Do you have less than optimum credit?

Have you been putting off working on making it better?

Well, you want to stop procrastinating.

If you have a credit score below 740, you are wasting money.

And the further away from 740 you get, the more money it costs you.

There are two types of costs that go into calculating the true cost of bad credit.

One is the direct cost and the other is indirect cost.

I will walk you through both.

Direct Cost

This is the amount you will directly pay to the lender.

You pay more money because your lender gives you a higher interest rate.

Let’s look at an example.

You and your friend want to buy homes.

Both of you go to the bank and apply for a loan.

His credit score is 740 and yours is 620.

He gets an interest rate of 4.0% and you get an interest rate of 5.5%

Both of you get loans for $200,000 for 30 years.

His monthly payment is $954.83 and your monthly payment is $1,135.58.

You pay $180.75 more per month and $65,069.07 more over the entire 30-year mortgage.

That’s a lot of money!

But we’re not finished yet. It gets worse.

Indirect Cost

This is the cost what you could do with that $65,069.07 in savings.

Let’s continue our example.

Your buddy is really smart and he invests that extra $180.75 in an S&P 500 index fund for 30 years.

At an 8% return, he made $269,382.47.

Ouch.

That makes having bad credit extra painful.

A total cost of $334,451.54 painful.

Summary

Your true cost of that 620 credit score is $334,451.54.

That’s because you add the direct cost of $65,069.07 and the indirect cost of $269,382.47.

This article will leave you feeling good if you have good credit.

Or feeling really bad if you have bad credit.

It’s okay if you have bad credit.

There’s nothing you can do about the past.

But you can change the future.

Work on changing your credit score.

You can get a 740. It’s not mythical.

Take one day at a time.

Do you have any other costs of bad credit?

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