Your very first renovation is an exciting time in your life, and the thrill of your big change can have you dreaming up huge possibilities. But the cost of following your dreams can leave a dent in your credit. To make sure your first time renovating stays on track, here are some tips to protect your score.
Save Before You Borrow
Financing your project with savings is the best thing you can do. You’ll avoid the added cost of interest that comes with borrowing, and you won’t have to worry about paying anything back.
It also comes with a possible impact on your credit history.
If you already have a personal line of credit (LoC) in your name, it helps you avoid tying up its limit. This may come with the following two benefits:
- You’ll have more funds available in a true emergency
- It helps maintain a low utilization rate, which may impact your history positively
If you don’t already have an LoC, it keeps your file clean. This may impact your history in the following ways:
- You’ll avoid undergoing a hard check
- You won’t add a new account to your file and lower the overall age of your history
Use it in Emergencies
Borrowing isn’t the best way to begin a renovation, but it may be the only way you can complete it if unexpected emergencies tack on extra expenses.
Like, let’s say, you’re in the middle of a DIY teardown of your basement, and you accidentally step on a nail. Do you have the extra cash to update your tetanus shot?
Or how about the added costs you’ll face after finding an unexpected termite infestation in your attic?
If your savings can’t cover unexpected emergency expenses like these, borrowing may be the best option.
Compare Personal Line of Credit vs Home Equity Line of Credit Loans
Before you apply anywhere, take the time to compare a personal line of credit vs home equity line of credit.
These unique products serve different purposes in your reno; only you can decide if one is better suited for your needs.
Generally, a home equity LoC is ideal for large, planned projects, while financial institutions like CreditFresh recommend relying on a personal LoC as a safety net in emergencies, not to make upgrades around your house.
If you still aren’t sure which one fits your plans better, check out CreditFresh to learn more about when a personal line of credit might fit into your budget.
Create a Budget and Stick to it!
It’s all well and good to keep your LoC on the sidelines, but it’s hard to keep your promise in the middle of a project. Costs tend to spiral quickly — whether you’re only updating the furniture in your den or remodelling your entire living room.
Having a budget that’s realistic for the scale of your work will help you manage these costs better.
Research the price of everything — from materials and equipment to contractors and licenses — then tag on a little extra in case something goes wrong. This way you’ll have some wiggle room in your budget if something doesn’t go according to plan.
It doesn’t matter what your budget ends up being. Large or small, every renovation stands to benefit from good money management. These tips will help you protect your score, even if you end up borrowing to complete your project.
Loves home. I am here to provide how to make your home a much better place. 🙂 Blogging about HomeDecor, Home Improvements and more.
