We love how Kristina Sutton , (@debtfreeblkgrl on Instagram) is sporting our It's My Money™ shirt! With our free giveaway contest, you can too! It's simple share a photo/post on your social media about your financial goal this year and tag/mention It's My Money's social media page for a chance to win! We'll be announcing the winners at the end of the month.
If you enjoyed Part 1 of our breakdown on credit scores, we dig a little deeper with in this post to show you just how much they matter.
Here is an example of buying a car that gives a good picture of what happens when you credit score is low:
Car for purchase:
2016 Nissan Versa - $12,000
36 months/3 year loan
Person A has a credit score of 720 and Person B has a credit score of 580. Both are able to get a loan for the car but check out the difference in interest, monthly payments and total interest each will pay.
Credit Score: 720
Monthly payment: $351.00
Total interest: $639.00
Credit Score: 580
Monthly payment: $416.00
Total interest: $2,960.00
Person A pays $12,639.00 for the car, while Person B pays $14,960.00. This is an example of how a person pays $2,321.00 more for the same item because they have a lower credit score therefore have a higher interest rate.
When your credit score is low, you pay more when getting loans or may not be able to get a loan a all. Creditors see loaning you money or extending you credit is a risk as your three-digit credit score gives them a picture of how you have paid on prior loans or credit cards.
Your current credit score:
If your credit score is 720 and above CONGRATS!! Keep up the great work.
If your credit score is not currently at 720 or above. Don't worry, you can start now on the path to increase your credit score. Managing your finances, pay your bills on time, don't open any more lines of credit, reviewing your reports and your scores begin to increase. It takes some time to have a less than desirable score, so it will take some time to increase it but it is possible. If you haven't read Part 1, you can check it out here.
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