As the availability of credit continues to be tight (it could get tighter!) having a good credit score is now more important than it has ever been and having a low credit score will carry with it a variety of costs both tangible and intangible. Think about it from the bank's perspective, many people want to borrow money from you and you have limited funds to lend so you are going to choose to loan your money to people who demonstrate lower risk variables (ie. those with a longer history of responsible repayment and thus maintain higher credit scores).
Of course there is the tangible cost of obtaining credit that costs you, the borrower more because of the higher interest rates and fees associated with these loans. On a home purchase, this can amount to 10's of thousands of dollars over the life of the loan.
There are also less tangible costs like 'opportunity costs'. Simply not being able to purchase a home in this favorable buyer's market because your credit score does not make the grade could potentially cost you the 'opportunity' to own a home and thus benefit from all of the advantages of being a homeowner. This missed opportunity could also equal 10's of thousands of dollars over your lifetime. Missed appreciation, fewer tax credits, etc.
The credit crisis is expected to last for some time and recovery will be slow. This means that bowwers with less than good credit scores (those below about 680-700) will continue to have a more difficult, more expensive time obtaining the credit thet they need.
Focus on building your credit folks....it'll cost you big time if you don't!
Author: Randall Filbert, MPA www.LendingIdaho.com www.FamilyGuideToFinances.com
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