part of the country to take the time to check their credit reports before they do so. This will allow them to determine whether there are any unfair markings on these vital documents that can likewise have a huge negative impact on a borrower's credit rating. If any such entries are found in the course of scanning these documents, they should be reported right away to the company or companies that issued them. Moreover, it might be wise for consumers to enlist the help of a credit repair law firm, which may be able to fix the potential problems more expediently than if they had tried to do so themselves.