What A Poor Credit Report Score Costs You |
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There is a lot of difference between how
you are treated, by way of charges and facilities, if you have good credit
report score or a poor credit report score. People with a poor credit report score are always at a disadvantage. The following examples will definitely inspire you to mend your ways. Mortgage Loans: Normally mortgage loans involve large sums of money and as such even a .5% variation in the interest rate can result in considerably higher monthly payment and an overall higher cost of the house. On a $100,000 15-year mortgage loan, a person with excellent credit report score would obtain the mortgage at 8% and thus pay $955.65 as monthly payment, whereas a person with not so good credit report score would be able to obtain the mortgage only at 10% and thus he would have to pay $1074.61 as monthly payment. The person with poor credit report score would thus be at a disadvantage of $118.96 per month. Auto Loans: As in the example above, if two persons purchase identical vehicles from the same car dealer and apply for a loan of $18,000 each with a repayment period of 3 years (36 months), the difference in their monthly payments and the total cost will depend upon their individual credit report scores. To quantify the difference, we can consider the current rate of 7.30% for those with excellent credit report score and 20.95% for those with really bad credit. The person with excellent credit report score will have to pay $532.07 per month and the total price of the car will be $ 19,154.52, whereas the person with really bad credit will have to pay $677.69 per month and the total price of the car will be $24,396.84. The advantage for the person with good credit is $145.62 in monthly payments and a total saving of $5242.32! The difference in excellent credit and really bad credit is substantial as you can see from the above example. However, there are intermediary stages as well which might not warrant financing at a 20% rate. Even if you qualify at 13%, you will still pay $2,679.16 more for the same car than the person with excellent credit report score. In tangible terms, the difference can be even greater as people who get loans at lower rates can pay off their loans much faster, thereby reducing the total cost to them. On the other hand, people with poor credit report score will have to go on paying for a longer period to afford the monthly payments and thus they will be paying considerably extra in terms of the total cost. Credit Cards: It will not take much time for people with excellent credit report score to get approval for credit cards and that too at an interest rate of about 9% and no annual fee, whereas people with bad credit might not get approved and even if they do, they would have to pay 19% to 24% interest rates and annual fees ranging from $200 to $450. If we compare two persons who habitually carry a balance of $3,000, the one with good credit report score will pay about 8% and the person with bad credit will pay at least 19%. The person with bad credit will have to pay more than twice as much, plus all the fees associated with having bad credit. Insurance: Although there is no relation between bad credit report score and insurance risk, the insurance agents normally charge more if you have a bad credit report score and your insurance premium is determined accordingly. Employment and Housing: Employers and landlords also discriminate against applicants with bad credit report score, much against federal and state laws. As a result you might have to live in inferior housing and be denied good-paying jobs. The purpose of the above information is to encourage you to work towards getting and maintaining a good credit report score as a poor credit report score can only mean losing out on all good things of life. |
