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How Your Credit Can Cost You $100K...

By Will from Holland

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A few years ago, when I was living in the Caribbean, I met this guy while surfing.

His name was Mack, a nice guy in his twenties, from LA. He was studying in Puerto Rico to become a doctor. We caught a few waves together, had a chat, and became friends quickly.

We've stayed in touch over the years. Every time I went to California for work, I made an effort to see Mack. We would catch a few waves at Manhattan Beach and cruise around the strand on skateboards. We always had fun.

Mack talked fondly about his work as an emergency room doctor. He lived in a beautiful house just two blocks from the ocean. He appeared to be successful in life at an early age.

Then one evening, while we sat on his balcony after a surf session, he asked me about my work as a financial literacy advisor. He said, "I have an interesting story for you—one that I am a little ashamed of, and don't tell many people."

I learned that Mack, clever and bright as he may be, made a bunch of mistakes with his money. A couple of simple mistakes cost him at least $100K over the decade after he graduated from college.


Yes, Mack had made some money mistakes which badly hurt his credit, and he ended up throwing away all that money.


By paying bills late, racking up credit card debt and not reading the fine print!

  • Mack got a student loan to pay for his tuition. One month, when he was short on cash, he couldn't make the payment and sent it in more than 30 days late.
    • Unfortunately, his loan company reported it to the credit bureaus.
  • Around the same time, Mack got a credit card and had some fun with it. He carried balances from one month to the next and eventually maxed it out. He did the same with another two or three cards while he was in college.
    • Carrying balances, maxing cards out and not paying off cards can hurt your credit.
  • Mack bought a computer for his schoolwork. He bought it on sale and paid for it with a financing plan. Unfortunately, he didn't read the fine print, which stated that if he was late on a payment, he would have to pay full price for the computer, rather than the discounted price. Needless to say, he missed a payment, and ended up paying a lot more for his computer. He needed money he didn't have, and had to take out a personal loan.
    • Do I need to explain how this hurt his credit?

So that's how Mack ended up "bashing" his credit! Bummer, right?

How did Mack end up throwing away that $100K I mentioned earlier?

Many companies check your credit before loaning you money. Generally, the worse your credit is, the more you pay for things because of interest rates and charges. Here's how it added up to $100K:

  • When Mack bought a car, the car dealership charged him an additional 15% interest on his loan. This totaled aproximately $15,000 over 4 years.
  • When Mack took out another credit card, he was charged an interest rate of around 22%. He used his card a lot, and calculated he'd spent around $5,000 more than he had to over the course of the decade...just for the interest on his credit card bill.
  • Mack also bought that beautiful house... (and this is where it really hurt!). The lending company that issued his mortgage charged him 5% more to finance the home. Total money wasted over a 30-year mortgage? Around $80,000.

Well... there you have it: $100K wasted. BAM! That's gotta hurt...

Fortunately, it's not hard to avoid these money mistakes. Just do a couple of simple things:

  • Pay bills on time. Learn how to budget and save, even while in college. Don't know how? Work through our Burning Money module.
  • Be careful with your credit card(s)! Don't carry balances and don't max out your card. Learn how to use it correctly in our Sucker Punch module.
  • Slow down before going into any financial transaction! Make sure you budget and save, read (financing) contracts and watch out for scams and rip-off artists. Learn all the tricks in our When It Hits The Fan module.

That should do it. Good luck. And if you have any tips or tricks yourself, do be sure to let us know!

Cheers, Will