When it comes to your credit score, a few points can make a big difference. While the average American has a credit score of 687, even raising it a few points can save big amounts of money. Here are 8 ways a higher credit score can save you big bucks!
A good credit score is fundamental to getting the best rates on a home loan. Due to the way mortgage payments are spread out (usually over 30 years) and front-loaded with interest, called amortization, even small rate differences can save – or cost – you HUGE amounts of money. Studies show that the average payment on a $250,000 mortgage loan is $1,077 for someone with a credit score above 760. However, that same person with a score of 680-699, which is still respectable, is $1,133. Over the 30-year life of the loan that adds up to more than $20,000!
Over-use and mismanagement of credit card debt are some of the most toxic traits for eroding long-term wealth. Having a solid credit score will allow you to shop out and get approved for credit cards with favorable terms and lower interest rates, saving you thousands of dollars over even a few years. A report by Washington Mutual and the CFA in 2007 states that consumers could save a collective 20 BILLION dollars on credit card finances charges alone if they just raised their credit score by 30 points!
Remember that you’re not buying the car, you’re buying the money to buy the car. Financing an automobile is one of loans we pay least attention to, but the difference between good financing and less-favorable financing can cost you a lot of money, and that’s all based on your credit score. A below-average credit score can cost you as much as $5,000 in higher interest rates on a $20,000, 60-month auto loan.
Some insurance companies also use credit scores as an indicator of how often a consumer might file a claim, and how much it will cost them. A high credit score can save you hundreds of dollars off your insurance premiums every year.
Gas and electric companies pull your credit these days, and a bad score may cost you an additional $200 or so in security deposits for their services.
Likewise, cell phone companies will charge you a costly security deposit if you have a low score, which is equated with a history of not paying your bills. If your credit is too shaky, they might only give you a pay-as-you-go plan.
RENTAL SECURITY DEPOSITS
When applying to rent an apartment or a house, landlords will pull your credit. A lower credit score means you are a bigger risk to them, and probably a higher security deposit, if you get the place at all.
These days, even employers look at your credit report, especially if you are applying for a job in financial services or working with clients and financial products.