• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Cult Of Money

Cult Of Money

Personal finance for the crypto-curious.

  • About
  • Podcast
  • Contact
  • Cryptocurrency
      • How To Start

      • What Is Cryptocurrency And How To Invest?
      • What Is Bitcoin And How Does It Work?
      • What Is Ethereum And How Does It Work?
      • Most Common Crypto And NFT Scams (And How To Avoid Them)
      • Proof Of Work vs. Proof Of Stake vs. Proof Of History
      • How To Invest In Crypto In Your IRA Or 401k
      • Tools + Resources

      • Best Cryptocurrency Exchanges
      • Best Cryptocurrency Wallets
      • Best Crypto Savings Accounts
      • Best Tax Software For Crypto And NFT Traders
      • Reviews

      • Coinbase Review
      • Gemini Review
      • BlockFi Review
      • Binance Review
      • Hodlnaut Review
      • Ledger Wallet Review
  • DeFi
      • How To Start

      • What Is DeFi?
      • What Is Staking Your Crypto?
      • Centralized vs. Decentralized Exchange
      • Tools + Resources

      • What Is Uniswap And How Do Decentralized Exchanges Work?
      • Reviews

  • NFT
      • How To Start

      • What Is An NFT?
      • Tools + Resources

      • Most Popular Play-To-Earn Crypto Games
      • Popular Projects

      • What Are VeeFriends And Are They Worth It?
      • Bored Ape Yacht Club NFTs Are Popular (And Expensive)
      • What Is The Sandbox And How Can You Play?
      • Why Visa Bought A CryptoPunk
  • Investing
      • How To Start

      • Tools + Accounts

      • Reviews

  • Personal Finance
      • Banking

      • Best Bitcoin Rewards Checking Accounts
      • Tools + Resources

      • Tax

      • Income Tax Prep Guide
      • Bookkeeping And Accounting For Crypto And NFTs
Credit

Your Credit Rating Can Cost Or Save You Thousands Of Dollars

By Karl • October 27, 2021

At The Cult of Money, we want to help you navigate your finances. To do this, many or all of the products featured here may be from our partners whom we receive compensation from. This doesn’t influence our evaluations or reviews. Our opinions are our own. Learn more here.Advertiser Disclosure

There are thousands of financial products and services out there, and we believe in helping you understand which is best for you, how it works, and will it actually help you achieve your financial goals. We're proud of our content and guidance, and the information we provide is objective, independent, and free.

But we do have to make money to pay our team and keep this website running! Our partners compensate us. CultOfMoney.com has an advertising relationship with some or all of the offers included on this page, which may impact how, where, and in what order products and services may appear. The Cult of Money does not include all companies or offers available in the marketplace. And our partners can never pay us to guarantee favorable reviews (or even pay for a review of their product to begin with).

For more information and a complete list of our advertising partners, please check out our full Advertising Disclosure. CultOfMoney.com strives to keep its information accurate and up to date. The information in our reviews could be different from what you find when visiting a financial institution, service provider or a specific product's website. All products and services are presented without warranty.

So many things are based on your credit rating today.  The difference between having a high credit rating (lets presume that we’re talking about a FICO score for example) can cost or save you thousands of dollars.

Your credit score can also play a factor in how much you pay for insurance, whether a landlord would rent you an apartment, or even if you can maintain a security clearance at your job.

The bottom line is your credit rating matters.

Your credit report can cost or save you thousands
Credit Report Card

Why Your Credit Rating Matters

  • Credit Cards – This is the most obvious, the rate you’ll be charged on your credit card.  However, you really shouldn’t be carrying a balance, so with credit cards, your score will affect whether or not you can get those great reward credit cards and their sign-up bonuses.  This could cost you hundreds of dollars in benefits.
  • Any possibility of getting personal loans – Banks won’t give you a personal loan without great credit.  You could always hit up a payday loan place (or better yet Prosper), but you’ll still pay hundreds or thousands of dollars more in interest than someone with great credit.
  • Whether you get that sweet deal on a great rental – Many landlords and rental services will pull your credit.  Depending on your credit, you may be asked to put up additional deposits, charged a higher rent, or not offered a rental at all.  This can cost you thousands of dollars more than someone with great credit scores.
  • Student Loans – With the cost of education being so high, a small change in rates can have huge effects.  The average student loan debt was greater than $39,000 for graduates in 2021.  For private schools, this amount is likely even higher.  Over a 10 year repayment, a bad credit score could cost you thousands of dollars in extra interest, for something that you already received. Check out this student loan refinancing comparison and see why your credit score can make a big difference.
  • Your mortgage rate – The difference between prime and subprime credit could be worth several percentage points on your mortgage, or recently whether or not you can even qualify to get a mortgage.  The difference 4% and 6% on a $250,000 loan over 30 years is almost $110,000.  Here is where your credit score could cost you hundreds of thousands of dollars.
  • Your job, the hiring process and any required security clearance – More and more employers are pulling credit reports to see how responsible you are.  Why would they trust someone with company resources when they don’t even take care of their own responsibilities?  Missing out on a great job could make your life miserable, plus you could potentially cost yourself hundreds of thousands of dollars over the course of your career.

Intelligent use of leverage is a great way to increase your wealth and standard of living.  However the key to leverage is to make sure that it works for you and not against you.  Credit provided in all the above examples can be either beneficial or detrimental to your life.

What Goes Into Your Credit Score?

  • 35% affects Payment History
  • 30% affects Utilization
  • 15% affects Established History
  • 10% affects Inquiries
  • 10% affects Mix of Credit

So looking at the components of your credit score, the most important things to remember are that you don’t want any late payments, bankruptcies, liens, or collections, and you ideally won’t be using most of your available balance (credit limit on credit cards) and you’ll have a number of different lines of credit open for as long as you can.

FICO released data indicating how different credit events on a mortgage affected the credit score.

Impacts to your credit score of several mortgage related events
Credit Impacts

As you can see, the credit points lost is greater for the higher credit rated consumer.  Another way to look at this is that you wind up at the same credit score for a given event, regardless of where you started.

Time it takes for your credit score to return to prior levels
Time For Credit to Recover

Like climbing a mountain one step at a time, it takes much longer to get back to a high credit score after one of these events than it takes to get to a lower level credit score.  Looking back at the impact table, you can see little difference between the 30 days late and 90 days late.  Check to learn how I save money for an emergency fund.

How To Track Your Credit Rating

If you’re looking for a free way to track your credit rating, we recommend using Credit Karma. This free tool allows you to pull up your credit reports, and gives you a great estimate of your credit score. It also gives you tools and resources to help boost your credit score. Check out Credit Karma here.

The moral the story is don’t be even a little late paying your bills, the impact is huge.  Readers, have you had credit score impacts due to a single missed payment or error?  What were the effects?

Karl

Karl Nygard is the original founder of Cult of Money and created the website to share his ideas on investing, personal finance, and more.

Editorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.

Comment Policy: We invite readers to respond with questions or comments. Comments may be held for moderation and are subject to approval. Comments are solely the opinions of their authors’. The responses in the comments below are not provided or commissioned by any advertiser. Responses have not been reviewed, approved or otherwise endorsed by any company. It is not anyone’s responsibility to ensure all posts and/or questions are answered.

Subscribe
Login
Notify of

0 Comments
Inline Feedbacks
View all comments

Primary Sidebar

  • Facebook
  • Instagram
  • Pinterest
  • RSS
  • Twitter
  • YouTube

Editor’s Picks

  • 8 best cryptocurrency exchanges ranked

    8 Best Cryptocurrency Exchanges Ranked For 2023

  • crypto savings accounts

    6 Best Crypto Savings Accounts For 2023

  • Cryptocurrency Bonus Offers

    10 Best Crypto Promotional And Bonus Offers

  • best crypto wallets

    Best Crypto Wallets For 2023 (Software And Hardware Options)

  • Best Portfolio Trackers For Cryptocurrency And Stocks

    6 Best Portfolio Trackers For Cryptocurrency And Stocks

  • best tax software for crypto and NFT traders

    Best Tax Software For Crypto And NFT Traders In 2023

Popular Posts

  • proof of work vs. proof of stake vs. proof of history

    Proof Of Work vs. Proof Of Stake vs. Proof Of History

  • Why I Bought An NFT

    Why I Bought An NFT [And 5 Reasons You Should Too]

  • My Dogecoin Experiment: What I Learned From Investing $2,000 In DOGE

  • common crypto and nft scams

    Most Common Crypto And NFT Scams (And How To Avoid Them)

  • Bookkeeping and Accounting for Crypto and NFTs

    Bookkeeping And Accounting For Crypto And NFTs

  • what is a 51% attack

    What Is A 51% Attack? (And How Is That Game Over For Crypto?)

  • what is staking crypto

    What Is Staking And How Can You Make Money With Your Crypto?

  • what are veefriends

    What Are VeeFriends And Are They Worth It?

  • how to file a complaint against crypto exchanges

    How To File A Complaint Against A Crypto Exchange [Crypto Regulators]

Footer

Pages

  • Best Cryptocurrency Wallets
  • Best Cryptocurrency Exchanges

Categories

  • Cryptocurrency
  • DeFi
  • NFT
  • Personal Finance

About

  • About The Cult Of Money
  • Contact
  • How We Make Money
  • Advertise With Us
  • Facebook
  • Instagram
  • Pinterest
  • RSS
  • Twitter

Copyright © 2023 | Cult of Money | Privacy Policy | Terms of Service

wpDiscuz