Consumers who make efforts to raise their credit scores from “fair” to “very good” may see big payoffs. LendingTree researchers analyzed loan request and average loan balance data to see how a lower credit score can increase borrowing costs for the average consumer. They compared the impact across several types of debt: mortgages, student loans, auto loans, personal loans, and credit cards.
Overall, raising a credit score from “fair” (580-669) to “very good” (740-799) can save a consumer $45,283 on their debt. That’s the average in extra interest on all debt that consumers will pay when they have a credit score ranked as fair. Mortgage costs can account for 63 percent of those potential savings. By raising a credit score from fair to very good, consumers could save $29,106 in mortgage costs, the study shows.
For example, a person with a high credit score would likely have a monthly mortgage payment that is $81 less than someone with a fair credit score. “The person with very good credit could invest that money, use it to pay down debts faster, or to increase the down payment on future loans, which could exponentially increase the value of those savings over the same 30-year period,” LendingTree reports.