FICO scores are an important part of determining a person’s financial status and well-being.
They determine your ability to obtain credit as well as loan terms like the interest rate, down payment, etc… which in turn dictate the overall amount of money that you pay on the loan.
Consumers with higher credit scores represent a lower credit risk to lenders and pay much less than borrowers with lower credit scores.
How much less?
Let’s look at an example;
2 different borrowers, one with a 620 FICO Score, the other with a 760 FICO Score are borrowing $280,000 on a 30-year fixed-rate mortgage.
Here’s how their payments would break down.
What would you do with an extra $93,000?
Now, extrapolate that out to auto loans which have much higher variations in interest rates where a consumer with a 760 score can finance a vehicle at 0% interest and a borrower with a poor credit score may end up paying 7%, 8%, 9% or even 25% in annual interest on a vehicle.
Credit cards interest rates also vary from 0% with no additional fees for consumers with good credit to 35% with a minefield of annual, monthly and even weekly fees for consumers with poor credit scores.
Ultimately, consumers with low FICO credit scores end up paying hundreds of thousands of dollars more for the same homes, cars, furniture, appliances, and other goods than those with good credit.
Bad credit can be very expensive
Credit scores matter, improve your credit scores and improve your financial health.