Impact of Credit Score on Loans

Impact of Credit Score on Loans

For this activity, you'll need the credit scores you calculated previously in the activityCALCULATE: FICO Credit Scores. If you've already completed that activity, copy over the credit scores in the chart below; if not, you'll need to do that activity now.Use the highest number from their estimated range.Note that Danielle had no credit history, but since that time she's opened one credit card and made her payments on time. Her current score is 685.

NAME

SAM

JESSICA

DANIELLE

Estimated Score

Now, assume that each of the three students has graduated from college, maintained their credit score, secured a $50,000/year job, and now wants to go car shopping.Use theFICO Loan Savings Calculatorto determine how much the loan is going to cost Sam, Jessica, and Danielle.

Note: This calculator goes down every year in late September-early October. If you are doing this activity during that timeframe, use thisCar loan calculatorto complete the activity instead!

Enter the following information into the calculator:

1. Car price:$21,000
2. Interest Rate: refer toaverage rate (new)at the top right of calculator
3. Trade-in / down payment: leave blank
4. Number of months:60
5. Push Calculate

1. Complete the chart below using data from the calculator.

NAME

SAM

JESSICA

DANIELLE

Estimated Score

APR (~interest rate)

Monthly Payment

Total Interest Paid

1. What is the difference in APR paid by Sam and Jessica?

1. How does that APR difference impact their monthly payments and total interest?

1. Hypothesize: What if they were buying a car with a $42,000 principal instead?

Now, let's see how Sam's, Jessica's, and Danielle's credit scores would impact a mortgage. This time they're each trying to finance $250,000 of a condo using a 30-year fixed mortgage. Use theFICO Loan Savings Calculatorand enter the following information:

Note: This calculator goes down every year in late September-early October. If you are doing this activity during that timeframe, usethis articleand find the section titled "How Credit Scores Affect Mortgage Rates" to complete the chart below. Use$200,000 as the loan amount.

1. Type of Loan:30-year Fixed
2. State:National
3. Loan Principal Amount:$250,000
4. Current FICO Score Range:Varies by person
5. Push Calculate

NAME

SAM

JESSICA

Danielle

Estimated Score

APR (~interestrate)

Monthly Payment

Total Interest Paid

1. If someone asked you, "Why should I bother worrying about my credit score?" what would you say?

www.ngpf.orgLast updated: 10/21/19