Do You Know Your Credit Score?

It is essential to know your credit score since it is the most important factor in determining what rate you will pay when you borrow money.

• More than one-third of American adults, 37% admit that they do not know their credit score.
• Nearly two-thirds of American adults, 64% or 144 million people -- have not ordered a copy of their credit report in the past year.

Source: National Foundation for Credit Counseling, 2009 Financial Literacy Survey, April 2009

Average FICO Scores Dropping

More than one in four Americans now has a FICO credit score below 600, which is considered low, and could have difficulty getting credit cards, car loans and mortgages.

New numbers supplied by FICO Inc. show that 25.5% of consumers - about 43.4 million people with active credit have scores that are lower than 599 on the 300 to 850 scale. The data also showed that 2.4 million more people have fallen into the lowest FICO categories in the past two years. Historically the rate of people with scores of 599 or lower has been around 15 percent.

If your credit score is below 600 you likely have serious negative items affecting your credit score like a bankruptcy or many late payments by more than 90 days. Any score under 620 is considered high risk and often called "subprime" which tells the lender that it is highly likely you will default. The good news is that no matter what your score you can always do things to boost it.

What's a Good FICO Credit Score?

A credit score of 760 or above is going to get you the best interest rates and terms possible on a mortgage or many other forms of credit. In fact, you're in a position to shop around for the best possible conditions.

How FICO Credit Scores Work

When you apply for credit, whether for a credit card, a car loan, or a mortgage, lenders want to know what risk they'd take by loaning money to you. FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus - Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you. Your FICO scores affect both how much and what loan terms lenders will offer you at any given time.

Where Can I Get My FICO Score?

myFICO is the official site run by Fair Isaac Corporation where you can order an individual FICO credit score from either Transunion or Equifax. However, you can get a general picture of whether you have good credit or bad credit from any credit score. Keep in mind, these scores will be different than your FICO scores and different from each other.

Car Insurance and Your Credit Score

Your credit score can also affect the rate you pay for car insurance. People with low credit scores are statistically more likely to make accident claims, and as a result, many insurance companies take this into account when they set your premiums.