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But really, how damaging is it if you don’t have good credit? The answer will probably surprise you:
You could, over the course of your lifetime, lose hundreds of thousands or even millions of dollars if you don’t have a good credit score.
Let’s use a simple payment like a car payment to show how this works. For someone with good credit, the interest rate on a car payment can be very low, around 3% to 4% (as of this writing). Someone with low or no credit scores can pay very high interest rates for a car loan, as high as 18% or more.
The payment on a $15,000 car loan with a 4% interest rate over 4 years is $339 a month. Were you to increase the interest rate to 15%, you’re now looking at a $417 monthly payment. That’s a difference of $78 a month, just because of your credit!
Now, take that $78 difference over the course of a year, and it’s $936 a year more that you’re paying because of your credit. Or, over the course of 10 years, you’re looking at $9,360. That’s a nice used vehicle every ten years that you lose, just because of your credit.
The real effect is seen over the long term. That $78 dollar payment over the course of 40 years (add up all your car loans from 20 years old to 60, for example) and you’re looking at $37,440 dollars. And this doesn’t even count the lost money from investing over time and the gains you can achieve over a lifetime.
A staggering amount of loss, all from a $78 difference in payment. Now imagine if we were talking about hundreds of dollars in additional payments a month?
Presently, someone with a good credit score can easily obtain a home loan with an interest rate as low as 4.5%. A home loan with bad credit: 9%. That creates a difference of $446 a month in payments on a $150,000 home load. Over 40 years, that’s $214,080 or pure loss, without even counting how much you missed for not being able to invest. That could easily cover a couple of very nice college educations, or even a house!!
The list goes on and on with credit cards, insurance payments, etc. You could quite easily be looking at a difference of $700-$800 a month just for having a good credit score. That adds up to hundreds of thousands or millions of dollars over your lifetime!
The good news is that your credit score is something that you can learn how to control. If you have some issues in your past, you can repair those through learning how to repair your credit on your own, or by seeking the assistance of reputable credit repair professionals. And, last but not least, credit protection is a smart move for anyone, especially those with good credit. Identity theft is the fastest rising crime in our society.
Take control of your credit score as fast as you can. It’s worth a fortune to you and your family.
How can I have a good credit score?
How many credit cards are recommended to have open?
How often should I use them?
What can I do to increase my points?
Can you give me some tips on how to maintain a good credit?
I have 694 points but I want to get more points
Answer
The people with the highest credit scores have a combination of several revolving (credit card) lines and installation (loans) lines. There really is no set number though.
The easiest way to build credit is to buy small things every so often and paying them off in full by the due date. If you have debt now, the best way is to pay it off; the lower the balances you have, the higher your score will be.
694 is an average score, which is good. And as your accounts age, which means that you shouldn’t close accounts that you don’t use, your score will also increase.
One more thing: There is no such thing as having too much credit, it’s just how responsible you are with it. But you have to be careful about applying for it too often because it’ll raise a red flag to creditors thinking you are trying to get into debt, and statistically, those with higher scores rarely apply for credit.
Below are links to articles for more and specified tips.