Really, the better question should be “How MUCH does bad credit cost you?  In a word…TONS!

Your FICO scores are determined by a number of things but most importantly how timely your credit is paid and the overall amount of credit used as compared to your credit lines available.  Of course other factors come into play but these two play the most significant in determining your credit score.

Your credit score for many lenders is the biggest factor if your loan will be approved at all and at what interest rate. To give you an example I was speaking to one of our members and he was telling me he had a credit score of 552 and over the last few months had increased his scores to 632.  At first you might say not to shabby, an 80 point increase.  I agree,  an 80 point credit score increase is nothing to sneeze at and certainly looks like some solid credit repair has been under way!

This member and I’ll call him Mr G for today’s discussion.  Well Mr G was extremely happy he was able to buy a newer truck and was happy with the new financing.  The interest rate he agreed to was 10.75% interest. Certainly the upside is that he got the financing as it’s questionable if he would have been able to get financing at all just 4 months ago!  But the bottom line if he had 720-740+ credit scores his rate very well could have been around 5% or better.

When I explained to Mr G that the $20,000 loan amount over the 6 year term he agreed to at 5% vs the 10.75% would be $56.03 every month for the 72 months he had the loan.  That’s a whopping $4034.16!!  Money given to the bank simply because of a credit score.   I asked Mr G what would he do if he had an extra 4 grand socked away?  I had to laugh when he responded with a deep throated “uurrgghhh”

While things were on the right path there was much to do with getting Mr G’s credit repair in overdrive.  His mortgage loan was at 7.75% and he owed roughly $160,000.  His loan had been opened almost 5 years ago and had been paid right on time every month.   He had tried to refinance about a year ago but had been denied so he had put this task to the back of his mind.

We agreed that over the next 2 months he was going to pay his visa card down to $1000 down from the $3200 he owed on his $4000 limit so he would be at just 25% of available credit.  As well we would continue to require validation of a couple of the bad credit marks still on his credit report.  This should cause another increase in his credit scores.

The reason is that when Mr G is able to refinance his mortgage to the current rates of about 5% this will cut about $287.35 off his mortgage payment.  Over 5 years that’s $17,241 interest savings!  over 10 years $34,482 and over the life of the loan, 30 years $103,446 in total interest saved!    You should have heard his growl then!

Bad credit not only effects the interest rates of all types of loans and credit cards but can affect insurance premiums as well.  Bad credit is one of the biggest factors that keep people in credit prison.  Having good credit scores are one of the most important things to creating long term wealth!

Write me a comment back and tell me what experiences you’ve had.  To find out more… Check this out!

Be Bold!