Sometimes, people may not have perfect credit, but their credit is “average” or “ok” or “good enough to qualify for loans, credit cards, etc.” In these cases, people often don’t even think about credit repair because, let’s face it, it’s not an urgent need unless it keeps you from getting something you want. With average credit scores (in the range of 680-740) you can usually get what you want, but it comes at a higher price.
Even if you have no credit card debt, there are two things that almost everyone has:
- A car payment (or two)
- A mortgage payment
Let’s take a closer look and see just how much higher that price really is…
Higher Car Payments
For many car finance companies and banks, top tier credit is 750 or above. This means that if your credit scores are not above 750, you’ll pay a higher interest rate. According to June 2022 statistics in US News, a borrower with credit scores in the 700-749 range will have an interest rate approximately 2.7% higher for that car loan than a person with 750+ credit.
On a car loan of $50,000 over 60 months, that “average” or “good enough to qualify” credit score will cost $70 more per month. $4200 over the full term of the loan.
If that “good enough to qualify” credit score is 660-699, you can expect that interest rate to be roughly 7% higher than someone with 750+ credit. That’s an increase of nearly $200 per month or $12,000 over the life of the loan.
If you think you escape this by leasing your car, think again. That higher interest rate is factored into your lease payment as well.
Oh, and by the way, if you are paying on 2 car loans, double these numbers.
Higher Mortgage Payments
Now let’s examine a mortgage loan where top tier credit is usually 760 or above.
MyFico.com reports that as of June 8, 2022, average 30 year fixed mortgage rates are 4.743% for credit scores of 760+, increasing to 4.965% for 700-759, and 5.142% for 680-699.
On a mortgage loan of $450,000 (which may be low for many areas of Southern California), you can expect to pay about $80 more per month for that credit score in the 700-759 range and $110 more per month if you are 680-699. Even if you never pay your home off in full, it’s still an extra $1000-$1300 per year out of your pocket.
So, for the average family with a house and two cars, that “average” credit score could be costing you over $6000 per year!
How to Give Yourself a Raise
A few months of credit repair will often get you into the top credit tier, which means you can qualify for lower interest rates and keep that $6000 in your pocket every year. Yes, it might require some work and sacrifice to keep your higher credit scores once you have them, but you do get compensated for the effort – to the tune of several hundred dollars every month.
Intrigued by the thought of keeping more of your hard-earned income? Call us today and let’s talk about your specific situation.