John had a slightly below average credit score of 643. His credit scores had remained in the lower 600s for several years. John didn’t really care about his credit scores. He felt he didn’t have to worry about his scores since he already had a house. He felt he was alright.
That changed. John had some personal expenses that added up and he accrued some debt. Interest rates fell and John felt the time was right to refinance his mortgage and payoff some debt. He took out a mortgage of $252,000. Since his credit score was 643, he had to pay more – A LOT MORE.
The extra costs for having a low credit score were much more than he ever imagined; taking money to paying off debt at 70% loan-to-value was an extra $7,245 to keep his interest rate at the going rate of 3.50%. That was in addition to the regular closing costs of a mortgage.
He paid a steep price from the fact that he didn’t follow or do anything to improve his scores. Now, he is paying big time to get what he wants.
He has learned a valuable lesson – a small investment in My Credit Plan to follow and improve his lenders scores can save thousands later. It would have saved him a whole lot of money now - $7,245.
(The name has been changed in this blog)