How Much Does A Low Credit Score Cost You?

By Article Guy On December 30, 2009 Under Money Management

Fix My Credit

How Much Will You Pay For A Low FICO or Beacon Score?

Do You Have Credit Cards?

If you have a low Fico or Beacon score you will be in the Jilted category, getting a great rate on a credit card is totally out of the question.  If you do get a credit card, you may be hit with outrageously high interest rates, upfront set-up fees, reoccurring monthly fees and cash deposits.

Auto Loans

Your payments on an automobile will cost you an arm and a leg with bad credit.  Here are examples.
$20,000 auto loan over 5 years

Category	Interest Rate	Payment	Total Cost After 5 Years
Prime	7%	$405	$24,300
Subprime	14%	$477	$28,620
Hardy Money (Jilted)	21%	$557	$33,420

Loans For The Home

$100,000 home loan over 30 years

Category	Interest Rate	Payment	Total Cost After 30 Years
Prime	6.50%	$632	$228,625
Alternative A	7.50%	$699	$251,715
Subprime	10%	$877	$315,925
Hard Money (Jilted)	14%	$1,184	$426,553

Having bad credit can cost you hundreds of dollars.

 

Do you need to raise your credit score?

 

What Affects Your Credit Score?

There are 5 things used in calculating your total FICO score.

Payment History is 35% of your score
Payment history is determined by if you pay your accounts on time.  
Payment history includes any loan that you have had to make monthly payments on.  For I.E, auto loans, mortgages, credit cards, department stores and finance companies. 
If you are late on an account it can it is possible it will turn into a collection account or public record.  These include, but are not limited to bankruptcies, lawsuits, liens, collections, wage attachments and judgments.  These are very serious accounts and hurt your credit score dramatically.
Security- How delinquent is the payment?  Have you been thirty,sixty,ninety or hundred twenty days late? Is it still outstanding?  Paying on time will raise your Beacon or Fico Score greatly.
Recent history- How long ago where you delinquent?  Are you still delinquent?  Current late payments can hurt your score by 100 points.
Prevalence- How many obligations do you have?  What percentages of your accounts are late now?

How Much Debt You Have is 30% of Your Score

Does your income allow you to make your payments and pay your home bills on time and still have money to spend on every day activities? 
What type of account is it?  Credit accounts are figured differently depending on the type. Credit cards are different than mortgages in factoring your FICO score or determining if you apply for a loan.
It is important to look at how much credit debt you have.  A lot of accounts with small balances may lower credit score because you could run up those balances If you run into finacial trouble. If you have not used a credit card in many years, it is good to close it. Paying down your debt below 30% will help keep your credit FICO score high.  Try to keep the amount of credit cards you keep down to a minimum.  Three or four open credit cards are a great amount to have.
If you have high balances on your credit cards and are close to your limit, it is affecting your score, even if you have made your payments on time.  Banks do not want to see high balances because it shows that you may not have the money to pay anymore than the minimum payment.

Amount of Time Credit Has Been In Use is 15% of your FICO or Beacon score

The longer you have had credit, the higher the score as long as the credit you have has been in great standings.  That means that older people that have always had good credit will probably have higher scores than someone who is younger with good credit, but young people can still have a great credit score.
It is very important to look at how long have you had an account and the length of time it has been in the credit report.  The average age of your accounts are taken into considerations when figuring your FICO score.  You must also use the accounts that you have.  If it has been long time since you have used an account, it may not hold much of a score.  Using the accounts you have will help your score.

Inquiries are 10% of your

It is easier to obtain credit these days via mail, internet and many other ways.  Every time you let someone run your credit and you get an inquiry, and it can hurt your credit FICO score.  Mortgage and auto loans are treated differently for example auto loans made within 14 days are counted as one There are no good inquiries.  Every time you fill out a credit application, you get one or more inquiries.  A lot of inquiries look bad.  Almost any inquiry is not good, there are neutral ones that don’t hurt your score.Pre-approval inquiries are when a potential lender has looked at your credit to determine whether they want to offer you a credit.  These are not factored in to your score, but once you fill out an application with the lender, it will show up to be a bad inquiry that does hurt your score.

Lenders periodically review your credit to see if there are any major changes.  If they see a major change in your score they may close your account.  These are also not supposed to be computed into your FICO score. Inquiries can show a banker how often you are trying to open up new accounts and how recent those attempts were.
Primary consideration is given to the following:

• Number of inquiries in last six months
• Number of trade lines opened in the last year
• Number of months since most recent inquiry

How inquiries are computed is somewhat complex and they should be avoided if possible. 

Types of Credit Experience is 10% of your score

It’s great to have a different kinds of accounts.  Having installment accounts, retail accounts, credit cards and a mortgage is good.  Since this is only worth ten percent of your score, it is not a big factor but can help.  Do not go out a try to open different kinds of accounts because a bad mix may hurt you and lower your score.

Do you have questions about raising your Credit Score?