Getting a good deal on a loan or credit card largely depends on the credit score of the borrower. Certainly, this is no secret.
What is surprising is the amount of money one can save by successfully boosting one’s credit score for the benefit of domain lenders. Make no mistake, the sooner you do it, the better.
for example: New study from Lending Tree It is estimated that you could save $50,000 by raising your credit score from the “acceptable” range to the “very good” range.
Credit rating agencies consider the “fair” range to be in the FICO 580 to 669 credit rating range. Lending Tree reports a “very good” range between 740 and 749.
This equates to a monthly savings of just over $250, a number that will likely help American families fight back inflation and rising consumer prices. Total average monthly payments would be $3,029 with fair credit or $2,777 with very good credit – a difference of $252.
The study also indicated that increasing your credit score has the greatest impact on mortgage costs. “Boosting from fair credit to very good could result in $40,041 in mortgage savings, which is 81% of about $50,000,” the report stated.
The study added that consumers with very good credit could save $12,654 on personal loans, $36,498 on auto loans and $377,766 on mortgages if they had the lowest APR instead of the highest.
“There is very little in life that is more valuable than getting bad credit,” said Matt Schulze, senior credit analyst at LendingTree. “A lower credit score could cost you thousands — or tens of thousands — of dollars over your lifetime in higher interest rates and fees, and it could also prevent you from getting that loan altogether.”
The good news?
Improving your credit score is important because good credit scores determine the rates for your loans, so it’s important to keep your score healthy to help save money.
“Your credit score determines how much you will ultimately pay for goods and services,” said Kristi Kim, CEO of TomoCredit. “Increasing your credit score by 100 points can save you $250,000 plus in your life in fees and interest fees alone.”
Going from “bad” to “good” to very good “with your credit score will take some time, so be diligent, but also be realistic.
“When trying to boost your credit score, it is important to manage expectations, and ultimately, the amount of time it takes to fix bad credit depends on how bad your credit condition is,” said Wayne Brown, founder of Dogan Brown.
Minor mistakes that have pushed someone into bad credit will be easier to recover from than some serious mistakes that can take years. However, the effort justifies the means.
“Improving your credit from bad to good, from good to very good, and from very good to excellent is important to ensuring that you get the best loan interest rates,” Brown noted.
To start this process, think strategically and be careful about spending beyond your means.
“Consumers really need to be careful about increasing their capacity,” said OppFi CEO Todd Schwartz.
Make plastic a priority
when exploring and options For credit, consumers should carefully compare and consider their choices.
For example, when looking for credit, people should consider options that achieve three things, Schwartz advised.
Enable them to repay the principal in return for the renewal of their debts on an ongoing basis.
Focus on creditors who report payments on time to credit bureaus.
Focus on creditors who don’t have any kind of fee like prepayment penalties.
“These important consumer protections will help ensure that consumers who need credit can pay their debts and appear better off,” Schwartz noted.
One area of personal finance where increasing debt can make a big difference going up the credit food chain is credit cards.
“Frequency is important,” Kim told TheStreet. “It is best to pay off your credit card balance as frequently as possible regardless of the dollar amount. Paying off your balance helps build your credit score and keeps credit utilization rates low, which helps improve your credit score.”
It is also necessary to know how to manage money and to have financial literacy.
“This is particularly the case during periods of high inflation, when people need to understand the pros and cons of the credit card accounts they open, their credit score, the market and the economy,” Kim added.