How to Increase Purchasing Power

Good credit can increase your purchasing power.
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It should come as no surprise that inflation decreases the amount of stuff you can buy. A year from now, the same amount of money will probably buy you less house, less car and less of anything else. Boosting your purchasing power will come in handy, particularly when you buy a home or other pricey merchandise you want.

Up That Credit Score

Personal finance expert Suze Orman points out that a high credit score can put more purchasing power in your hands. How much your credit score affects your buying power is especially important when shopping for a big-ticket item like a home or vehicle. Unfortunately, a less-than-perfect credit score is going to buy you less of anything you want. To make up for it, you're probably going to use more of the total amount of credit you have available when, in fact, you have less of it. This can lower your credit score, which is exactly what you don’t want to happen. According to myFICO, owing fewer debts and paying all your bills on time are key factors credit reporting agencies use to calculate your score. Another way to boost your score is not to open any new credit accounts that you don’t need.

Add to Your Income

Making more money can increase how much money a lender lets you borrow. Both good credit and a higher income give you more buying power and lowers the interest rate on the money you borrow. One way to increase your current income is by going back to school for more education. Improving your marketable job skills gives you more leverage if you decide to approach your boss and ask for a raise. If you don’t already have a college degree, find out if your employer offers a tuition-reimbursement program. You can also increase your salary potential by earning a master's degree, or by taking what you know and using it to earn extra income. Consider freelancing part-time or pursuing a small, home-based business on the side.

Pay Off Some Debt

Pay off high-interest credit cards and student loans to cut down on your monthly expenses. Getting rid of short- to medium-term debts gives you more money to spend. After wiping out your credit-card debt, work next on paying off your student loans. Student loans are usually low interest, but the loan terms can extend out over 10 years or more and you might not want the debt hanging over your head for that long. Although a lender may allow you to owe some amount of debt and still qualify you for a mortgage or auto loan, a low debt-to-income ratio can qualify you for a bigger loan.

Think Down Payment

The National Association of Realtors says that while getting out of debt is always a smart move financially, sometimes it makes better sense not to take all your money to pay off debt. You may actually do better to hold on to some cash, especially if you are looking to buy a house. Saving up for a large down payment increases your purchasing power, which can help you get more house for your money. If you are afraid that having too many bills on top of a mortgage payment will keep you awake at night, making a down payment quickly builds home equity that you can use to pay off your other debts. The best part is you can put extra cash in your pocket at the end of the year by deducting the interest you pay on a home-equity loan on your taxes.

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