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Maximizing Credit Scores with Tax
Refunds
This tax season, as you contemplate how to make the
most of your tax refund, consider the opportunity to reduce your debt.
Using tax refunds to purchase a new surround sound system or to take an
exotic vacation may be tempting, but the benefits of widening the gap between
your credit balance and your credit limit can far outweigh any other
option…especially in the long run.
The decision to use these funds to
reduce debt load may not come as an easy one, considering the monies received
have been often regarded as “extra money.” But using tax refunds towards credit
card, mortgage, or auto loan balances can be a smart decision for any consumer’s
credit.
According to recent Experian National Score studies, consumers
with balance-to-limit ratios of at least 50% have an average PLUS Credit Score
of 673. It can be inferred that consumers with lower credit usage have a higher
PLUS Credit Score than those who have higher credit usage.
By paying
down debt load, you can lower your debt, which in turn can have a positive
effect on your credit score. Increased credit scores can mean increased buying
power, including lower interest rates and more financial options, which can
benefit you both now and in the future. The result of a higher credit score can
mean lower interest rates, which in turn can lead to more cash in your pocket.
Instead of adding to your debt load with “nice-to-have” purchases, the
benefits of paying down your debt are a worthwhile consideration. Lower credit
usage can mean higher credit scores, lower interest rates, and more money saved.
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