Your credit score is derived from the varying factors in your credit file, including how extensive your credit history is, the number of open accounts, and the type of the items listed on your reports (loans, mortgages, public records, and others). From these factors, a three-digit number between 300 and 950 is produced. Lenders generally use your credit score in combination with other factors (such as income) to determine your credit worthiness.
Items with a negative classification can greatly damage your credit score.
Negative items include:
| Items with a negative classification can greatly damage your credit score. | |||||
| 750-850 | 700-749 | 650-699 | 600-649 | 550-599 | 500-549 |
| 5.5% | 6.0% | 6.5% | 7.5% | 8.5% | 9.5% |
| Percentage of consumers with credit score range: | |||||
| 750-850 | 700-749 | 650-699 | 600-649 | 550-599 | 500-549 |
| 28% | 21% | 16% | 12% | 9% | 5% |
Credit Cards If you have bad credit, it may be impossible to secure a prime credit card. And the sub-prime cards that are available to you usually require outrageous setup fees, high monthly fees, require large cash deposits, offer low credit lines, and in many cases don’t even report positive credit activity to the major credit bureaus.
Automobile Financing Bad credit may even cause you to pay up to 50% of the original value of your car in unnecessary interest rates! This added interest can cause financial strain each month as you are overburdened with these higher rates. Take a look:
| $20,000 car loan paid over 5 years: | |||
| CREDIT STATUS | RATE | PAYMENT | COST OF bad credit |
| Perfect Mildly Damaged Damaged |
10%
14% 20% |
$424.94
$465.37 $529.88 |
$0.00
$4,722.54 $8,593.30 |
Home Mortgage
It may seem painful to be forced to pay such an exorbitant amount for an auto loan, but that’s nothing compared to how much extra bad credit could cost you on your mortgage loan. Poor credit could force you to spend hundreds of thousands of dollars more over the life of your loan.
| $200,000 home loan paid over 30 years: | |||
CREDIT STATUS |
RATE | PAYMENT | COST OF bad credit |
| Perfect
Mildly Damaged |
6%
8% 11% |
$1200.00 $1467.00 $1904.00 |
$0.00
$96,120.00 $253,440.00 |
Are you willing to pay the costs associated with bad credit, or would you prefer to do something about it? Improving your credit may be one of the best lifestyle decisions you ever make. Get a free consultation today.
