Your credit score is one of the factors that helps determine the interest rate a lender would be willing to give you. Put simply, a good credit score helps you get a lower rate.

Most lenders use the FICO score to determine your interest rate. Although the exact range is unknown, it seems that FICO scores tend to fall between 300 and 850. A good credit score is generally considered to be 680 and above. Of course it is ultimately up to the lender to determine their risk tolerance, but it is thought that 680 and above is good.

How do you get a good credit score?

– Pay your bills on time
– Don’t max out your credit card
– Don’t take out credit cards you don’t need
– Start early to develop credit history

Try setting a budget for yourself and sticking to it. Don’t live beyond your means because it can come back to haunt you. There are resources out there link mint.com which help you organize and keep track of your finances, but a simple excel spreadsheet can do the trick too.

Benefits of a good credit score

– Lower interest rate
– Easier to refinance
– Better mortgage

The better the credit score, the lower the rate. A fraction of a percent lower on your mortgage interest could save you tens of thousands of dollars. A good credit score gives you more options and opens you up to more opportunities.

To check your FICO credit score, you can go to a site like www.myfico.com. It won’t lower your score because checking it yourself is considered a soft inquiry. However, be aware that to get your true FICO score, you have to pay for it. Free credit score sites like www.creditkarma.com and www.creditsesame.com will give you an estimated score, not your actual FICO score. Of course you can use the estimate as a guide, but be aware that it may differ from you real score.