- We all know that a lower than excellent credit score
is bad, but how much is it actually costing you?
I was talking to one of my beautiful sisters the other day
and she mentioned how she got a cheaper price for something
because she has a good credit score.
Yes, you really are being judged based on your credit score.
Not by me, though.
I like you no matter how bad your credit score is.
But this got me thinking about how important it is
to have a good credit score.
So in this video, I'm gonna go over four ways
having a bad credit score can really hurt you
and in most cases, cost you a ton of money.
As I go through this list, I'm gonna lay out
actual numbers to help you understand the true cost.
One of these absolutely blew my mind
and you need to know about it.
Hey, I'm Jarrad, and on this channel,
we like to talk about all things
personal finance and investing.
Please Hulk smash that thumbs up button,
because I look at you the same way that I look at giraffes,
which is basically like I bet you were just born awesome.
Having a good or bad credit score
is about as black and white as it gets.
You either have it, or you don't.
I know they have ranges from very poor to exceptional,
but I would say that anything less than a 740,
which is technically a very good credit score,
would be considered very poor.
Luckily, a very poor credit score
is something that's easily fixable.
Depending on how bad it is, it could take longer,
but the important part is that you have the opportunity
to increase it starting today.
One of the simplest ways to increase your credit score
would be to, of course, pay your bills on time.
Now, I know this should go without saying,
but seriously, this is a huge deal.
If you're someone who's very forgetful,
like one of my exes, then set your credit card
to be paid automatically every single month.
I have one of my credit cards that for some reason
I can't put on Autopay, I don't know why, but I can't,
so I have a reminder set on my phone
that goes off every single month on a Sunday night.
Since I know that I'm not usually
doing anything Sunday nights,
it kind of makes doing it that much easier.
And if I am, then I just log in to the app on my phone
and pay the bill right away.
Another way to easily keep your credit score up
is by not closing down all the credit card accounts.
A part of your credit score is based
on the average age of your credit card accounts.
So if you have a credit card that's 10 or 15-years-old
and you cancel it, then your average credit age
will decrease, which hurts your overall score.
Just like wine and whiskey, the older the better.
Allegedly, though, because I think
that they both taste pretty darn gross
no matter how old they are.
Sometimes credit card companies will automatically
close accounts if they have not been used
for long periods of time.
If you get a notice in a mail from a credit card company
that they're going to close your account due to inactivity,
then charge something to that card to make sure
that this does not happen. A good way to make sure
that you're still actively using an old credit card
is you just put a small recurring payment on that card,
kind of like Netflix or something like that.
Just make sure to make that payment
every single month, though.
Hey, it's me, and sorry to interrupt this video,
but this is Jarrad from the future.
I'm currently editing the video you're watching right now
and I realized hey dummy, you forgot to mention two things.
So I'm gonna add those two things
towards the end of this video, stay tuned.
Based on the Experian report,
the average credit score increases with age,
which is a good thing because hopefully,
we all get smarter as we get older,
or it just tells us that by that time we're kind of forced
to pay all of the bills that we racked up
in our younger years.
Another interesting stat that I found
was that the average credit score increased
the more money people made.
So basically, try to make as much money as you possibly can.
Look, having a good credit score tells the outside world,
how responsible and reliable you are.
It's a great indicator as to whether or not
you have a good handle on your finances.
I know that some people will tell you
that you don't need a credit score,
but go ahead and let yours hit that big zero,
and tell me how things work out for you
over the next 10 or 20 years.
It's not necessarily a number that tells the outside world
that you love being in debt.
It makes your life so much easier
and gives you more options.
Think if your credit score like your adult report card.
It tells you your personal finance story
and gives some insight into what your relationship
with money has been in the past.
Let's get into the cost of a bad credit score right meow.
The vast majority of landlords will run your credit report
before they let you move in to any of their properties.
This might seem like it's not fair,
but put yourself in their shoes for a minute.
If you had a large investment like that,
then wouldn't you wanna a little assurance
that the potential renter had a good track record
with paying their bills in the past?
My sister recently told me
that if she didn't have a good credit score,
then she was gonna be charged extra $700
for her security deposit
on top of the 200 she had already put down.
And her monthly rent would have increased
by an extra $30 per month.
This absolutely blew my mind when she told me that.
Someone with a less than ideal credit score
is not a protected class,
so landlords have the right to do this.
Who knows? They may not even give you a heads up
that you were getting charged more
due to your back credit score,
so you could be paying way more and not even realize it.
Another time having a low credit score can hurt you
is when you purchase a car.
Now, of course, you're gonna get a higher interest rate
if you finance that car,
but the price of your car is most likely going to be
increased without you realizing it.
When I was recently shopping for a car,
I used the whole process as a way to kind of gain
as much insight as to how they could be taken advantage
of people like you and I, and found out something like this.
Like I said, you're gonna automatically
have to pay a higher interest rate
the lower your credit score is.
But they also automatically hike up the price of cars,
as well, since you're a riskier borrower.
You're basically getting double hit
on how much you're paying for a car,
even if you were someone who has a decent credit score.
They could still have that special finance pricing
baked in into the cost of the car.
On a car I looked at,
the price was bumped up by extra $700
and they weren't willing to go down on it.
And I was, of course, paying cash for that car, too.
They were just stupid enough to leave that extra cost
on that car price and expect someone like me
with an excellent credit score
and paying with cash to pay for it.
The lesson here is that car dealerships
will always be scumbags no matter what.
There, I said it and I do not feel bad about it.
The added cost of a car, if you have a bad credit score,
can range from anywhere between 1,400 and almost $6,000.
Next, you're gonna pay a lot more for a mortgage
if you have a poor credit score.
Almost tens of thousands of dollars more.
Most people wanna eventually own a home,
but lenders need to know
that you'll be able to pay the money back.
Even if you don't wanna own a home,
but eventually wanna start investing in real estate,
this will really impact your ability to buy large assets
for investing in the future.
I honestly never realized how much extra
you're actually paying interest with the poor credit score.
Let's look at an example.
On a 200,000, 30 year fixed mortgage,
someone with excellent credit
would get a rate of about 4.322 APR
and have a monthly payment of $992.
The total interest that they would pay over those 30 years
would be a little over 157,000.
For someone with a credit score
in the range of 620 to 639,
borrowing the same $200,000
would have a monthly payment of about 1,188
and a rate of 5.991%
The total interest this person would pay over those 30 years
is over 227,000.
That's an extra $70,000!
The worst your credit score,
the most it's going to cost you.
Keep in mind that lenders don't have to give you money
for a home if your credit is shat.
They could deny you altogether.
That's why I mentioned at the very beginning
that anything less than a very good credit score,
so anything below a 740
would be considered a bad credit score.
You have a potential to be denied a job
because of a poor credit score.
I was actually really shocked about this one
so I had to do a little bit more digging
and talked to some people that I know in the HR field
just to make sure that this wasn't one
of those old wives tales.
I found out that this is very factual.
Now, keep in mind that this is all based on a company
that you apply for a job with
and not every business checks it.
I'm assuming this is more likely in the financial space,
but one of my past colleagues
who works for a different company
which isn't in a financial space told me
that they would check credit scores
of the people that they hire.
She did ask that I not name the company that she works for
but she did mention that if you have a bad credit score
and the job is between you and one other person,
then this would be baked in the final decision.
So credit score isn't the only reason
someone wouldn't hire you
because there's a lot of things that they consider.
But it is a part of those many pieces to the puzzle
that give them an idea of if you were going to be
a good fit for their company or not.
Think about it.
If you're someone who has made bad choices
with your finances, then you may be a lot more likely
to make bad decisions on the job.
It's tough to put an exact number on this one,
but if you were passed up for an $80,000 per year job
and you end up getting a job that is $60,000 per year,
then you're essentially out $20,000 per year.
The cost of this one could end up being astronomical,
especially if you wanna consider how much you lose
in compound interest, if you had invested that money
that you would have been making.
The first
(doorbell rings) (dog barking)
Someone's at my door.
The first one that I forgot to mention
is that you could get denied a cellphone contract
if you have a poor credit score.
Now, I didn't realize this because I've been
with the same cellphone carrier for many years,
so I haven't really had to deal with this.
But if you were someone with a poor credit score
and you were trying to switch cellphone carriers
to save a few extra bucks,
then you might get screwed out of that new contract.
So I don't know what the threshold is
when it comes to the credit score,
and when they would deny you,
I couldn't find anything on that.
But for talking in terms of dollars,
if you're gonna switch to a cellphone carrier
that you'll maybe save 20 or $30 a month,
that's like 300, $360 a year
that you're getting screwed out of
because you have a poor credit score.
And the last one that I forgot to mention
is that if you have a bad credit score then that goes
into whether you have higher insurance premiums or not.
Now, the stats are 95% of auto insurers
and 85% of homeowner insurers fact your credit
into their policy decisions,
depending on the state that you live in.
So I can't put an actual dollar amount on this
because everyone gets different insurance levels
and coverages so I can't tell you exactly what the amount is
but I would imagine probably a couple hundred dollars a year
it's gonna cost you.
If you haven't before, you need to start taking
your credit score a lot more serious.
Thanks for checking out this video.
Please Hulk smash that thumbs button
and leave a comment down below.
Let me know your thoughts
on this whole credit score thing.
Check out these videos around my head
and I have links in the description
to help you all solve your personal finance needs.
I'll see you in the next one, friends.
Adios.