How much do different credit scores cost?
Bad credit can cost you hundreds of thousands of dollars over the course of your life. In fact, when we both had $51,000 in credit card debt, we were spending $10,000 a year on credit card interest alone. How much is your credit score costing you?
Learn the impact of different credit scores:
Boost your credit score to save thousands
In this episode of Queer Money®we uncover the shocking truth about how much your debt is really costing you. We’ll start with a review of credit score ranges from exceptional to very poor and discuss the five factors that affect your credit score.
We then explain how much interest a borrower in each credit score range pays on a credit card (on average) and calculate how many thousands of dollars you could save each year with a better credit score. Listen in to learn how your credit score affects the amount of interest you pay on mortgage debt, and learn how much your score is costing you – and what you can do about it!
“We always recommend that you keep the credit card you have had the longest as it has the longest credit history.”Click to tweet
Topics covered about the costs of different credit scores
The Five Credit Score Ranges
Exceptional: 800-850
Very good: 740-799
Good: 670-739
Mass: 580-669
Very bad: 300-579
What factors affect your credit score?
Payment history – 35%
Credit utilization – 30%
Age of credit history – 15%
The debt mix – 10%
Last activity/number of requests – 10%
How much interest do we pay on average on credit cards?
Exceptional = 14%
Very good = 18%
Good = 20%
Fair = 24%
Very bad = 25%
Why people with low credit scores pay more interest
The lender assumes that the borrower is at greater risk
You want a higher return in the event of a default
A comparison of interest payments on a $10,000 credit card balance
Exceptional = $1,400/year or $116/month
Good = $2,000/year or $167/month
Very Bad = $2,500/year or $208/month
The MoneyTalksNews interest rate comparison for a 30-year mortgage
Result of 630-639 with 5.34% interest = $201,610
Result of 760-850 with 3.751% interest = $133,484
A difference of $70,000
Our top tips for Queer Money listeners
- Use the Debt Lasso Calculator to determine the cost of debt
- Reduce debt costs (improve your score + reduce debt)