Credit Score under 650
Chances are if you have a credit score under 650 life is going to be just a bit tougher. Since the economy and consumers are so dependent on credit, a low credit score will cause you to pay more of credit over your life.
The Cost of a Credit Score Under 650
There is no better example of how a credit score under 650 will effect your life than the purchase of house. This is the largest purchase of a consumers life. The comparison will be between someone who have an excellent credit and a person who has a credit score below 650. On a $300,000 mortgage the person with an excellent score will wind up with a monthly payment around $1,550 and an interest around 4.8%. The person with the credit score below 650 will have a monthly payment around $1,770 and an interest rate around 5.8%. A whole 1% higher. That might not sound like much but if you look at the total cost of the loan you will really see the effect.
The total cost over 30 years for the person with an excellent credit is $558,000 and for the person with a credit score below is $637,200. That is $79,200 extra spent. If that is not enough to convince you. Then you need to consider all the other loans in a consumer’s life like: auto loans, personal loans, and credit cards.
Actually, this might not be even accurate because getting a mortgage will be pretty tough with a credit score below 650. This will sometimes push you into the sub prime category based on the lender you are dealing with.
What to do if You Have a Credit Score Below 650
The first thing is to check your credit report for errors. Having any potential errors removed from your credit report will give your score an instant boost. The next thing to do is know the credit score formula and this will point you in the right direction. You will then realize you can never make 30 day late payments, pay down your debt, only apply for credit if you need, and take advantage of your credit mix.
Conclusion
If you are below 650 it is not the end of the world. You can definitely recover, but with anything you need to commit.
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