I’ve been an advocate of paying down debt, improving your credit score, and saving money for a while now.
However, while I get immense satisfaction from seeing my score go up and saying goodbye to debt, that’s not why I’m so passionate about it all.
I preach the benefits of good credit because I think having secure finances can make you pretty darn happy.
If you have student loan debt or a significant credit card balance, you already know how debt can cause sleepless nights and emotional episodes. Dealing with monthly payments and interest rates can be stressful and overwhelming.
Now, a new study explains all the emotions you may have attached to your credit score. It turns out that your credit worthiness can have a positive (or negative) impact on personal satisfaction within your life.
How does my credit score impact my happiness?
Credit Karma partnered with professors from the University of Virginia and surveyed more than 1,000 Credit Karma members earlier this year. They received input on questions about saving money, spending habits, and personal happiness.
While money might not be able to buy happiness, the study showed that saving money combined with good credit could be a recipe for a satisfied life. The academic research reported that people who enjoy saving money are more content with their lives than people who don’t.
Of those who responded who had excellent credit, 95 percent of them also reported having more than $1,000 in savings.
That’s a stark contrast from people with low credit. Three out of four people with poor credit scores reported having no savings at all.
That lines up with other research, too. Last year, the Federal Reserve issued a report that said nearly half of Americans in 2014 could not come up with $400 in an emergency. A single unexpected car repair or medical bill could wipe out their savings.
Living so close to the edge is stressful. It’s understandable that people with low credit and no nest egg would be less happy.
What are the benefits of good credit?
Maintaining a credit score may not sound like an exciting path to happiness. But when you think about it, it makes sense.
If you have good credit, that’s a strong indicator that you have a handle on your finances. You are likely spending within your means, are debt-free or are paying down debt, and have an emergency fund to rely on in a crisis.
One of the main benefits of good credit is that it gives you freedom. With a strong credit score, you know you can get approved for a mortgage, a new apartment, or a car loan with low-interest rates.
If you have enough money in the bank, you can pursue your passions. And good credit, along with a substantial savings account, can open doors for you.
How can I improve my credit?
This study highlights the importance of improving your credit and building up your emergency fund.
But if you have debt and a low credit score, that does not mean you will be unhappy forever. By becoming aware of the impact of money on your mental state, you can stake steps to improve your situation.
Make all of your payments on time.
On-time payments are one of the biggest factors credit bureaus look for when determining your score. Focus on making at least the minimum payments on all your bills and debts.
Decrease your debt burden.
If you have trouble keeping up with your student loan payments, consider refinancing to reduce your interest rates and monthly payments.
Refinancing can reduce how much you owe each month. And, you’ll have more breathing room in your budget to pay off other debts, like credit cards.
Lower your expenses.
Break the paycheck-to-paycheck cycle by cutting down on your expenses. Small changes like making coffee at home rather than stopping at the local café and eliminating cable can help you set aside more money.
Launch a side gig.
There are only so many corners you can cut in your budget.
Check for errors.
Make sure to check your credit report for errors. You can view your credit report for free at AnnualCreditReport.com.
Above all, be persistent. Your credit score will not change dramatically overnight. It takes consistency and hard work.
Credit Karma’s study highlights the importance of good credit and financial habits in determining how happy you are.
If your financial situation is not where you want it to be, take steps now to start building a more secure financial future. By being proactive now, you can set yourself up for a happier tomorrow.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|