Hopefully, you already know that bad credit can cost you because lenders are liable to charge you higher interest rates.
Perhaps you’ve even read articles like “The True Cost of Bad Credit” — in which Money Talks News founder Stacy Johnson continues:
“Second, it can impact other expenses, like your car insurance, because some insurers figure that people who wreck their credit are also more likely to wreck their cars. And, third, it can hurt your ability to find work: Many employers also believe that those who aren’t responsible with their money might not be responsible with the boss’s either.”
But have you ever considered how much money a lackluster credit score can cost you over the course of your life? LendingTree recently did — and the answer was as much as $45,000.
The company examined data regarding loan requests and average loan balances to determine how much various types of loans cost the average American with a fair credit score (defined here as 580 to 669) compared with someone with a very good score (740 to 799).
For reference, base FICO credit scores and VantageScore credit scores range from 300 to 850.
The five types of debt included in LendingTree’s analysis are:
- Credit card: Over the life of the debt, the average person with a fair credit score pays $5,629 more in interest than the average person with a very good score.
- Personal loan: $3,790
- Car loan: $4,783
- Student loan: $1,976
- Mortgage: $29,106
That amounts to an additional $45,283 in interest payments over someone’s lifetime, assuming the person takes on all five types of debt.
Even if you don’t expect to carry that much debt in your lifetime, however, these figures still underscore the importance of — and the amount of money you save by — increasing your credit score. That is true of any consumer with a less-than-perfect credit score who will ever carry any type of debt.
Don’t know your credit score? Check out “6 Companies That Give Free Credit Scores to the General Public.”
Yet to achieve a perfect score? You will find plenty of help improving your credit here at Money Talks News. For starters, check out:
- “Boost Your Credit Score Fast With These 7 Moves“
- “The 4 Simple Keys to My Flawless Credit Score“
- “11 Surprising Ways to Wreck Your Credit Score“
LendingTree’s findings also underscore the importance of shopping around for credit cards and loans to be sure you get the lowest possible interest rate, and save the most money. One way to simplify this process is to use free online comparison-shopping tools like those you will find in Money Talks News’ Solutions Center.
For example, click on “Credit Card,” “Personal Loan” or “Mortgage” to get an idea of what rate you could qualify for or to see what kind of interest rates are currently available for these products.
What’s your take on credit scores and the many ways they can impact you for better or for worse? Tell us about your experiences by commenting below or on our Facebook page.
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