Your Bad Credit Could Cost You $1 Million

Credit cards: Let's assume, for our exercise, that both the people with good and bad credit both carry the median credit card debt of $2,200 over 30 years. If the person with good credit had an interest rate of 9% and the person with bad credit had an interest rate of 20%, the person with poor credit will pay an extra $7,260 over a 30-year period.

Lost interest: If the person with good credit took the difference and invested that money in an account that earned 8% compounded annually for 30 years, he or she would have well over $1 million saved. In fact, investing the $800 difference in the cost of the mortgage alone would be worth $1.2 million.

Insurance: All types of insurance (auto, health, homeowners) will likely cost more for a person with poor credit than one with good credit. Insurance companies know that people with poor credit make more claims than those with good credit -- and therefore are more of a risk to insure.

If your credit score is taken into account on any of your insurance rates, an individual with poor credit will pay more than a comparable individual with good credit.

Job: You may lose out on a better job due to poor credit. More and more employers pull your credit report when you apply for a job, because many see a risk in employing a person with poor credit. The same can be true with promotions. For example, people in the armed forces may not be able to get clearance for classified documents and areas due to poor credit, therefore blocking potential advancement.

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