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How Much Does a Bad Credit Score Really Cost You?

How Much Does a Bad Credit Score Really Cost You?
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Unfortunately, the difference between an exceptional and poor credit score could cost you nearly $400,000 in your life, according to recent study. This effect is less amplified between exceptional and fair credit scores, but even then, Interest payments can cost you tens of thousands of dollars. Here’s a closer look at the amount Credit scores can It costs you your whole life.

Mortgage interest could eat up your earnings for a decade

according to New study from SelfInc., a financial technology company, the average American will pay an estimated $130,461 over their lifetime in interest fees. The breakdown by FICO credit score is as follows:

  • Below 620: $486,040
  • 620 to 639: $158,512
  • 640 to 659: 133,828 USD
  • 660 to 679: $114,803
  • 680 to 699: $105,291
  • 700 to 759: $98 045
  • $760-$850: $388 88

As the balance indicates, the interest accruing to the poorest credit score amounts to 9.4 years of wages for the average full-time worker. Why is this effect so exaggerated? Well, since borrowers with credit scores below 620 cannot qualify for conventional loans, they are forced to take it. High-risk mortgages which have much higher interest rates, Which cost them more money in the long run. That’s why it’s important that your credit score is over 620, and then Apply for a mortgage.

High-risk car loan interest can cost you an income for a year

The study also looked at the lifetime cost of interest on auto loans (based on average prices of two used cars and four new cars over the lifespan and related interest rates). The breakdown by FICO credit score is as follows:

  • 300-500: $87,523
  • From 501 to 600: $65,549
  • 601 – 660: $39.031
  • 661-780: $20,937
  • 781 – 850: $14,545

What’s interesting here is that even with a good credit score, a 100-point difference in your credit score will result in interest payments roughly equal to the annual wage you get from a part-time job.

Credit cards are a little more difficult to measure

Credit cards are different because they revolving credit loans, Not Installationsment loans As you see it with mortgages or auto financing. For this reason, it is not easy to measure the average lifetime interest rate based on a borrower’s credit score. There are other reasons for this, too: Borrowers typically need credit scores above 670 to qualify for a credit card, and many borrowers make on-time payments before interest begins. per CNBCThe average interest amount on a credit card is $9,624.24.

How to build your credit score

Even borrowers with the worst credit score can slowly rebuild it In a few years, but she Good credit behavior is required at that time. If your credit score is rock bottom, Check out this Lifehacker post Which covers your options for building a good credit history from the start.

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