In today’s world, your credit scores have the power to impact where you live, what you drive – and how much bang for the buck your hard-earned dollars will get you. If you’re like most, the amount of your monthly payments is a big factor in determining how much car, home or other big-ticket item you afford to finance. In other words, your “purchasing power”.
What you need to know about your credit scores:
- Your credit scores are a critical factor in determining the interest rate you get from lenders.
- In turn, that interest rate determines your monthly payment amount.
- The higher your credit scores, the lower your interest rate.
- Paying less interest means you can finance more without raising your monthly payments.
Here’s how it works.
As an example, let’s say you want to buy a new car – and can afford a payment of $482 a month. With a 608 credit score, a higher interest rate around 13.74 percent kicks in. Because of the high interest rate, you can only afford to finance $21,000. And at the end of your 60-month loan term, you will have paid a whopping $8150 in interest alone. With a 661 credit score, you may qualify for a lower interest rate around 3.99 percent. Now, you can afford to finance $26,500. Meaning you can buy a nicer ride – and at the end of your 60-month loan term, you will have paid $2750 in interest – a $5400 savings.
The more you know about how to develop, maintain and protect your credit scores, the greater your purchasing power can be.
Avoid unwanted surprises!
Before you finance a big-ticket purchase, check all three of your credit scores from TransUnion®, Equifax® and Experian®.