We have a heard the saying that a good credit score will get you an amazing rate and save you money. But, how much does a bad credit score actually cost you?
What your credit says about you.
A credit report is essentially a report card for how you handle your finances. Anything that has to do with you and financial situations, if reported, will most likely appear on your credit report. Let's say you have never missed a late payment, have a few different types of loans, and keep your utilization at less than 30%. The likelihood of you having a good credit score is higher. When creditors see this, they deem you as a responsible person who they can trust.
On the other hand; if you have missed payments, some accounts are in collection, only have a couple active accounts, and your utilization is over 80%, you are deemed as a risky person.
Now let's take this example: We have Person A with a 730 credit score and we have Person B with a 599 credit score. They are both wanting to buy a brand new Toyota Camry for $23,000 on a 66 month term.
Person A will have an interest rate of 1.99% a monthly payments of $368.22. At the end of their 66 month term Person A will pay a total of $24,302.39, having only paid only $1,302.39 in interest.
Person B will not be as fortunate as they will have an interest rate of 14.99% and a monthly payment of $513.97. Person B will pay a total of $33,921.44 by the end of their term. This means that they have paid a total of $10,921.44 in interest alone!
So if you are still wondering how much a credit score can cost you, just know it will cost you a lot! Imagine if this was an example of them buying a house. Person B would have to pay so much more!