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Credit as an Asset
Money SmartsApril 21, 2020
How is my credit score an asset?
Having a good credit score can be key to getting a great rate on that mortgage for your dream home. Credit can help secure your education. Credit can help you land your dream job.
What difference does it make?
- Auto Loans: Having a good credit score can make all the difference! Car shoppers with scores in the 650 - 699 range can expect rates to be double what top tier borrowers receive. Those with scores in the 450 - 649 range are looking at interest rates three times higher than the best rates available.[1] This means, if your credit score is below 700, you could end up paying thousands more over the life of a car loan. The difference in money saved between a score that is below 620 and a score of 720+ could be $109 per month, or $6,540 over the life of a five-year $20,000 auto loan!
- Mortgages: When shopping for a home, the difference in savings could be tens of thousands of dollars depending on your credit score. According to the loan savings calculator on myfico.com, you can save $180 per month on a $200,000 home loan if your score improves from a 620 to a 760. That’s $64,000 in savings over a 30 year term! You can also use strong credit to negotiate terms.
- New Job: If you think credit checks are an uncommon part of the hiring process, think again. According to The National Association of Professional Background Screeners and HR.com, 25% of HR professionals use credit or financial checks while hiring for some positions, while 6% check credit for all applicants.[2]
- Student Loans: Credit also affects the ability to obtain a lower rate for student loans. For some individuals, this can mean the difference between being able to go to college and not. Higher credit scores allow borrowers to refinance loans and save money. com states that, “borrowers who choose a loan with a shorter repayment term, in order to maximize overall savings, reduced their interest rate by 2.13 percentage points and will pay $17,344 less over the life of their new loan.”[3]
When is the best time to try to fix your credit score?
NOW! If your credit score is less than ideal, contact our Housing and Financial Counseling Team! Together we can walk through your credit history, budget, and address your goals, concerns, etc. Schedule a screening to get started!
[1] Vincent, John M. “What Is a Good Credit Score to Buy a Car?” U.S. News & World Report, U.S. News & World Report, 21 Jan. 2020, cars.usnews.com/cars-trucks/good-credit-score-to-buy-a-car.
[2] NerdWallet. “Why Employers Check Credit - and What They See.” NerdWallet, 18 June 2019, www.nerdwallet.com/blog/finance/credit-score-employer-checking/.
[3] Carter, Matt. “Refinancing Student Loan Debt Can Save Thousands.” Credible, Credible, 9 Mar. 2020, www.credible.com/blog/refinance-student-loans/credible-savings/.