Make Sure Your Credit Score Is High

Your credit score is the single most important factor determining whether you'll get approved for a loan and what the interest rate will be. And a growing number of companies having nothing to do with the business of offering credit (such as insurance companies, cellular phone companies, landlords, and affiliates of financial services firms) are now scrutinizing the data on credit reports and using this information to decide whether to do business with a consumer and how much to charge.

But according to a recent survey most people don't understand credit scores, or what's considered a good or bad score, .

Ignoring your credit score could cost you a lot of money!

The difference between a high and low score can mean a lot to your wallet.

A consumer applying for a mortgage with a FICO score between 500 and 559 would qualify for no better than a 10.2% fixed-rate 30-year loan. The same person with a score between 620 and 674 would be quoted 8.43%. With a score between 700 and 719, the rate would drop to 6.7%, and above 720 the borrower would get a 6.6% loan. That would make thousands of dollar difference per year.

The lowest interest rates are reserved for those with scores above the low 700s. A consumer with a score in the low 600s might end up paying a high interest rate or be denied credit altogether.

Mistakes on your credit report lower your score

Unfortunately, it is possible for incorrect or outdated information to appear on your credit report. Mortgage and credit industry experts say the odds of errors are greater than you might suspect. This could be due to typing errors that occur when data is keyed in to your file. In other instances the reason for the error could be that credit applicants provide incorrect or incomplete information or even apply under a different name.

The presence of unseen bad data in your credit report cost you dozens of your credit score --and potentially thousands of dollars of higher monthly payments on your home loan.

Whether you know or not, someone is already keeping track of your credit

Your credit score changes over time. Every time you apply for, use, make or miss a payment on a loan or credit card, you build another entry on your credit report—and raise or lower your credit score. More recent activity carries more weight.

Your credit score is based on several types of information contained in your credit report:

• Your payment track record.
• The amount of debt you owe.
• How long you’ve used credit.
• How often you’ve applied for new credit and whether you’ve taken on new debt.
• The types of credit you currently use, such as credit cards, retail accounts, installment loans, finance company accounts and mortgages.
  
  

If you're planning on purchasing a new home or automobile anytime soon, you could save hundreds of dollars in payments by knowing what your credit report says before you approach a lender.

Consumers are advised to check their credit scores as soon as they decide to make a major purchase, like a house, or know they will be moving and applying for a new job or apartment. That way, they have some time to improve a low score.