Cost of Debt: Reasons You Need a Kick Ass Credit Score

Summary: Debt affects your credit score and makes life more expensive. We’ll show you the cost of debt and reasons you need a kick ass credit score.<br> A good credit score saves you money in many ways. You don’t have to achieve the “perfect” score but having a score above 760 will go a long way towards making life cheaper.<br> What is a Credit Score?<br> A credit score is a number calculated using a number of factors to show how creditworthy you are. Lenders use this number to decide whether or not to lend you money, what rate of interest you will pay on that loan and in the case of credit card companies, whether or not to issue you a card and what your limit will be. Credit card interest rates are pre-set so your score doesn’t affect that.<br> What Makes Up a Credit Score?<br> There are six major components that make up your credit score. We did an in-depth <a href="https://www.listenmoneymatters.com/highest-credit-score/">article</a> on it but to quickly re-cap, these are the factors;<br> Payment History: If you pay your bills on time.<br> Utilization: How much of your available credit is being used.<br> Derogatory Marks: Do you have delinquent accounts, past bankruptcies, judgments against you etc?<br> Length of Credit History: How long you have had a credit file.<br> Total Accounts: How many credit accounts you have open and how many types (credit card, mortgage, student loan, etc)<br> Credit Inquiries: How many times has your credit been checked because you’ve applied for a new credit card or loan.<br> What is a Good Score?<br> There is a range your score can fall into. Each credit bureau has their own scale but in general, the ranges are as follows<br> *300-630 is bad.<br><br> * 630-689 is fair.<br><br> * 690-719 is good.<br><br> * 720-850 is excellent.<br> Either end of those is pretty hard to achieve and some people obsess over their credit score way more than necessary. There are lots of reasons you need a kick ass credit score but kick ass can be achieved at 760. So if you are there, you’re set.<br> Reasons You Need a Kick-Ass Credit Score<br> If you <a href="https://www.listenmoneymatters.com/how-to-build-credit/">don’t have a kick-ass credit score</a>, here are some reasons to get one.<br> Interest Rates<br> This is the big one. The two most expensive things in life are taxes and interest and if you can avoid them, you will reach <a href="https://www.listenmoneymatters.com/financial-freedom/">financial independence</a> much faster. If you want to <a href="https://www.listenmoneymatters.com/how-to-save-for-a-house-fast/">buy a home</a>, a car, or borrow money for anything from <a href="https://www.listenmoneymatters.com/online-businesses/">starting a business</a> to renovating your house, your credit score will determine the rate of interest the lender sets for the loan.<br> What’s a point here and a point there? A lot when we’re talking about interest rates. If you buy a $300,000 house with 20% ($60,000) down with a 30 year fixed rate mortgage at 4.5% rather than 5.5%, over the life of that loan, you will save $52,794.<br> Your monthly payment at 4.5% will be $1,216 versus $1,363 at 5.5%. That’s an extra $147 per month. If you invested that $147 every month at an average return of 7% a year and did that for 30 years, the same length of your mortgage, you would have $180,381.86.<br> Just that little one percent difference could mean a difference of more than $200,000.<br> Job Search<br> Employers may pull your credit report as part of a back ground check. This is most likely to happen if the position involves handling cash, access to personnel files or a senior level position that requires a lot of decision making.<br> You can see why a potential employer would want this information in those circumstances; people who have poor credit could be thought more likely to steal either money or the <a></a>