The True Cost Of Credit

How Much is Your Credit Worth to You?

True Cost of Credit Price Tag and QR Code

The true cost of credit is answered by how much is it worth to you? Although credit is nothing new and has existed since before the 1900's.

Is it worth it to you to have the flexibility to get a loan for a car or house instead of paying cash?

The worse your credit, the more you have to pay in interest.

So you have three categories of people.

  1. You have some people who refuse to use their credit. They don’t want to pay the interest  They are happy paying cash and do not need to make large purchases.   However, this is a exceptionally small percentage of the people today.
  2. There are other people that do not need to make substantial purchases.  They could very well have perfect credit, but they do not need it, so they might not even know.
  3. Then there are those that do not use credit because their credit is frightfully poor, and they do not know how to fix or repair it.

Unfortunately, it will not be at the lowest interest rate.  You will end up paying more for what you are buying. Many lenders may tack on fees and higher interest rates as a security because they are lending to you even though you have a terrible past according to your credit report. 

Higher interest and additional fees are a significant cost that we pay when having poor credit.
This is why it is so important to repair your credit.

Credit Card Cost Of Credit

When you don’t pay the full balance of your credit cards, the interest you pay can be astronomical because the rate is so high.

Using a credit card cost calculator will guide you in determining how much you will pay....almost double.

If you have a $600 balance on your credit card and you only make the minimum payment of $15 with an interest rate of approximately 22%. You will end up paying almost double for the use of that money.... $1125 and it will take you 69 months--almost 6 year to pay it off and over $500 in interest.

Mortgage Cost Of Credit

As you can see, a house payment calculator will even show a sadder story when it comes to how much you pay.

True cost of credit loan example

When you have good credit, you can afford a more expensive home and pay less.

Life Cost Of Credit

The true cost of credit is not only the amount you pay in higher interest rates, but it can also cost you in other areas of your life. 

Housing:  Bad credit can affect your ability to find shelter. You may not be able to get a mortgage at all, even FHA home loans, but you still need a place to live. Many housing agencies will pull a credit report before renting to you.  A lot of private landlords are also realizing that they should check your credit history to see if you pay your obligations on time.

If you have a poor credit report due to late payments, or nonpayment chances are you could lose the apartment you wanted to rent or the house you want to purchase.

Employment: Some employers will pull your credit report before hiring you.  If you have poor credit, they may not hire you.  This could cost you on losing out on your dream job. 

Unfortunately, they may feel that your credit report tells a story.  It may look as though you are not responsible enough to pay your bills on time, and that could affect your job. 

They may also believe that it shows a personality flaw.  It could say a lot of things to different people. 

Insurance: The true cost of credit is not only related to loans and credit cards but also you ability to get a job and insurance premiums.

Insurance companies now use credit reports and scores as a tool in determining your auto loan rates. The worse your credit, the higher the insurance companies perceive the risk so you end up paying more in premiums.

The True Cost of Credit Bottom Line

These are just a few of the many examples that will help you to understand the true cost of credit, and how it can help or harm you.  If you have a decent credit standing, you will get the loans, the credit, the job, and the home or apartment that you hope to get.

If you have imperfect credit, you will affect your life by not being able to purchase the larger items, you will not be given loans, credit, jobs, or housing.  This can hinder the way you live, and affect your everyday life.  The true cost of credit cannot only be measured by how much it costs in dollars, but what it may cost in your life circumstances.

It is so important to repair your credit when you realize how much it impacts you.

Related Articles

Credit Card Cost Calculator - A credit card cost calculator can be a very useful tool when it comes to managing and repairing credit.

House Payment Calculator
- Using a house payment calculator lets you know what you will pay for a mortgage loan and is a great tool to use as you are going through the credit repair process.

Debt Reduction Calculators
- It is important to use debt reduction calculators from time to time in order to help you maintain a proper financial status and assist you on your credit repair journey.

Payoff Calculator for Debt Reduction
- In order to pay off all the money that owe, you need to have a plan. A payoff calculator for debt reduction will assist you in developing such a strategy to help you with your credit repair.

FICO Score Calculator
- A FICO score calculator (also known as a FICO score simulator or credit score simulator) can help you determine an estimated range in which your credit score lies.

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