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How Bad Credit Affects You


Your credit score is created using a mathematical formula that measures data from your credit report. Your payment behavior, debt levels, and credit history are evaluated and help lenders determine the interest rate you will pay upon approval.

Having a high credit score will help you receive the best rates on new loans and credit.

Example 1: Financing an Automobile

If you are making payments on a typical auto loan, you are probably paying between $2,100 and $5,900 more in interest just for having bad credit. See the chart below:

$25,000 car paid over 5 years:
Credit Status Rate Payment Cost of bad credit
Perfect 7% $495.03. $0.00
Mildly Damaged 10% $531.18. $2,160.00
Damaged 15% $594.75 $5,940.00
 

Example 2: Mortgage on a Home

Bad credit in auto financing can really hurt, but it is nothing compared to the cost of bad credit when a home is involved. A typical home financed for 30 years can cost between $73,000 and $230,000 more in interest if you have mildly or severely damaged credit. See the chart below.

$200,000 home paid over 30 years:
Credit Status Rate Payment Cost of bad credit
Perfect 6.5% $1,264.14. $0.00
Mildly Damaged 8% $1,467.53. $73,080.00
Damaged 11% $1,904.65. $230,400.00
 

 

 

 

 

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