The Importance of a Credit Score

What is the total financial cost of low credit scores over a lifetime?

Consumers with credit scores of 600 and below (as compared with consumers who have credit scores of 700 and above) will pay two to four percentage points more when financing a mortgage.

Question: How much does each point of interest cost a consumer per year and per month?
Answer: Each point represents 1% of the loan per year, divided by 12 = cost per month.

I.e.: If you have a $200,000 loan each point would cost you $2,000 more per year in interest (1%) making your payment $166 more per month for the life of the loan.

If one person has a 200,000 mortgage loan at 6% as opposed to someone who has a $200,000 mortgage loan at 10% they are paying $8,000 more per year in interest than they should be, this goes on year after year for the life of the loan.

So this means that 2 families can be living next door to each in the exact same home. Both burrowed the same $200,000 from the bank but one family’s mortgage payment is $666 more per month on the very same home.

Remember, not only do you pay more in interest each month for your loan with damaged credit you may also pay dramatically more to take out the loan in the first place.

Question: How much more can getting a loan with damaged credit cost?

Answer: 200 – 300% more!

I.e. when you take out a $200,000 loan it will cost you 1-2% for the loan this is why when you get your payment book it says you owe $202,000 on a home that you bought for $200,000.

However, you could pay 200 – 300% more for your loan with damaged credit. Meaning your outstanding loan will be increased $4,000 - $6,000 each time you refinance for the same $200,000 loan.

This is why most lenders do not have a great motivation to help you improve you credit in any substantial way; they make dramatically more money on people with damaged credit or more specifically, low credit scores. Obviously, this does not describe your loan officer or you would not be hearing about us and our services.

Things that impact you financially because of damaged credit.

1. Mortgage and rent payments
2. Car and recreational vehicle financing
3. Insurance costs
4. Credit card and household financing
5. Business loans
6. Jobs and promotions

People understand that low credit scores cost them more money on the things they finance but they have no idea how MUCH money it costs them.


If you have Credit scores of 600 or below; as compared with
someone who has credit scores of 700 or above you could easily
be paying $500 - $1000 more per month than you should be on the items you are currently financing, because of the higher interest rates you are paying.

Alternatively, if you were to take that same money and invest it over the life of that 30 year mortgage loan each $500 could easily grow into $750,000 during that 30 years. That money could be yours or your creditors, your choice.

At the end of the day you do not repair your credit simply to buy a house or a car. You improve your credit to permanently change your financial life once and for all.