It might be common knowledge that having a good credit score can help in the home loan process, but a new study from LendingTree
put specific dollar amounts to this benefit.
LendingTree compared the range of credit scores generally considered “Fair” (580-669) and “Very Good” (740-799) to measure the difference in costs of the life of loans. The company reported that raising a credit score from “Fair” to “Very Good” could save $56,400 across five common loan types, including mortgages–an average total difference of $316 a month. Mortgage costs accounted for nearly three-quarters of those savings, or $41,416.
How is that possible? According to LendingTree, the total interest paid over the lifetime of a mortgage for someone with a “Fair” credit score is $261,076. In comparison, those with a “Very Good” credit score would pay $219,660.
“Assuming every other factor is equal, someone with a very good credit score would have a monthly mortgage bill that is $115 lower,” said Kali McFadden, senior research analyst at Charlotte, N.C.-based LendingTree. “They could invest that money, use it to pay down other debts faster or save it for downpayments on future debt, which would exponentially increase the value of those savings over that same 30-year period.”