First up, a brief background knowledge. Your credit score is worked out based on record about you from lenders that have financed you so far. They submit information on your payment history to the three major credit reporting bureaus. These organizations then make a numerical score, also referred to as a FICO score (named after the Fair Isaac Corporation).

You can equate your credit score to grades for a test in school. Credit score and credit rating move in tandem. FICO scores move in the range from 300 to a maximum of 850. Anything below 700 needs to be improved. Then how come should you worry?

*higher loan at lower costs

A better credit score will fetch you home finance at lower rate of interest. These days credit situation is very tight, banks give a very high weightage to your FICO score when you request a home equity loan. For example if you manage to get a reduction of just 2% in interest rate on a 30 year fixed mortgage on a $200,000 house you will save almost $100,000!!

* Cheaper insurance premiums

Your credit score is verified by many auto insurance companies and health insurance companies before they determine the insurance premium for you. It is observed that people with a better FICO score are less likely to lodge a claim against their insurance policy. So, they reward customers with better credit by providing them a cheaper premium on life, health, and auto insurance.

*A better job

It has bee observed that employers are obtaining your credit reports of prospective employees. Although it is done to cross check your application, there is nothing to prevent them from discovering how you manage your fiscal affairs, as well.

Therefore, several additional facets of your life are being impacted by your credit score than you may have thought. Increase your score, and you might as well enhance your standard of living with cheaper interest rates, a better job, and a more affordable lifestyle. Back to basics: What is your credit score?

It is easy to procure a copy of your credit report. In fact you can get one for free from each of the three major credit reporting bureaus once a year. You can do so on the web by visiting annualcreditreport.com This is a web site supported by the credit bureaus. You can opt to get a copy from all three at the same time or prefer to get on form each of them at different times of the year. One distinct advantage of obtaining the report simultaneously is a better comparison. All the same, you will not be eligible for another free credit report for 12 months. You can keep track of changes in a better way if you opt to receive them over the year. It is crucial to follow your credit report, because lenders keep supplying modified information.

Note that your complimentary credit report will not disclose your FICO score. The three major credit bureaus (Equifax, Experian, and TransUnion) will be pleased to charge you for that information, like many other web sites. Beware about all offers coming your way like monthly reports but for a subscription.