New research shows just how much you can save – on many kinds of loans – when you hike your score.
There are at least a dozen reasons to raise your credit score—and a new report tells us exactly how much money we might save by doing so. In short, credit score affects interest rates.
Researchers from LendingTree determined people with “fair” credit scores—generally 580-669, according to the report—will pay $45,283 more in interest over time than people with “very good” scores—740-799.
Saving this kind of money can go a long way in helping you manage your finances. So how does this break down into saving on one specific loan?
Say you have $5,265 in credit card debt…
First, congrats! You’re an average American borrower (according to LendingTree, which crunched data from its users earlier this summer).
- With a fair credit score, your interest payments would eventually amount to $9,423
- With a very good credit score, your interest payments would eventually amount to $3,794
The difference? $5,629. That’s more than the debt itself. Speaking of which: With 157 million Americans owing on their credit cards, the national total surpasses the national deficit. So you’re in good company.
Here’s what you could save on other loans with a very good credit score, and how to get to it.
Paying off your home? Your credit score affects interest rates
Of the types of loans LendingTree looked at, mortgages were logically the largest.
The average home lender bought a $234,437 house. And while bad credit doesn’t necessarily stop you from getting a home loan, you should know what it’ll cost you.
- With a fair credit score: $226,266 in interest payments.
- With a very good credit score: $197,161.
The difference? $29,106, just like in the headline! Even a fraction of that could help you with a down payment on your next home. And down payments, according to a report Debt.com covered recently, are “one of the greatest hurdles to homeownership.”
Never ending student debt
Still paying for school? Welcome to the club: Folks like you and me are enabling what’s become a national student loan debt of $1.4 trillion.
If you’re like LendingTree’s members, your loan might be somewhere around $37,525. Do you know how your credit score affects interest rates and payments?
- Fair credit: $9,035 in interest.
- Very good credit: $7,059.
That difference? $1,976. Over time, those savings could at least keep you from missing any student loan payments, and those do not bode well for your credit score. And if you’re already doing the deed, do it right: Here’s how to get those payments under control—and out of your life.
Need more? That very good credit score could also save you:
- $3,790 in interest on the average auto loan.
- $4,783 on the average personal loan.
“It would take most Americans well over a year to collect $45,283 of interest via take-home pay,” LendingTree’s report says, an amount it adds is “money they’d never have to pay if they had good credit.”
How to score very good
There are ample resources you can rely on to improve your credit score, like our own Credit Education Center.
Before repairing your credit, you should get to know how the credit rating system works.
After that, here are five steps you should take to get back on track…
- Download your credit reports for free
- Review your credit reports
- Dispute any items that are incorrect
- Evaluate the negative information you’re up against
- Build credit by taking small strategic steps
Here’s more information (and a video) on the above, like paid and free options available for each.
Don’t let bad credit cost you more money in the future. Debt.com has credit repair solutions to maximize your credit score.
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Article last modified on December 27, 2018 Published by Debt.com, LLC . Mobile users may also access the AMP Version: Buying a house with only a "fair" credit score? It might cost you $30,000 - AMP.