Bad credit? No credit? No problem. You hear lenders saying it all the time but who’s really paying the price? You! Sub prime lenders charge higher interest rates, usually three percentage points above what prime borrowers with good credit pay plus thousands of dollars in fees. Ultimately this vicious cycle of accepting sub prime offers can result in catastrophic debt overload which then leads to bad marks on a credit report or even bankruptcy.
It is estimated that approximately 60 million Americans are negatively affected by derogatory information contained in their credit reports- that’s a staggering figure. The cost of poor credit goes much deeper than just trying to qualify for a small computer loan or secured credit card. Your credit reports reflect your character! Lenders, landlords, employers and even insurance companies view your credit worthiness by how well you manage and pay your debts.
Credit is a cost effective weapon to fight poverty and it serves as a vehicle in the overall well-being of the socioeconomic. Managing credit correctly can ensure financial well-being. Continual late payments, inaccuracies and errors reflect negatively on your character and limit your financial options. While we can see the importance of good credit, maybe you have not given much thought to how much your bad credit is costing you. You are being punished for your lacking credit record in almost everything you do.
Your credit score determines your ability to borrow.
| Credit | Credit Score |
| A+ | 750 and Higher |
| A | 720 to 740 |
| A- | 680 to 699 |
| B+ | 660 to 679 |
| B | 640 to 659 |
| C+ | 620 to 639 |
| C | 600 to 619 |
| D-F | 599 and Below |
Consider this. Your credit reports decide just how much you will be charged in interest on any given loan, if you can even get a loan.
Car Financing
Car dealers can use errors on your credit report to charge you higher interest rates!
|
$15,000.00 auto loan |
||
|
Credit Rating |
Rate |
Payment |
| Perfect |
8.5 % |
$ 327.00 |
| Damaged |
14 % |
$ 364.00 |
| Poor |
21 % |
|
With the above illustration, you can see how much you are paying extra per month for the same loan! Add that up annually and the difference is massive.
Home Loans
While the impact of expensive auto financing can be detrimental, it is nothing compared to how much you can be paying for bad credit with a home loan. If your credit score falls below 640, you could be paying too much for a home loan or refinance.
Good Credit Mortgage
Summary of Payments & Interest
Your Monthly Payment $ 699.21
Total Interest Paid over Life of Loan $ 151.717.22
Average Monthly Interest over Life of Loan $ 421.44
Poor Credit Mortgage
Summary of Payments & Interest
Your Monthly Payment $ 952.32
Total Interest Paid over Life of Loan $ 242.836.42
Average Monthly Interest over Life of Loan $ 674.55
Not even considering the loan amount but only the savings based on your monthly payment, you can certainly visualize the effects of bad credit and just how unattainable it makes ever owning your own home! The difference in monthly payment and total interest paid is dramatic. That’s over $91,000.00 in additional interest!
The bottom line?
The cost of bad credit is high, no doubt -but the cost of repairing your credit can also be very expensive and many times you achieve little or no results. Credit repair is one of the most popular search terms on the Internet and consumers’ continue to search for quick fixes. If you can learn anything from this page, understand there are NO quick fixes. Yes it is possible to repair your credit- millions do but don’t have such high expectations that you’re sorely disappointed in the end.
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