How a Low Credit Score Can Hurt You
The credit score should be considered the "most important 3-digit number in your life". A low credit score can cost you a lot of money. To help you understand just how much money you can lose due to a low credit score, here are a few examples:
Credit Cards
If you have a low credit score, you will not be eligible for prime credit cards. These cards have the best interest rates, payment terms and credit limits, which make it easier for you to maintain good payment history, thus further establishing good credit. Consumers with less than stellar credit "qualify" for less attractive credit cards, or "sub-prime" cards. These cards often require exorbitant fees, monthly fees, low credit lines, or cash deposits. In most cases, these cards are difficult to maintain a positive payment record with and often fail to report your positive credit activity to the credit bureaus. A sub-prime credit card cannot only cost you money, but can also make it very difficult for you to improve your credit scores.
Car Buying
When trying to buy a car with a low credit score, you will not qualify for the lowest interest rates available. This can often translate to $3,000 to $6,000 more in interest payments. This additional interest will take the form of higher monthly payments. While it may not seem like a lot of money on a monthly basis, when calculated over the life of the loan it can add up to be a sizable amount.
For example: A loan for $25,000 to be repaid over 5 years:
| Credit Status | Interest Rate | Monthly Payment | Extra Interest Paid |
| Excellent | 8% | $507 | $0 |
| Poor | 12% | $556 | $2,952 |
| Bad | 16% | $608 | $6,062 |
Home Buying
As you might imagine, the effects of low credit scores are most evident with large purchases, such as purchasing a home. For most people, a home is the largest purchase they will ever make. If you have a low credit score (below 740), you may end up paying between $2,000 and $3,000 of additional interest each year over the course of the loan, which can amount to $60,000 and $100,000 more in interest than if you had an excellent credit score.
For example: A $200,000 mortgage to be repaid over 30 years:
| Credit Status | Interest Rate | Monthly Payment | Extra Interest Paid |
| Excellent | 7% | $1,331 | $0 |
| Poor | 9% | $1,609 | $66,140 |
| Bad | 12% | $2,057 | $99,019 |
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