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When you're about to make a major life decision, such as buying your first car or home, you could face a range of different emotions. Excitement, fear, anxiety and varieties of stress may emerge when you contemplate how to tackle a big purchase such as a new car or mortgage.
But what if there was a way to feel a little less overwhelmed and a little more prepared?
That's where credit planning with Chase Credit Journey® comes in. This free online tool gives you access to resources that can help you prepare for major purchases even if you do not have an existing account with Chase. In this article, you will learn:
- How your credit score can help with your purchase
- Why a plan can help
- How your purchase can affect your credit score
How your credit score can help with your purchase
Maybe you didn't realize how important your credit score would be when it came to landing ideal rates on a car loan. However, with a little research, you've come to understand that even a small difference in your annual percentage rate (APR) can save you thousands.
Your credit score is a way to showcase your reliability when it comes to making payments. When you have a good credit score, you may have more options to choose from, increased access to better rates and more. Of course, a quality credit score is just one factor. You'll still need to have access to money to pay for your purchase, and the overall discipline to make your monthly payments a reality. But a good credit score is your bedrock—the foundation that sets you up for success.
Why a personalized action plan can help
Now that you know how a good credit score can help with planning your large purchase, maybe you're realizing that you want to improve your credit score. But how?
When you enroll in Credit Journey®, you'll have access to the credit planning feature, a resource to help you increase your credit score. You can input your specific goal (say, planning to buy a car) and receive a personalized action plan provided by Experian™ to help improve your credit score by at least 5 points. These action items are listed out for you in clear, concise steps so that the journey of improving your credit score won't feel so daunting.
By mapping out your goals, adjusting your budget and taking action on your personalized plan, you can set yourself up for achieving the credit score you want. You'll also see how your score changes over time as you start to take the actions recommended. With score refreshes, you can track how your score progresses over time.
How your purchase can affect your credit score
Credit score are complex—one action doesn't necessarily mean your score will shift dramatically. Rather, a sequence of events and actions over time may impact your score.
For example, let's say you met your score goal—congrats! You have a higher credit score than where you started, which means you could have more opportunities to receive a good APR on your loan. So, you take out a loan, and make your large purchase. How might this action impact your score? Let's break this down further.
- Hard inquiries—your lender may check your credit report to determine your creditworthiness before issuing the loan. Doing so could negatively impact your score, but don't worry! It may only decrease by a few points.
- Credit mix—when you take out a loan, you've just added a new type of credit to your credit profile! Credit mix is an important factor when calculating your score and building credit. Diversifying your profile could help improve your score over time.
- Payment history—as you begin making regular, on-time payments, you could see your score reflect positively. That's because payment history is a major component of your credit score. Make sure your payments are on time and in full.
- Credit utilization—because your ration of debt to credit may change due to your new loan to make your purchase, your score may be impacted. However, adopting creditworthy best practices can prevent your score from falling too much, too quickly.
Bottom line
Planning out a large purchase can be intimidating if you don't know where to begin. With Credit Journey's personalized action plan, you don't have to feel so lost. With step-by-step actions and frequent score refreshes, you may be able to see your credit score improve over time and put you in a good position to make the purchases you want.
