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. Taking measures to repair credit should be the first thing a potential home buyer must consider before going through the approval process. Failing to recognize that credit repair is an investment that can save you in the further future might cost you thoudands of dollars.
So just what are some credit tips to repair a poor score?
Making on-time payments. Payment history accounts for 35% of your FICO score - the single largest category. Having a low balance. Keeping debt within 30 percent of your total credit allotment accounts for 30% of your FICO score. Having a diversity of different credit, which is 10% of your score. Having a lengthy credit history, which represents 15% of your score. The final 10% of your FICO score is represented by new credit. This reflects to new sources of credit you have opened recently, as several new accounts may pose a greater risk to lenders.
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.
Credit repair is hard enough. Trust in our team to help you with your credit needs. You can find us by searching key credit repair either with Bing or Google.