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Unfortunately, the difference between an exceptional and poor credit score could cost you nearly $400,000 in your lifetime, according to a recent study. This effect is much less exaggerated between exceptional and fair credit scores, but even then, the interest payments could cost you tens of thousands of dollars. Here’s a closer look at how much credit scores can cost you throughout your lifetime.

Mortgage interest can eat up a decade’s worth of your earnings

According to a new study from Self, a financial technology company, the average American will pay an estimated $130,461 over their lifetime in interest fees. The breakdown by FICO credit score is as follows:

  • Less than 620: $486,040
  • 620–639: $158,512
  • 640–659: $133,828
  • 660–679: $114,803
  • 680–699: $105,291
  • 700–759: $98,045
  • 760–850: $88,388

As the Balance points out, the interest owed for the poorest credit scores works out to 9.4 years of pay for the median full-time worker. Why is this effect so exaggerated? Well, since borrowers with credit scores lower than 620 can’t qualify for conventional loans, they’re forced to take subprime mortgages that have much higher interest rates, which cost them way more money in the long run. That’s why it’s important to get your credit score above 620, then apply for a mortgage.

Subprime car loan interest can cost you a year’s income

The study also looked at the lifetime cost of interest on auto loans (based on the average prices of two used cars and four new cars over a lifetime and respective interest rates). The breakdown by FICO credit score is as follows:

  • 300–500: $87,523
  • 501–600: $65,549
  • 601–660: $39,031
  • 661–780: $20,937
  • 781–850: $14,545

What’s interesting here is that even with a decent credit score, a 100-point difference in your credit score will result in interest payments that are roughly equivalent to the annual take-home pay of a part-time job.

Credit cards are a bit trickier to measure

Credit cards are different because they’re revolving credit loans, not installment loans like you see with mortgages or auto financing. For that reason, it’s not easy to measure the average lifetime interest based on a borrower’s credit score. There are other reasons for this, too: Borrowers typically need credit scores above 670 to qualify for a credit card, and many borrowers make on-time payments before the interest kicks in. Per CNBC, the average amount of lifetime credit card interest is $9,624.24.

How to build up your credit score

Even borrowers with the worst credit scores can slowly build it back up within a few years, but it requires good credit behavior in that time. If your credit score is at rock-bottom, check out this Lifehacker post which covers your options for building up a good credit history from scratch.

 



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