Many people don’t understand how important their credit score is. Your credit score is an indication of how well you manage your money and how fiscally responsible you are. Think of it like your school transcripts and report card, so you want it to be as high as possible.
Banks use your credit to determine if you qualify for a loan and if so, at what interest rate and amount of credit. Essentially, it is used to determine your risk, and thus your cost to borrow. The higher your risk, then the higher your interest rate. For example, if you purchased a car at $25,000 and paid no money down and your interest rate was 3.5% over 48 months, then you would pay $1,827 in interest over the course of the loan for a total of $26,827 for the vehicle. Conversely, if you have a bad credit score and your interest rate was 15%, then the same car would cost you $33,397. That is $6,570 more for the same car!
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