June 30th, 2008
The Importance of Credit
At Credit Karma, we want to give our users access, information, and leverage. We read everyday about the importance of credit but I don’t think we do a very good job quantifying it. Last Friday, I called up a friend at E-LOAN and asked about the best rates for a 650 credit score versus a 600 credit score mortgage rate. For the 650 borrower, the best rate was 6.75% with no points. For the 600 borrower, the best rate was 8.75% with 3 points.
Assuming a $250,000 mortgage and using our mortgage calculator, you will see that the 600 borrower will pay over $93,000 more over the life of the loan in interest and will have to pay an additional $7,500 in closing costs. That means, a mere 50 point difference in credit score can cost upwards of $100,000. The difference is obviously higher if you have a larger mortgage assuming you can get the loan. To me, this makes credit the most important number in your financial health more than your SSN, credit card number, or even the balance in your bank account.
With this in mind, I suggest that you keep an eye on your credit score. You know better than anyone when you will have a major purchase. So when you plan your next big purchase (mortgage, car, etc.) , be diligent about knowing your score. Check it once a month and make sure you know the factors that make it go up and down. Remember that good credit takes years to build only only a few missed payments to destroy. Given the costs associated with credit, it can be the most expensive mistake of your life.
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A very good piece of information, I liked it
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Before a landlord extends a lease do you, the landlord will do a credit check on you and your roommates. The purpose of your credit history, from the landlords perspective, is to gauge what kind of renter you will be–specifically, will you pay rent on time? Having no credit can be just as unfavorable as having bad credit.
Credit is very very important even to get approved for a loan.
thanxs i found this very helpful and understanding and im only a teen
Hi,i am pleased with your information.It is very helpful information for every credit card holder.
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angelina carrera