The Cost of a Low Credit Score Loan

By: Ryan

It can be quite a disappointing feeling to find out that you are having trouble getting approved for a low credit score loan. Unfortunately, by the time someone goes to get a loan they realize just how important maintaining a clean credit report and outstanding credit score is. As an example, let's say you have to purchase a $200,000 home on a 30 year fixed mortgage at 8% interest instead of 6% (because of your credit score). That extra 2% is going to end up costing you a total of $96,934.11 over the term of the low credit score loan. That means your house will cost you 1.5x what you actually agreed to pay for it!

Wouldn't it make sense before you go to apply for your loan if you took just a few minutes to review your credit report and do just a few quick things to increase your credit score? Even if you think you have perfect credit, chances are there are some minor things you can do to bring your credit score up a few points. After all, 75 percent of all credit reports contain erroneous information, and you have the right to have a credit report that accurately represents your creditworthiness.

But a low credit score won't just hurt your secure a loan, there are other areas that your credit score affects your life. Your auto insurance, homeowner's insurance, life and health insurance, and even employers all receive credit reports and your credit score to determine how reliable and likely you are to stick to your end of the bargain.

Reviewing your credit report regularly and knowing how to defend your right to a fair credit report is an important habit you should develop. It can save you thousands of dollars that a low credit score loan would otherwise cost you.

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