Bad Credit Aftermath – How Much it Can Cost You?
How Much Does A Bad Score Really Cost You?
Common sense will tell you that having a good credit score is much better than having a poor credit score, as far as loan approval and interest rates go. But do you really know how much a bad score can really cost you? You might be surprised.
Take a 30-year mortgage for example. Now take a good credit score (680-699), an excellent credit score (740+) and a poor credit score (620-639). Here’s a look at the breakdown of possible costs over the course of a hypothetical $200,000 home loan:
- Excellent credit (4.025 percent): A likely monthly payment of $958, which equates to an $11,493 annual cost and a $344,798 lifetime cost.
- Good credit (4.974 percent): A monthly cost of $1,070, annual cost of $12,846 and lifetime cost of $385,368.
- Poor credit (5.418 percent): A monthly cost of $1,133, annual cost of $13,598 and lifetime cost of $407,950.
As you can see, having an excellent credit score can save you up to $113 per month and $40,591 over just having a “good” credit score over the course of a 30-year mortgage. And an excellent score can save you $175 per month and $63,173 over a “poor” credit score. Hence, taking measures to repair credit before financing such a significant purchase is crucial to your short- and long-term finances.
So just what are some credit tips to repair a poor score?
- On-time payments
- Keeping debt within 30 percent of your total credit allotment
- Having a diversity of different credit
- Having a lengthy credit history
As if having a favorable credit score wasn’t important enough, the above examples certainly place even more significance on the importance of credit repair and debt management if you’re in a financial bind. As the above examples show, a good credit score could mean the difference of tens of thousands of dollars over the course of a long-term loan. That’s a lot of money that you surely could put toward other purchases and a big incentive to take measures to improve your credit score today.
For more information on how to repair your credit, please contact our office at 617-265-7900 or request a free consultation below.