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The Cost of Bad Credit

Did you know that bad credit can actually cost you money? Most of us know we’ll pay a little extra for not keeping our credit score in tip-top shape, but how many of us know how much extra we will pay? The cost of bad credit also goes beyond just what you’re paying in interest. It can impact your quality of life, from the cost of your cell phone contract, to the kind of insurance you can get, to what job you hold and more. Here are a few ways bad credit can cost you.

Higher house payment.

Are you in the market for a new home? If your credit is spotty, then you’ll likely pay tens of thousands of dollars more in finance charges.

Homeowners Insurance.

Now that you have your new house, you must insure it. According to The National Association of Insurance Commissioners, 85% of home insurers use credit-based insurance scores in states where it’s deemed an underwriting or risk classification factor. So, if your credit takes a dive, your homeowners insurance may go up.

Private student loan rates.

Federal student loan rates have interest rates that are set annually by the government. With private loans, that’s not the case. If you are looking at private student loans to fund your college education and you have a poor credit rating, your student loan interest rates could go into the double digits.

Your future spouse.

No one likes rejection, and it still hurts whether it’s due to a lack of chemistry or some other reason – like your credit history. A whopping 75% of women and 57% of men, say credit scores play a role in their dating decisions, according to a survey of 1,000 single adults from FreeCreditScore.com. Most respondents said that money management skills were just as important as looks in deciding if someone was worth pursuing.

Are you a numbers person?

According to a study by Syracuse University, below is a breakdown in dollars and cents of how much extra you could pay on the things you need credit to acquire.

  • Homeowners Insurance - $590.50/year
  • Car Insurance - $1,374.10/year
  • Mortgage - $30,057 over 30 years
  • Car - $9,320 over 5 years
  • Credit card - $4,975.23 making only the minimum payment (don’t do that, bad idea). A higher-rate credit card would take nearly 15 years to pay off, about 5 years longer than a low-rate card with the average balance.

Wondering if you have bad credit?

There are a couple of easy ways to find out where your credit stands.

  • You can obtain a free credit report once per year from each of the three credit bureaus – Experian, Equifax, and Trans Union. Visit AnnualCreditReport.com or call 877-322-8228. The reports are free, but expect to pay $7-12 (depending on the bureau) if you want to see your credit score.
  • Contact one of our GreenPath financial counselors take you through a free credit report review. Call 877-337-3399.

Knowledge is power.

Knowing the basics of credit reports and credit scores shouldn’t be hard. The resources below offer further understanding of credit and what steps you can take to improve yours.

Blog Check Your Credit Crash Course

Crash Course in Understanding Credit
(Downloadable PDF)

Blog Check Your Credit Scores and Reports

Credit Scores and Credit Reports
(Interactive Video)

 

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