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Building good credit can help you borrow — and save — money.

You may know that a good credit score may make it easier for you to borrow money. But did you know it may actuallysave you money?

One of the key benefits of a higher score may be cheaper financing from lenders for home or car loans, which keeps more money in your pocket over time.

But how much could you really save? A lot!

The most common score that lenders use is the FICO score — a ranking from 300 to 850 based on your payment history, existing debt, types of credit used and several other factors. The higher the score, the more likely you may get a loan or new line of credit, as well as realize other savings, like lower insurance premiums.

Let’s say you take out a 30-year loan of $100,000 to buy a home. If you have a FICO score ranging from 760 to 850, you may get a financial outcome like this:

FICO Score Annual Percentage Rate (APR) Monthly Payment Total Interest Paid (over 30 years)
760–850 3.832% $468 $68,401

 

(Check out this explanation from the Consumer Financial Protection Bureau on the difference between an APR and an interest rate.)

However, if you have a lower FICO credit score ranging from 620 to 639, you may get a financial outcome like this:

FICO Score Annual Percentage Rate (APR) Monthly Payment Total Interest Paid (over 30 years)
620–639 5.421% $563 $102,623

 

This is a pretty big difference — you’d save $95 on your mortgage payment each month and a total of $34,200 over the course of 30 years!

Check out a full breakdown of loan savings based on credit score ranges via FICO’s loan savings calculator, which uses up-to-date APRs.

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