Debt Consolidation and Credit Card Counseling

Low credit scores can be costly

The information age has allowed people to be generally more informed than they used to be. That’s good, as life is generally more complicated than it used to be. These days, nearly everything is computerized, monitored, and worked out to the finest detail. And when it comes to financial matters, you’ve got to understand how people are evaluating you in order to get anything done.

When it comes to financial matters, nearly everyone understands that there are credit bureaus that keep track of all personal financial transactions and all debt, including those in default.. Those transactions are logged in a credit report, which can be viewed by any potential lender who might wish to do business with you. That’s not exclusive to people you might want to borrow from; even companies that send you those “preapproved” credit card applications have already checked out your credit report to see if you’re even worth the trouble.

Along with the credit report comes a credit score, a three digit number that is supposed to represent your credit status at a glance. The traditional model, known as the FICO score, has a range that runs from 300 on the low end to 850 on the high end. If you rate 720 or better, you will have little trouble borrowing money at favorable rates. If your score is below 650, you will have a hard time borrowing money at all, let alone at reasonable interest rates. 

Here are a few of the things that will cost you more money if your figure is below 650. Some of them may surprise you:

• Mortgages - You will probably pay at least 1% more on a mortgage than will someone with a score in the 720 range. In some cases, over the life of a 30 year mortgage, the lower score may cost you more than $100,000 in additional interest.
• Car loans - The same applies to car loans, where the best interest rates apply to those with the highest scores. On a smaller loan, such as a car loan, you may pay an interest rate that is several points higher than if you had a “prime” score. 
• Landlords - You might find in trying to rent an apartment that your prospective landlord has checked your credit. If your score is lower, you might find yourself paying higher rent. You will almost certainly find yourself paying a higher security deposit before you move in.
• Insurance - In states where it is permitted, car insurance companies charge higher premiums to those customers with lower credit scores. The companies say that their statistical data shows that such customers are at a higher risk for accidents and thus cost the company more money.

All manner of people check credit reports these days. The ways in which a low score can cost you money are many. It doesn’t have to hurt, though, as it isn’t all that difficult to keep your score healthy. The biggest key is paying bills on time. Even if you only make a minimum payment, make sure that you pay it on time. That will help a lot.

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