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HOW BAD CREDIT WILL COST YOU (LITERALLY)


We have established the many ways that having bad credit can cost you, whether its by causing you to miss out on a job opportunity, or causing you to be denied a loan for your home or car. But did you know that bad credit can literally cost you? And in some cases, it can vary from thousands to millions over time.

A good or excellent credit score will get you lower interest rates, as well as zero interest credit cards. This can potentially save you thousands of dollars in loan interest fees.

A home loan with bad credit is a financial risk for both the borrower and the lender. The lender, however, takes the most risk, so they charge persons with bad credit, more fees and interest for these types of loans.

A bad credit mortgage interest rate is based upon the credit score of the borrower. The lower the credit score the higher the interest will be. Therefore, if you have bad credit, you will end up paying much more in interest than someone whose credit is good. For example, two friends go about their lives, taking out student loans, buying cars and homes, and taking on a bit of credit card debt. While their expenses are identical, their credit scores and corresponding monthly payments and interest charges are not. Over a lifetime, the person with credit rated "fair to poor" can expect to pay over $200,000 more than the person with good credit.

If you have bad credit, the extra interest charged on a mortgage can be a real killer. Let us say both women buy homes at age 30 for $300,000, and then upgrade to $400,000 homes at age 40. In the long run, Karen the one with bad credit ”will wind up paying about $100,000 more than Emily, even though they're both buying basically the same house. When you tally up other costs related to bad credit (extra interest paid for student loans, credit cards, and such), it can easily add up to more than $200,000 over a few decades. On average, mortgage loans with bad credit cost a borrower 2-3 times more than good credit mortgages. The same policy would apply to car loans and other types of loans.

Poor credit can also leave you to the guiles of dishonest mortgage brokers. These brokers get thousands of dollars in fees by getting borrowers to sign contracts with enormous interest rates. Brokers get paid higher bonuses with the higher interest percentages. Simply raising your credit score from 500 to 600 will save hundreds of thousands of dollars in the duration of a loan. Knowing you'™re getting the best interest rate on your loan will give you the opportunity to save money. Imagine being able to save $400,000 in a savings account over 30 years instead of paying it out in interest.



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