Imagine if you had the power to make every large purchase in your life cheaper. If every single time you borrowed money, a lender gave that same amount to you for less than they give other people. Imagine if you could pay less for money.
Enter Fair Isaac
I’ve written about credit scores and how to improve them before but their importance cannot be overstated. A credit score is a rating 300-850 that states how likely you are to default on a loan. The closer you are to the 300 end of the spectrum, the more of a credit risk you are. This allows a lender to objectively determine if they feel comfortable lending you money. This process removes personal biases from the equation and allows applicants to be treated fairly. It’s no wonder that the largest administrator of credit scores is the Fair Isaac Corporation.
So What?
Well, a lender uses this number to determine your eligibility for a loan. The more of a credit risk they view you as, the more they will charge you to borrow their money. The cost associated with borrowing money is called interest, and less you can pay the better. The higher you can get your score, the lower they will charge interest. Having a credit score closer to that 850 mark can mean the difference of a couple percent on your loan.
Wait, Just a Couple Percent?
I know that doesn’t sound like much, but the times you need to borrow money most are for larger purchases. When I say larger purchases think buying a house or a car, now you could see how a percent here or there could be significant. According to myFICO.com, when evaluating a typical fixed 30-year mortgage for $200,000 those with a credit score of 760-850 can save over $66,000 as compared to those with a score of 620-639. A percent here or there can add up very quickly over a long time frame. This is due to compound interest and the savings from this score can make a major difference in your life.
I Get It, Now Where Do I Start?
If this has convinced you to protect, watch, and grow your credit score, that’s amazing and I’m humbled. See my article on quick ways to start improving your credit dramatically if you’re looking for a couple surefire ways to save large amounts of money down the line.
**Disclaimer: The Tempered Bull is committed to enhancing the finance wellbeing of our readers; however, these articles should not be your only resource. The suggestions made here are meant to be taken in conjunction with professional financial assistance. We are not financial professionals, just regular people with a passion for sharing our experience. The Tempered Bull does not have any private knowledge about the companies we discuss, and The Tempered Bull and its associates do not benefit from your purchase or sale of any equites. The Tempered Bull has a disclosure policy.