So while good credit scores are critical when someone is looking to buy a new home, refinance his or her existing home or purchase a car, the average consumer has a minimal understanding of the importance of their scores, according to various studies from the Consumer Federation of America.
By taking a few simple steps to increase their credit scores, people can save thousands of dollars a year on a mortgage or car loan, according to the CFA.
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In the case of a mortgage, for example, a person with a credit score of 720 could qualify for a 30-year mortgage carrying a 5.5 percent interest rate, according to an example from the CFA. Someone with a score of 580, on the other hand, probably would pay 8.5 percent or more. On a $500,000 mortgage loan, the difference between having good credit and bad credit could be an additional $1,000 a month.