Most of us know that the higher our credit score, the better. We may even know that we can save some money by maximizing our score. (If you don't know your credit score, you're entitled to a free credit report.)
At Bankrate.com, Tamara Holmes offers some helpful and eye-opening specifics on just how much a good credit score can help you. Here are some of her findings:
- First, the basics. FICO credit scores range from 300 to 850, with 15% of the population scoring below 600, 27% scoring between 600 and 699, 18% scoring between 700 and 749, 27% scoring between 750 and 799, and just 13% achieving top scores of 800 or more.
- With mortgages, if your credit score is below 650, your interest rate will likely be at least 1% higher than that of someone with excellent credit.
- Your credit score can also limit the degree to which you can refinance your mortgage. A low score can cost you tens of thousands of dollars in extra interest on a home equity loan.
- Car loans, too, are affected. If you're sporting a low credit score, you'll pay a higher interest rate -- perhaps as much as two percentage points higher -- and will fork over hundreds, if not thousands, of extra dollars over the life of the loan.
If you're getting the idea that this credit score will affect most of your life, you're on the right wavelength. Insurance? "Someone with a credit score of approximately 650 or higher could receive a discount of anywhere from 'a few percent to 15 percent or even more,' says Robert Hartwig, chief economist for the Insurance Information Institute." That means you might get to pay $150 less on your car insurance and your home insurance -- for a total of $300 per year and $7,500 over 25 years.
It doesn't stop there, either. These days, everyone is checking your credit -- from possible employers when you're bucking for a job to prospective landlords when you're seeking shelter. Pay your bills on time and you might get a lot more out of life.
Learn more in our Credit Center, which features some surprisingly interesting info about the credit card industry. Being smart about credit can save you lots of money. You can read about all things credit-related on our Credit Cards and Consumer Debt discussion board.
Speaking of credit cards, check out our Fool credit card, which is so snazzy that it often serves as a conversation piece.
And finally, remember that credit cards are a big business and investors can profit from it. If the industry doesn't make you uneasy, check it out. Look into card-issuing companies such as Income Investor recommendation JPMorgan Chase
This article has been updated by Foolish research associate Katrina Chan and was originally published on June 23, 2006 by Selena Maranjian. Neither Katrina nor Selena owns shares of any companies mentioned in this article. Bankrate is a Rule Breakers recommendation. The Motley Fool has a full disclosure policy.