I was speaking to a young lady the other day that had NO idea how her bad credit was costing her money. After running some numbers with her, she said she was sick to her stomach and wanted better for herself.
Let’s compare $1,000 rent payment to a $1,000 mortgage payment. Depending on the interest rate and taxes a $1,000 mortgage payment should get you around a $175,000 home.
Rent: After 30 years you have NOTHING and you have to keep paying each month.
Own: After 30 years you have no more payment and you have $175,000 in equity.
Many mortgage programs base the interest rate in part on the credit score. Here is a comparison using two different rates for the same $175,000 loan.
If you qualified for a 3.5% rate, over 30 years you would pay $$107,898.80 in interest.
If you had to pay 4.25% due to your credit, the same loan would cost you $134,920.40 in interest, that’s $27,021.60 more, YUCK.
It is sad, but most consumers have no idea what interest rates they pay on their auto loans. Bad credit can lead to VERY HIGH interest rates and, in most cases, these consumers over pay for the car since their bad credit puts them in a very bad negotiating space. Example based on a $20,000 car note.
If you qualified for a 1.9% rate, over 72 months you would pay $1,177.36 in interest.
If you had to pay 19% due to your credit, the same loan would cost you $13,662.16 in interest, that’s $12,484.80 more, SUPER YUCK.
So now that you know the numbers, it’s time to do something about it. You can get plenty of credit information from the FTC or you can look to join a reputable credit repair organization. Whatever you do, stop wasting your hard earned money.
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Credit Reporting / Scoring Expert, Chris McConville is the President of Credit Education at CureMyScore.com and founder of myexpertcreditwitness.com where he works as an Expert Credit Witness work in both Federal and State Court. With more than 20 years experience working in credit along with his extensive past Mortgage Originating career, he’s dedicated to sharing his knowledge to educating consumers.
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