Sponsored Newspapers In Education Content
| SUNDAY,
APRIL 3, 2016
7
3 YEAR – AUTO LOAN – $20,000
FICO SCORE
INTEREST RATE
MONTHLY PAYMENT
TOTAL INTEREST PAID
720-850
6%
$608
$1,901
690-719
7.6%
$623
$2,430
660-689
9.6%
$642
$3,096
620-659
13.4%
$678
$4,391
590-619
18.1%
$724
$6,077
500-589
18.7%
$730
$6,290
CREDIT 411:
Maxing out your
credit cards can
lower your credit
score. So be
extra cautious
with the amount
of credit you’re
actually using.
CREDIT 411:
Your income
level has nothing
to do with your
credit score. How
you handle your
money matters
much more
than how much
money you have.
What’s a Credit Report?
Your credit report is like a school report card, letting lenders know how likely you are to pay them
back. If you’re applying for a car or home loan, lenders will look at your credit report to decide
whether you’re a good credit “risk.” Employers and landlords may also use it to get a sense of
how responsible you are with money.
...And What’s a Credit Score?
The information in your credit report is used to calculate your credit score, which is a 3-digit
number that gives lenders and others a quick, objective assessment of your credit risk. The
FICO scoring model ranges from 300 to 850. The higher the score, the lower the risk. So
this is a case where higher is always better.
HOW YOUR CREDIT SCORE CAN IMPACT YOUR INTEREST RATE
Let’s say you want to buy a car that costs $20,000, and you want a loan to pay for it over three
years. Your credit score will have a great impact on the interest rate you’ll pay. If you have a lower
score, you’ll pay a much higher interest rate. This, in turn, means you’ll make a higher monthly
payment and pay more money over the course of the three years. The following example shows
how someone with excellent credit will pay $1,901 in interest over three years while a person with
poor credit will pay $6,290.
The above information
is for educational
purposes only and does
not represent actual
pricing from a specific
financial institution.
