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RETRO HOUSEWIFE - MONEY & FINANCIAL MATTERS
How Good Credit Saves You Money
Guard your credit, the next time you want to make a purchase, big or
small, your good credit can save you money, from hundreds to thousands
of dollars. By contrast, a low credit score can cost you hundreds or
even thousands of dollars per month. Very few things in life can
have a more devastating effect on your monthly budget than a poor credit
score. Who looks at your credit?
- Prospective creditors,
- Insurance companies: (auto insurance, health insurance, life
insurance),
- Prospective employers, and
- Prospective landlords.
Here is a personal story of how good credit saved us money:
Five years ago we bought a Ford Expedition. One of the best financial
decisions my husband and I ever made. At the time we owned a BMW which
we bought used from a dealership. A year later, at the time of the
trade, we owed more on the auto loan than the BMW was worth, and we were paying 9% on the loan
because it was a used car. We owed 8 thousand dollars more on the BMW
than the Ford dealership was willing to pay us. So the Ford dealership
added the $8k to the price of the Expedition. That sounds terrible
doesn't it? It wasn't. The key for us, was the interest rate. Ford
was offering 0.9% interest to those buyers with good credit.
$20,000 car paid over 5 years:
|
| CREDIT STATUS |
RATE |
PAYMENT |
COST OF BAD CREDIT |
Perfect
Mildly Damaged
Damaged |
10%
14%
20% |
$424.94
$465.37
$529.88 |
$0.00
$4,722.54
$8,593.30 |
Or, put another way, if you buy a $20,000.00 car and you pay 8%
interest over a five year loan you will pay $24,331. The same $20,000.00
car at 0.9% interest over five years will cost you $20,460.00. That is
almost a $4,000.00 savings over the life of the loan.
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