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The Shocking Cost of Varying Credit Scores

  July 21, 2020  |    #Eliminate Debt

What is the cost of varying credit scores?

A bad credit score can cost you hundreds of thousands of dollars over the course of your lifetime. In fact, when the two of us were carrying $51K in credit card debt, we were spending $10K per year in credit card interest alone. So, how much is your credit score costing you?

Hear the impact of varying credit scores:

Boost your credit score to save thousands

On this episode of Queer Money®, we’re uncovering the shocking truth about how much your debt is really costing you. We begin with a review of the credit score ranges from exceptional to very poor and discuss the five factors that impact your credit score.

We go on to explain how much interest a borrower in each credit score range pays on a credit card (on average), calculating how many thousands of dollars you could save each year with a better credit score. Listen in for insight on how your credit score impacts the amount of interest you pay on mortgage debt and find out how much your score is costing YOU—and what to do about it!

“We always recommend that you want to keep the credit card you’ve had the longest because that has the longest credit history.”Click To Tweet

Topics covered on the cost of varying credit scores

The five credit score ranges

  • Exceptional: 800-850
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Very Poor: 300-579

What factors impact your credit score

  • Payment history – 35%
  • Credit utilization – 30%
  • Age of credit history – 15%
  • The mix of debt – 10%
  • Recent activity/# of inquiries – 10%

How much interest we pay on credit cards (on average)

  • Exceptional = 14%
  • Very Good = 18%
  • Good = 20%
  • Fair = 24%
  • Very Poor = 25%

Why people with low credit scores pay more interest

  • The lender considers borrower higher risk
  • Want higher return in case of default

A comparison of interest payments on a $10K credit card balance

  • Exceptional = $1,400/year or $116/month
  • Good = $2K/year or $167/month
  • Very Poor = $2,500/year or $208/month

The MoneyTalksNews comparison of interest on a 30-year mortgage

  • Score of 630-639 with 5.34% interest = $201,610
  • Score of 760-850 with 3.751% interest = $133,484
  • A difference of $70K

Our top tips for Queer Money listeners

  • Use Debt Lasso calculator to determine cost of debt
  • Reduce cost of debt (improve score + decrease debt)

Resources for improving credit scores

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