All right here’s a little questionnaire for you:
- Do you drive across town to fill up gas at the station with the lowest price?
- Do you clip coupons to save on groceries?
- Do you check your credit reports on a regular basis for errors and do you know your credit score?
- Do/did you shop around for a mortgage with the lower APR and did you compare apples to apples when you did the comparison? Did you look at the fees involved?
- When buying a car, do you buy new or used? Do you pay for it in full or get a loan? If you get a loan, do you negotiate the cost of the car separate from loan discussions and do you shop around for a loan?
My point with the above questions is that I think that many to most people think about the first two bullets and some to most people don’t think about the last three. However, the last three bullets could save you far more money than the first two bullets.
I wrote about how your credit score is calculated in a previous post. You credit score is one of your most important assets. It can affect the rates you get on loans, the cost of your car insurance, whether you get an apartment and/or job, and many others. Ben Schlappig wrote a great article about credit scores in his TravelSort column. No credit card sign up bonus is worth ruining your credit over.
I’m going to steal a picture from Ben’s column to illustrate a point. He had an example of how your credit score may affect the interest rate you receive for your mortgage.
Now you may be saying, what’s the big deal about a 0.2% difference between the ranges? On a $300,000 mortgage, if your credit score is in the 700-759 range, instead of the 760-850 range, you would end up paying approximately $12,000 more over the life of the loan. And if your credit score was in the 680-699 range, instead of the 760-850 range, you would end up paying approximately $25,000 more over the life of the loan.
When looking at loans of any kind, make sure you shop around. And if nothing else, make sure you know your credit score and try to keep it as high as possible. It could save you a ton of money in the long run – money you could use to take fabulous vacations.