I seem to remember a commercial where the commentator asks why anyone would want to pay more for the same thing. The answer, of course, is that nobody wants to pay more for the same thing. In today’s age of comparison shopping, you’ll see people at the store checking their phone to make sure they aren’t paying more for the something they are buying.
Unfortunately, that’s exactly what happens if someone neglects their credit score. Look at an example where two people pay different amounts on the same thing, a home loan:
Member A’s credit score is 700 and mortgage rate is 4% APR for 30 years on $150,000 loan. The total interest Member A would pay would be $107,804. Now consider Member B who has a score of 600 and a rate of 6% APR on the same loan amount. Member B would end up paying $173,757 in interest. That’s a difference of about $66,000. Now this example is for illustration purposes, but you get the point. The better your score, the less you pay for the same thing.
Since your score is so important, we will give it to you for free. We’ve made your score and report available in our digital banking system via SavvyMoney. It is a great tool that explains what factors went into your score and practical advice on improving your score. Oh, and it send alerts which act as credit monitoring. And did I mention it is free.
It is also important to know what is not in your credit score. For example, your income is not part of the equation. So, you could make a million dollars a year and have a low score based on the factors that make up the score such as poor payment history, too much owed, etc. Also, the score is a point in time and can move up and down. This is especially important if you want to improve your score to save money on things like a mortgage.
Knowing your score is the first step to not paying more for the same thing.
Post author: Jamieson Mackay, CCUFC
APR = Annual Percentage Rate
The opinions expressed on this page are for informational purposes only and is not intended to provide legal or financial advice. The views expressed are those of the author of the article and may not reflect the views of the credit union.