Credit Score

5 Ways Credit Scores Influence Life – The Real Price You Are Paying

What if your credit score determined whether you had $40,000 worth of money in the bank or $40,000 worth of debt to pay back? This is a reality for many people, and most often, they don’t know it. Credit is powerful and impacts each aspect of your life. Do you want a good job? Want to cut down on your insurance costs? Or, maybe you just want to be able to buy something nice for yourself without having to pay 24.99 percent APR.

Study after study shows the same thing – if you have a poor credit score, you end up paying more for most of what you want and do throughout your life. A study from Lending Tree confirms it. They found people who have a lower credit score pay as much as $45,283 more than those who have a good credit score. This is all interest and fees.

The question is, then, how is credit impacting you right now? And, if you think about it, how is your credit score already hurting your future?

Here are 5 ways credit influences your life:

#1: Credit Score Impacts Your Ability To Buy a Home

The American dream of homeownership gets very real when you find out just how much your monthly payment is going to be. A small difference in your credit score could cost you the ability to obtain a loan. Here’s an example.

A person has a credit score of 745. This is very good. He or she qualifies for the lowest interest rate on a 30-year, fixed rate loan. They find a home worth $200,000 they wish to buy. They secure a loan with an interest rate of 3.75 percent. Their monthly payment is $926. Interest and the principle combined, they will pay $333,443 to buy the home.

The second person has a credit score of 640. They want the same home and seek out the same type of loan. But, because they don’t have a good credit score, the lender increases their borrowing rate to 5.5 percent. Their monthly payments are much higher at $1,136. More so, they will pay in total $408,808 to buy the same home. That small percentage of a difference means this home buyer will pay $75,365 more than the other person for the same home.

People who have a lower credit score pay as much as $45,283 more than those who have a good credit score. Click To Tweet

#2: Credit Score Impacts Your Ability To Finance a Car

You did it again – you dropped your phone in the toilet (and you don’t want to explain how), and now you need a new one. Cell phones continue to get more expensive each day. More people than ever need to finance their purchase. Most of the time, the phone seller will do this for you. But, some will, in fact, check your credit before allowing you to do so. The consequences include:

  • You may not qualify to buy the cell phone you want.
  • You may have to pay a down payment to secure it.
  • You may pay more in finance charges to buy it.

#3: Credit Score Impacts Your Ability To Set Up Your Own Business

That business idea you had? Perhaps you were going to make a million selling the gadget you created with your son’s Legos. You have an idea and a skill. You want to turn it into a successful business. You know you will have customers. You create a business plan, get customers lined up, and you are ready to go. Even though you have the ability start, and you have investors lined up, your business may be dead in the water.

Most businesses need to turn to investors and banks at some point to finance their efforts. You may need to purchase a building, buy equipment, or purchase inventory. You need to pay employees and pay for insurance. If your credit score is bad, you end up being turned down.

#4: Credit Score Impacts Your Ability To Get a Credit Card

Here’s the catch. To build credit, you need to use credit. And, if you make a mistake with your first opportunities to do so, you end up spending a great deal in interest. Then, it continues to haunt you.

Building credit is difficult, but overcoming poor credit is even harder to do. The key is to use credit just enough to show you are a reliable person.

Building credit is difficult, but overcoming poor credit is even harder to do. The key is to use credit just enough to show you are a reliable person.

You’ll need to use credit consistently, but you don’t want to use more than 30 percent of your available credit.
It takes time. Most often, it can take years to rebuild poor credit if you have limited access to it.

It’s difficult to obtain more credit until you get your credit in line.

See the problem? There are ways to rebuild your credit and plenty of excellent methods to help you to pay down your debt. But, if you don’t make the effort to do this, it will cost you in the long term.

#5: Credit Score Impacts Your Ability to Qualify for a Job

Employers are increasingly looking into the person they hire, and not just what is on the resume. They may check your social media accounts. They get to know you through previous workers. And, some check your credit score.

A poor credit score reflects that you have bad money management skills (no matter what your circumstances are for being in this position). They may not trust your ability to be a responsible employee.

In addition to these factors, consider what having a good credit score offers:

  • Lower costing utilities
  • Less expensive life insurance
  • The ability to buy the car you want
  • Your ability to invest through some financial investment firm

The list goes on. The question is, what can you do about it? The bottom line is it pays – financially – to improve your credit score. Doing the hard work now can help you to live the life you want later.

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