A credit monitoring service can assist you in saving money when purchasing a home or car in 2022.

Buying a home or car can be overwhelming, as it involves finding the right fit and securing optimal financing. The process of obtaining financing for these purchases is challenging, and a significant factor in determining financing options is your current credit score.

A credit monitoring service can provide real-time information on your credit score and notify you of any fraudulent activity, regardless of the condition of your credit.

If you're planning on purchasing a car or home this year, it's important to consider using a credit monitoring service to ensure your credit score is in good standing.

It is advisable to utilize a credit monitoring service frequently if you are planning to buy a car or a home.

1. Better credit means lower interest rates, and bigger savings

A higher credit score can lead to better financing options, resulting in lower interest expenses.

The Federal Reserve reports that in Nov. 2021, the average car loan was $35,284 with a 4.5% interest rate and repayment period of 67 months. This means the average consumer is paying $4,683 in interest over 5 and a half years, along with nearly no chance for the car to appreciate in value, making it a pretty bad investment. However, if you lowered the interest rate to 3%, the total interest paid would fall to $3,081.

A 2.5% interest rate on a 30-year-fixed-rate mortgage would result in a total interest paid of $191,489, saving over $43,000 in interest compared to the average interest rate of 2.87% in Q3 2021, which would result in a total interest paid of $234,707.

To obtain the best interest rates, you can use a credit monitoring service to determine your credit score and identify areas for improvement. However, it is important to do this well in advance of your purchase and make necessary changes to your credit score before shopping around for the best rate.

2. Mistakes might be holding you back

A study by Consumer Reports in June 2021 found that one in every three Americans has errors on their credit report.

Errors in personal information, such as incorrect addresses or phone numbers, can have serious consequences, including higher interest rates and inability to secure financing. These mistakes are often discovered during the purchase process, leaving consumers with no recourse.

The Federal Trade Commission has provided a step-by-step process for disputing credit errors, which involves contacting the bureaus and providing evidence of the error.

To avoid delays and issues with major purchases, it is recommended to clear up any problems with credit bureaus well in advance. Credit monitoring services can help detect fraud and offer identity theft insurance, as well as assist in resolving any issues that may arise.

3. A small time investment can save you big

I usually check my credit score every two weeks, which only takes me five minutes or less. I do this to see if my credit score has changed and to understand why it has shifted. While my credit score typically fluctuates by a few points due to my student loan repayments and paying my credit card in full each month, I remain vigilant for any sudden or unexpected changes.

You can set up a credit monitoring service to alert you of any changes to your credit score without regularly checking it.

Your credit score should be regularly checked as part of your personal finance routine, regardless of how you do it.

Best credit monitoring services

Numerous credit monitoring services are offered by companies, with many of them being free.

Here are a few of our favorites that are free to use:

If you want more comprehensive services like triple-bureau credit monitoring, extensive fraud alerts, and identity theft insurance up to $1 million, consider these options.

Bottom line

Just like running a marathon, building and maintaining your credit score is a long-term effort that requires consistent effort and attention. It's not something you should only focus on when you're planning to buy a home or car. Your credit score can impact your ability to qualify for an apartment lease, a new credit card, or even a job, so it's important to prioritize it regardless of your future plans. Without a strong credit score, you may miss out on valuable financial opportunities.

If you plan to purchase a home or car in 2022, enhancing your credit score could result in substantial savings in both the short- and long-term. To keep track of your score and prepare for significant purchases, consider utilizing a credit monitoring service.

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