Find a Location



By: AgFed Credit Union

Welcome to AgFed Credit Union's MoneyDig blog! 

Get confident about your personal finances with a number of articles, tips, advice and more.


Why a Good Credit Score Matters

 Jun 16, 2021
(not rated)
| 0

You’ve probably heard by now, more than once, that it is important to have a good credit score. While this sounds good and wise, the importance of a high credit score often doesn’t sink in until you see it in black and white.

We want you to understand that a good credit score matters in very real ways. The following example will help illustrate the difference your credit score makes for how much you pay for loans, such as financing a vehicle.


The Effect of a Good Credit Score

Before we begin, it is important to note that each lender will have their own tiers for determining what constitutes an A+, A, B, C, D, and E credit score and what rate applies to each score. The following example is for educational purposes.


Imagine you finance a new $25,000 car for 60 months (5 years). The chart below details how much your monthly payment will be along with the total interest paid over the life of the loan, depending upon your credit score.


Credit Score

Auto Loan Rate

Monthly Payment

Total Interest Paid

A+ = 720+




A = 690-719




B = 660-689




C = 630-659




D = 600-629




E = < 600





You can tell from the example above that higher credit scores result in lower interest rates. That means you pay considerably less each month and over the life of the loan to finance your vehicle.

As a comparison, imagine your credit score is a C. You would pay $81.96 more each month than if your credit score was an A+. Over the life of your loan, you would pay an additional $4,917.53 in interest when compared to an A+ score.

Now you can see just how much your credit score comes into play when borrowing money. But why does your credit score have such a significant impact?


Why Do Lower Scores Cost More?

At the end of the day, it’s a numbers game for lenders. They take a risk when they lend money. Your credit score tells them how much of a risk they’re taking when they work with you. The higher the risk, the higher the cost – these extra funds help protect the lender in case you default on your loan.

It may feel a bit unfair to be penalized by a lack of a favorable credit score. However, one positive to consider is that it serves as incentives for you to work on continually increasing your credit score. There are small steps you can take that will make a huge difference in your future. The key is to start now.


Boosting Your Credit Score

A credit score is one of the most important numbers for all adults today. Not only does it determine how much interest you pay on loans for things like cars and homes, but it also determines if you can get approved for apartments, some jobs, and more. It can even impact how much you pay for home or auto insurance.

Here are a few tips to help improve your current score:

  • Make all loan payments and bills on time.
  • Always pay more than the minimum balance on credit cards (try to pay the full balance each month).
  • Consolidate debt if you have a large volume of high-interest credit cards or short-term loans.
  • Resist the temptation to spend more than 25 percent of your credit card limit.

When you’re diligent about these small steps, it can have a tremendous impact on your credit score.


We’re Here to Help!

A little guidance can go a long way in helping you improve your credit score. We’ll be happy to show you how specific tools, such as auto-payments and debt consolidation can help you boost your score and simplify your finances.

To learn more, give us a call at 202-479-2270 or email us at


post a comment / show comments

Rate this Blog

Add a Comment


No comments have been posted to this Blog