Surprise Your Credit Score Matters More Than Ever In 2016

Dated: 03/26/2016

Views: 120

If you entered into adulthood after 2008, you probably became accustomed to thinking your cash savings are more likely to grow when safely tucked under your mattress than in most bank accounts, and that interest rates on auto loans and other loans are set in the single digits. But in December 2015, after seven years of fostering a low-interest environment intended to encourage consumer spending and investing, the Federal Reserve moved to increase rates by 0.25%. While the interest rate hike was certainly on the low end, it signals a shift for consumers -- one that makes maintaining a high credit score even more of a priority going forward.


Here's why.

Carrying auto loans will be more expensive

While interest rates on auto loans didn't see an immediate jump with the Federal Reserve's announcement, future increases will eventually hit consumers in noticeable ways. With auto loans tied directly to the Fed's benchmark rate, an interest rate increase will impact new loans (existing auto loans are fixed). In addition, with subsequent interest rate increases, the cost of vehicles themselves could rise as some dealers opt to decrease inventory in an attempt to skirt the cost of paying higher interest on the cars in their lots. Other dealers might stick to promotional offers and sales to incentivize sales, but these offers are reserved for those with good to excellent credit. (Shoot for 720 to land the best rates.)

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