You're constantly surrounded by information about how important your credit score is. Fact—your credit score has a big impact on your money. Let's test drive this with auto loans.
Serena and Justin
Serena and Justin are best friends and both 24 years old. They want to buy the same car, in different colors.
Serena and Justin want to finance their cars. Here are the details:
Both saved $15,000 for their down payments
Each car has an MSRP (sticker price) of $40,000
Both will need to borrow $25,000 for 5 years
Why is a credit score important?
A good credit score is important because it can mean the difference between getting a low or high interest rate.
Serena's credit score of 790 gets her a low interest rate and monthly payment.
She will pay just under $3,000 in interest to borrow $25,000 over the next 5 years.
The impact 135 points can make
What's standing in the way of these two besties getting the same loan for the same car? 135 points.
Justin has a credit score of 655. Not too bad, right?
Wrong—Justin’s credit score gets him a higher annual percentage rate (APR) and monthly payment than Serena. He will pay more than $11,000 in interest to borrow $25,000 over the next 5 years. This 135-point credit score difference will cost Justin $8,0001 more in interest than Serena. Seems unreal!
Being in control of your credit score can save you big money when it comes to loans.
This savings allows you to focus on what’s important to you—just ask Justin.