If you care about money, listen up. Hundreds to even thousands of dollars could be hiding behind your credit score. How? Great credit may qualify you for lower interest rates on a variety of popular purchases. The numbers are in and they may shock you. This breakdown shows you the incredible price differences between bad and good credit.
According to Kelley Blue Book, the average car price is around $35,285. Depending on the dealership, a borrower with excellent credit may qualify for a low interest rate of roughly 3.2% on a 48 month auto loan. Meanwhile, a consumer with poor credit may see an interest rate of 12.9% or higher.
When you add up the extra costs over the life of the loan, the borrower with a high score would end up paying about $2,353 in interest. In contrast, the borrower with a low score would pay a whopping $10,068 in interest for the exact same vehicle! That’s a price difference of $7,715 either in or out of your wallet based on credit.
First of all, let’s take this concept and spread it over a few of the most common purchases typically affected by credit.
- Average price of a new home: $200K
- Interest on a 30 year fixed mortgage with good credit: 3.6% or $127,345
- Interest on a 30 year fixed mortgage with bad credit: 5% or $186,512
- Savings of a higher score = $59,167
- Good credit premium: $1,383 annually
- Bad credit premium: $2,403 annually
- Savings of a higher score = $1,020
- Loan amount: $100K
- Interest over 48 months with good credit: 5% or $10,541
- Interest over 48 months with bad credit: 32% or $78,457
- Savings of a higher score = $67,916
In summary, if we add up all of the extra interest costs above, having good credit could end up saving a borrower in these scenarios. As a result of poor credit, an extra $135,818 in unnecessary fees could be paid over time. Think you could use that kind of cash somewhere other than paying fees? Yeah, we thought so.
Finally, if you’re struggling with high interest rates, click below to see how ScoreShuttle’s credit-enhancing technology may be able to you improve your credit.
Disclaimer: The numbers and scenarios listed above are based on generalized averages and are provided for illustrative purposes only. Other factors that may affect the true cost of a loan were not included in the calculations above. Your individual calculations will vary depending on the circumstances of your loan.