We’ve been following a fascinating study from LendingTree that shows how boosting your credit score can significantly impact your financial life. The research found that improving your credit score from fair (580 to 669) to very good (740 to 799) could save you upwards of $22,000 over a lifetime! Yes, you read that right — $22,000!
So, how does having better credit lead to these kinds of savings? Let’s break it down.
How can better credit save you $22,000*?
LendingTree’s study analyzed anonymized loan and average loan balances for two groups: those with fair credit (580 to 669) and those with very good credit (740 to 799). The key takeaway? The interest rates offered to people with higher credit scores were significantly lower, meaning they paid much less in interest over the life of their loans.
These savings accumulate over time through lower rates on credit cards, personal loans, auto loans and especially mortgages.
Here’s a breakdown of the potential savings:
- Credit card: $3,548
- Personal loan: $1,485
- Auto loan: $553
- Mortgage: $16,677
And if you score the best offers available across all loan and credit types, you could save nearly $28,000! Make sure you are comparing offers and shopping around to reap the benefit.
What are your takeaways from this?
If you’re planning to take out a loan, especially a home loan, improving your credit score could make a huge difference. For example, moving from fair to very good credit for a mortgage could mean saving over $16,000 over the life of the loan. That’s a game-changer!
Start focusing on improving your credit now. Whether it’s paying bills on time, reducing credit card debt, or keeping credit utilization low, every small step counts.
For more insights into boosting your credit score, check out our detailed guide. And for a TikTok recap of the findings, click here.
*Note: These savings are down from $49,472 when the study was previously conducted in 2022. Mortgage savings decreased the most, from $40,041 due to the larger difference in average APRs previously offered. An increase in inflation in recent years played a major role in the drop in savings.
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