You probably are well aware that a poor credit score costs you money, but you probably are not aware how much that can add up to over time -- sometimes well over $1 million.
For people with poor credit, the additional money they'll pay for things like mortgages, car loans and insurance, compared with what those with solid credit pay, can be in the mid-six figures over a 30-year period. Invest it wisely, and that number could soar to more than $1 million.
Here is how poor credit costs you in more ways than you imagined:
Mortgage: One obvious place that poor credit hurts you is the interest rate you must pay when you purchase a house. The average price for a home in June 2007 was $316,200.
According to MyFico, a 30-year, $300,000 loan for someone with a credit score of between 760 and 850 carried a 6.346% APR. Someone with a credit score of between 500 and 579 would have a 10.152% APR. That would mean that a person with a good score would have a monthly payment of $1,866, while the person with the poor credit score would pay $2,666 -- or $800 a month more for the same house. That adds up to $288,000 over the 30 years of the loan.Auto loan: Edmunds.com says that the average car loan is $24,864. According to MyFico, an auto loan for a person with good credit (defined as a score of between 720 and 850) would carry a 7.221% APR, while someone with poor credit (a score between 500 and 589) would have to pay a 14.909% APR. That works out to a difference of $88 a month, which comes to $3,168 over the three years of the loan. The average person keeps their car for 4.5 years.