Raising a 'Fair' Credit Score to 'Very Good' Could Save Over $56,000
Study Highlights:
- Raising a credit score from fair (580-669) to very good (740-799) saves
$56,400 across five common loan types. That's an average total difference of$316 a month. - Mortgage costs account for 73% of those savings (
$41,416 in savings with "very good" credit versus "fair"). - Refinancing student loans comes with the second biggest savings difference at
$4,707 , or 8% of the total difference in interest. - Borrowers with fair credit can expect to pay more than twice as much in interest for personal, auto and student loans, and 97% more on credit cards.
Total Interest Paid over Lifetime of Loans
The study analyzed borrowing costs across the 5 most common debt types, using average amounts for each outstanding debt. Assuming a borrower repays all five debts on time, their total costs for interest and fees will amount to
Debt Type |
Average Debt |
Interest with |
Interest Paid with |
Total Difference in |
Credit cards |
$3,668 |
$6,097 |
$3,102 |
$2,995 |
Personal loans |
$11,342 |
$6,325 |
$2,889 |
$3,436 |
Auto loans |
$25,346 |
$7,471 |
$3,625 |
$3,846 |
Student loans |
$35,208 |
$8,640 |
$3,933 |
$4,707 |
Mortgage |
$253,435 |
$261,076 |
$219,660 |
$41,416 |
Total |
$56.40 |
Even Americans who don't carry all five of these debt types can save significantly with very good versus fair credit. Assuming every other factor is equal, someone with a very good credit score would have a monthly mortgage bill that is
Raising your credit score isn't as hard as it sounds
The idea of managing your credit score can be intimidating and might seem like a lot of effort. The good news is that it's not as complicated or opaque as many people fear.
Changes to your credit score can happen quickly, with some consumers seeing positive changes in a relatively short period of time for things like paying down credit debt or disputing any errors on credit reports. Those who plan to take out a mortgage or other loan type should refrain from opening new credit accounts, as credit checks and young accounts can lower your credit rating. And for those in good standing with card issuers, it may make sense to ask for a higher credit limit, thereby lowering your overall utilization ratio (not increasing your buying power).
Credit monitoring can be an essential key to the process because it helps you identify what may be affecting your credit score and how ongoing decisions can change it. For instance, My
For the full report, please visit: https://www.lendingtree.com/personal/study-raising-credit-score-saves-money/
Methodology
Average loan balances and interest rates for personal, auto and mortgage loans were calculated from loan requests and offers from loan amounts requested by inquiring borrowers on the
Average credit card balance was calculated using a combination of data sources, including the New York Federal Reserve, anonymous My LendingTree user reports and
Credit card rates were provided by
For student loans, we assumed that those with a very good credit score could refinance at current private refinance rates, while those who don't continue to pay current undergraduate federal loan rates. Average student debt was calculated from anonymized My LendingTree user credit report data.
About
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Megan.greuling@lendingtree.com
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SOURCE LendingTree.com