Why is a Good Credit Score Important?

We all know a good credit score is what you need to get that house or car you want, but is it really that important?  How does your score actually affect your buying power?

As Investopedia/Yahoo! Finance defines it, credit scores are statistical calculations used to determine a person’s credit-worthiness.  There are three main credit reporting agencies – Experian, TransUnion and Equifax.  These agencies are in place to assist lenders (like banks) know the risks when lending money to the individual borrower.

So, let’s break it down.  Just how can this score affect your buying power?  Ok, for instance, if a homebuyer is applying for a $200,000 loan and they have a credit score of 760-860, then this person could possible receive a loan with an 4.353% APR.  The result would be a monthly note of $996.  On the other hand, a person with a credit score of 620-639 who applies for the same amount of money could end up paying an APR of 5.942%, with a monthly note of $1,192.

Big difference.

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