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Insurance Matters: Your Onemain Solutions Information Source

Why is credit insurance or debt protection so important?

The Consumer Credit Industry Association answered that question in their April 2017 Newsletter.

The credit score is the standard measure of consumer credit risk, a number that lenders who make auto and home loans, and issue credit cards turn to unfailingly to assess a potential borrower’s credit worthiness. Most credit scores fall between 600 and 750. A credit score of 700 or above is considered good. A score of 800 or above is excellent.

Ninety-five percent of American households own a vehicle and nearly nine in 10 Americans drive one to work. Eighty-four percent of new vehicles and 55 percent of used vehicles are financed. In other words, most Americans take out auto loans to get to work. The cost of any auto loan is directly related to the consumer’s credit score. The lower your credit score, the higher the interest rate you’ll pay on the loan and the higher the monthly payment.

The short- and long-term value of a 700-credit score can be significant to a household. On average, a credit score in that range can mean interest savings on an auto loan of approximately $4,000.

On the other hand, if a household member falls three months past due on its credit payments because of disability or involuntary unemployment, their credit score would drop 60 to 100 points. This credit score plunge would result in a two percentage- point increase in the interest rate on their next auto loan and make their car payment more expensive.

Source: The CCIA Star