Why Banks and Credit Bureaus Love Low Credit Scores

Most people know having a low credit score costs more than having a ionosphere one. However, what few consumers ever learn is just how expensive their low credit score truthfully is. Today…

* We WON’T talk about the fact a low credit score could surcharge you a good job (because over 50% about employers are now running credit checks on job applicants).

* We WON’T noise about the fact you could end up paying up to 40% more for your auto insurance (because most insurance organizations now check distinction when quoting premiums).

* We WON’T talk about the fact most utility companies for Electric, Gas, Water or Cable now demand a deposit before services receptacle be turned on thus of a low credit score.


* We WON’T articulate about the other FIVE ways a low credit score will cost you money and achieve life more difficult specific month.

No… today we’re going to talk about the one way a low credit score will cost you a fortune and why the banks and credit bureaus love your low credit score (if you choose to do nothing about it). This one air of credit supposing not addressed will cost the average American leap $100,000. Even worse, it can cost the average mortgage broker or loan officer over $100,000… separate year. The saddest chip of all? The banks and credit bureaus win if you choose to do nothing because its’ your loss ampersand your loss IS their gain. Let us explain… We all know the largest purchase a consumer will make in their lifetime is their home. As a result, the greatest amount of interest ever paid in a consumers’ lifetime will be on the loan, for that home. Again, most consumers know for a low credit score they’re going to pay a higher interest rate on that loan. However, few customers ever learn the REAL amount that increased attraction ends up costing them over the life of the loan. After all, the typical American Consumer now lives in a world where their only focus when financing anything, is greatest about,

The MONTHLY Payment.

This type of thinking feels good in the short run but becomes expensive in the long run. Let’s look at portion factual numbers as to why with the yarn of Bill and Ted. Bill furthermore Ted both bought homes in the same neighborhood, on the same street and for the same price. Bill had a high credit score and borrowed $180,000 to purchase a 4 bedroom 3 immerse home. Because of his high credit score he got a 30 year fixed rate loan at 5.5% interest. Here’s what Bills loan looked like:

His borrow amount was $180,000 His interest appraise was 5.5% This gave Post a monthly payment of $1022.02 His payments over 30 years totaled $367,927.00 His interest paid beyond the term totaled $187,927.00 (Of his $367,927 in total payments… $187,927 went to interest). Bill paid for his legislature twice after interest, but don’t cringe until we’re done talking about Ted.

Ted had a low credit score and borrowed $180,000 to purchase a 4 bedroom 3 bath shelter on the same parkway as Bill. He got a 30 year fixed lend as well, but because of his ignobility credit score his interest rate was 8.0% instead like Bills 5.5%. Here’s what Teds loan for the congruency $180,000 loan looked like:

Teds loan amount was $180,000 His interest rate was 8.0% This gave Ted a monthly payment of $1320.78 (about $300 more per month than Bills) Teds payments excessive 30 years totaled $475,479.00 Teds interest anted hurdle the orismology totaled $295,479.00 The hydra is NOT that Ted paid also $295,000 in interest on his loan of $180,000. The real issue is that Ted paid $108,000 MORE in interest than Bill just because his credit score was lower!

Teds omneity home loan interest paid = $295,479.00 Bills total stamping ground loan concern paid = $187,927.00 Difference = $107,552.00 The harsh reality is that Ted’s redound score cost him $107,000… But that’s not the official tragedy of the story… The worst part is Bill and Ted were brothers and both had bad credit at the same time (years before buying their homes). The only difference was Bill took initiative to fix his credit, while Ted didn’t. Now, expect yourself “Who got Teds’ $107,000 in extra interest payments?” ANSWER: The Bank. And that’s waarom banks love low credit scores. Customers like Ted are far more profitable than customers like his brother Bill. All because a lower credit score means they have to pay a higher interest rate and most people as if Ted don’t behold the big picture, instead they only focus on…

The MONTHLY Payment they can afford.

Banks love ragtag like Ted because they make millions crazy them. Will you end up being like Ted plus throwing away over $100,000 in interest payments on your home? Hopefully not… Now that we’ve covered why banks love low credit scores… let’s talk about waarom Credit Bureaus love them just as much (if prohibition more). “Why Credit Bureaus Love Low Credit Scores…” If you ask 10 Americans on the street… “How do Credit Bureaus make money?” You will invariable get the consubstantial answer all 10 times: “By Selling Credit Reports about Course!” While this answer is true, it’s not… the whole truth. The reality is that Credit Bureaus make the unwieldy of their nummary selling personal information, not running credit reports. In the example of Bill and Ted one doesn’t have to be smart to realize that Ted is a more profitable customer to the bank then Bill, because Ted has to pay a higher attract rate due to his credit score. This is because Ted is what’s known as…

“A SUB-PRIME Borrower” Since sub-prime borrowers are another profitable customers because they pay higher interest rates, there is a thriving business for Credit Bureaus to sell lead data to Mortgage Lenders. Remember, Credit bureaus make the BULK of their nummary NOT by selling estimation reports only by selling personal information. And, the yet concern more profitable than selling personal information, is when you can sell that very secret information, over and over to, multiple clients. Let us wrap up with just one example…

“TRIGGER Leads” A while back the Belief Bureaus came up along an very profitable product to sell to mortgage brokers called “TRIGGER LEADS.” The topnotch way we preference to explain a “Trigger Lead” to consumers, is to have them imagine they work at their narrow Sheriffs office answering the telephone. Then, every time someone calls and gives their name, address et alii phone number in order to file a police report that their bungalow was just broken into… they then seize that information and turn around and sell it as a “Lead” to 20 different “Home Security Companies” so they can contact the recent patsy about purchasing a security system for their home. After all, you can’t unearth a “Hotter Lead” for a home security system than a person whose just had their home robbed within the last 24 hours! Triggers Leads essentially accomplish the same way except they’re sold to mortgage brokers. It works like this: Joe Consumer goes to his indigenous bank or mortgage scalper to get pre-qualified to purchase a home. As a result, the lender pulls his credit in the process. The Credit Bureau see that Joe Consumer is shopping for a loan so they formerly sell his name, address and phone number to other mortgage brokers as a “Trigger Lead” within 24 hours, so they can call him and pitch him a better deal. Sound interesting… It gets better. In some cases the “Trigger Lead” will treffen sold 20 times in less than 24 hours. Shocked? Don’t be… not until you learn that “Trigger Leads” can cost around $5 each (or more depending on the data selects). So let’s flare downy the numbers realistic quick. Joe Consumer gets his credit pulled in the process of “pre-qualifying” for a home mortgage. His private information is then sold for $5 as a “Trigger Lead” to up to 20 different mortgage brokers within 24 hours. Simply math tells us that if 20 People Each Pay $5 for Joe’s Abutting Information that’s $100 produced off Joe’s Name! Now imagine how many “Joe’s” are produced each day by the Credit Bureaus? Selling sales leads for loans further credit card offers is BIG business for the Credit Bureaus. How many other businesses have a database of over 200 million names they can make tender distant selling over und so weiter over? Now, imagine WHO is the most profitable “LEAD” they cup sell? A person with a HIGH credit score? Or A person with a LOW credit score? The answer is obvious. And, it similarly becomes obvious why the Attention Bureaus have automated so much of their consumer dispute processes overseas. It’s including the reason why the Credit Bureaus permit shown no real incentive to reduce the number like damaging errors in customer credit reports with enacting stricter data management. In the end “SUB-PRIME Borrowers” are more desperate and expanded beneficial and that’s the reason proof the Credit Bureaus love your low credit score.