Last updated on March 5th, 2025 at 02:24 pm
Awareness is GOLDEN and many Good People are UNAWARE of how much money BAD CREDIT may be costing them.
Would you believe, that over a 30 year time period, in so many cases, BAD CREDIT may be costing a person well over ONE MILLION DOLLARS?!
This is like tossing money into the wind!
Now, I realize that I cannot make this kind of claim without offering a clear explanation of what I mean, so here it is…
If I were to take a person with BAD CREDIT and a person with GOOD CREDIT, and put them side-by-side after 30 years of them using ONLY credit cards, auto loans, and mortgages, you will see the enormous difference between what a person with BAD CREDIT PAYS, compared to what a person with GOOD CREDIT SAVES in interest charges.
Let me try to bring some clarity to my claim:
DISCLAIMER: Every situation is different and there will be many variables to my explanation, but for the sake of keeping things simple and to illuminate my point, I will be using very simple and straightforward numbers.
Now to keep things simple, I am going to focus ONLY on a Mortgage, Auto Loans, and Credit Cards.
Also, keep in mind that a GOOD CREDIT SCORE ranges from 760 to 850 and a BAD CREDIT SCORE ranges between 500 to 579.
Mortgage: A 30-year mortgage on a $300,000 loan for a person with a GOOD CREDIT SCORE would cost an Annual Percentage Rate (APR) of approximately 6.346% percent.
Now, for a person with a BAD CREDIT SCORE, that same house would cost an Annual Percentage Rate (APR) of approximately 10.152% percent.
This means that the person with a GOOD CREDIT SCORE pays $1,866 in monthly payments, while the person with a BAD CREDIT SCORE would pay $2,666 in monthly payments.
Which means that the person with BAD CREDIT pays an additional $800 per month for the same house which adds up to $288,000 in additional interest charges over a thirty (30) year mortgage.
Auto loan: The average car loan in 2024, as per Edmunds.com, was $24,864.
A person with a GOOD CREDIT SCORE may get approved at a 7.221% APR giving them a monthly payment of $492 dollars for 60 months.
A person with a BAD CREDIT SCORE may get approved at 14.909% APR giving them a monthly payment of $586 dollars for 60 months.
This will cost the person with BAD CREDIT an additional $94 every month for the same car, and in 60 months (5 years), this adds up to $5640 in additional interest charges.
The average person keeps their car for about 4.5 to 5 years.
So if a person with BAD CREDIT finances a new car every five years for 30 years, this would add up to $33,840 in added interest costs.
Credit Cards: The average credit card balance is $2,200.
A person with a GOOD CREDIT SCORE may pay an interest rate of 9% percent, and sometimes even less.
A person with a BAD CREDIT SCORE may pay an interest rate of as high as 20% percent, and sometimes even more, but we will stick with 20% for this example.
Over a 30 year period the person with BAD CREDIT would have paid approximately $7,933 in additional interest charges.
OK… we can slow it down right here.
If we were to add up the additional interest payments that the person with BAD CREDIT paid over a 30 year period, it would look something like this:
Mortgage: $288,000 additional interest paid
Auto Loans: $33,840 additional interest paid
Credit Cards: $7,933 additional interest paid
TOTAL ADDITIONAL INTEREST PAID: $329,773 Dollars
TOTAL $329,773 / 30 Years = $10,992.43 / 12 Months = $916.04 per month.
Now, you may be thinking to yourself that $916.04 per month is really not a lot of money.
OK… let’s take a look at the person with GOOD CREDIT.
Let’s say that the person with the GOOD CREDIT took the monthly $916.04 that they DID NOT HAVE TO PAY BECAUSE OF THEIR GOOD CREDIT, and decided to INVEST this money every month, into something as simple as an Index Fund, let’s say the S&P 500, which is very simple to do.
The S&P 500 averages 8% in compound earnings every year.
Compound Interest (earnings), as quoted by Albert Einstein, is the ‘eighth wonder of the world’, because earnings are gained not only on the monthly investment of $916.04, but gains are also earned on the 8% percent, and over a long period of time, in this case 30 years, a person can significantly grow their personal wealth.
So, if you were to have invested $916.04 every month, into the S&P 500 at an average gain of 8% every year, you would have saved-and-earned approximately:
$1,298,590.54!
YES! That is well over One Million Dollars!
Imagine, your $329,773 that you HAD TO PAY because of your BAD CREDIT would have earned you $968,817.54 by simply having GOOD CREDIT and investing this money in a simple S&P index account.
THAT IS ASTONISHING!
By living with BAD CREDIT, and choosing to do nothing to improve your BAD CREDIT, could be costing you hundreds of thousands of dollars.
Now I have no desire to get lost in the minutia of investing right now, and I do realize that there are no guarantees of positive returns when it comes to investing, and I also am aware that when it comes to investing, that the numbers will go up and the numbers will come down, but historically, after a long period of time, the average returns usually fall on the ‘up’ side.
Please do not misunderstand me.
My intentions here are not to come across as harsh… but this is REAL LIFE, and I cannot say it in any other way.
If you have bad credit, I strongly advise you to do what you have to do to quickly improve your credit.
By having BAD CREDIT you are just shoveling money into the pockets of your mortgage company, your auto finance company, and your credit card companies.
Wouldn’t you rather shovel money into your own pockets, into your own personal investment account and watch your money grow and prepare for a bright and prosperous future, because like it or not, there is a strong probability that you will get old, and you will need money to eat, to pay your bills, and to live a good life.
My goal here is to shine a bright light on how important it is to build GOOD CREDIT and to protect YOUR GOOD CREDIT.
Now if you have BAD CREDIT today, and my brief explanation has made you AWARE of your current situation, GOOD, but I have to tell you, it gets worse.
Because if you do have BAD CREDIT today, you could be losing more money by paying higher insurance premiums for your auto insurance, your health insurance, and your home insurance, and what about the opportunity to get hired for that dream job, are you NOT getting hired because of your BAD CREDIT?
If you are currently employed, your BAD CREDIT could be causing you to be disqualified for a potential promotion that could give you a huge pay increase.
So the bottom line here is this: your BAD CREDIT may be costing you BIG MONEY, and this is why it is very important for you to do all that you can to improve and protect your credit.
No matter where you are today, you have the power to make your money troubles go away, and create a better tomorrow… for YOU and Your Family.
If you are ready to improve your credit and take control of your financial life, check out our FREE Ultimate Credit Repair Guide and sign up for our FREE Credit Repair Tool at CreditUpDIY.