The Hidden Costs of Bad Credit

NEW YORK (MainStreet) — It’s generally accepted that bad credit can cost you, but most consumers fail to consider how much they are actually paying in monthly interest rates, which are higher for borrowers with bad credit.

“When consumers consider their monthly payments, the price might not seem so bad,” Tom Quinn, consumer credit expert for, told MainStreet. “But, when you look at the costs over the life of the loan, it adds up,”

To help illustrate just how much bad credit may be costing you, MainStreet used estimates from credit experts to see how much extra the average consumer would pay for a car loan, home mortgage and credit line with a 550 credit score vs. a 750 credit score.

Home Loan

Initially, we set up to compare how much someone with an uber-low credit score of 550 or below would pay compared to a member of the credit elite with a score of 750 or higher. However, experts quickly pointed out that someone with a score that low probably wouldn’t have to worry about higher interest rates since they weren’t likely to get a mortgage in the first place.

“Some lenders may try to argue this point, but there are really no published interest rates for a score that low,” John Ulzheimer, president of consumer education for, says.

This is because, as Ken Lin, CEO of Credit points out, the minimum credit score requirement for a conforming loan – one that meets the terms and conditions determined by beleaguered mortgage giants Fannie Mae and Freddie Mac – is 620.

So, we moved on to plan B and looked at a consumer with the minimum required credit score of 620. According to Lin, a person with that score can expect to pay 6% to 6.5% interest on a typical mortgage. 

Comparatively, a consumer with a credit score of 750 would pay 4% to 4.5% interest on a typical home loan .