Credit Repair Tips

Bad Credit Costs Money:

You probably know this but since the credit market adversity people with a good credit history will continue to have access to good offers such as mortgage, credit card and other kinds of loans.

However banks are taking steps to limit their risk, given the economic downturn of the last years they have tightened their lending standards.

That’s why it’s essential to monitor your credit report and to optimize your credit score to be in the “good” to “excellent” range.

A bad credit score costs money, pretty obvious, right? But you may not be familiar with how much money it will cost you. In many cases it can be very well over one million dollars.

Yes! You read that correctly, One Million Dollars, over seven figures. Now think about this, what can you do with an extra million dollars?

If you have bad credit, the additional money you pay for a home, a car and insurance, compared to someone who has good credit can easily add up to seven figures over a 30 year period.

Now that is money that invested wisely can rise to more than 1 million and give you a very comfortable lifestyle.

One obvious way bad credit hurts you is the interest rate you must pay when you make a purchase.

Mortgage:

Let’s take the example of an important purchase as it is a home. The median price of a home in the last 12 months (04/10 to 04/11) is around $150,000 (the place where you live affects that price but for this example will use this numbers)

A 30 year $150,000 loan for someone with a score between 760 and 859 carried a 6.346% APR, for someone with a score between 500 and 579 would have a 10.152% APR.

That would mean the person with the good score would have a monthly payment of $ 933, while the person with the bad credit score would pay $ 1,333 or $ 400 a month more for the exact same loan. The difference can add up to $ 144,000 over the life of the loan.

What can you do with an extra $ 144,000?

What about a car?

The average car loan is $ 24,864. Once again, for a person with a score between 720 and 850 would carry a 7.221% APR, while the person with a score between 500 and 579 would have to pay a 14.909 % APR.

The difference would be of $88 a month or a total of $3,168 over the three years of the loan. The average person keeps a car for 4.5 years.

If each person financed a new car every 5 years, it would cost the person with bad credit $19,008 more over 30 years than someone with good credit.

Insurance:

All types of insurance will likely cost more to a person with bad credit. Insurance companies consider people with bad credit a higher risk to insure, therefore an individual with a lower credit score will pay more than a comparable individual with good credit.

Job:

You may lose out on a better job due to bad credit. Employers pull your credit report today more than ever, because many see a risk on employing a person with bad credit.

Credit Cards:

For this example let’s assume both people (with good and bad credit) carry the median credit card debt of $ 2,200 over 30 years. The person with good credit has an interest rate of 9% and the one with bad credit has an interest rate of 20%, the person with  bad credit will pay an extra $ 7,260 over 30 year period.

Lost Interest:

If the person with good credit took the difference in the cost of the mortgage, $ 800 in an account that earns 8% compounded annually for 30 years he would be worth 1.2 millions.

The first thing is that you have to understand about the credit system is- it’s a system. And like with any system, those who understand the system have a tremendous advantage over the people that don’t.

The second thing is that taking the steps to fix your credit and improve your score is probably the highest paid job you will ever do.

It is up to you to learn how the system work and how to take advantage of it. If you stick around I will give you insider tips that will help you improve your credit if that is what you want or even get credit if you don’t have it.

 

Important Notice: If you are attempting to improve your credit or repair it, keep in mind that the techniques in this site are designed for individuals who had past problems but are currently on their feet financially. If you are currently experiencing problems paying your bills, the credit repair process will not work. You must be totally caught up on all your bills for six months before you can start repairing your credit report.