Know the score: A credit score is vital to your financial health

While obtaining your credit score is important, many of the services offering "free" credit scores and credit reports come with many strings attached. There is only one service that offers you the legally mandated annual free credit report.

Your credit score affects many parts of your financial life. Test your credit scoring knowledge with the Credit Score Quiz. is an informational tool developed by the Consumer Federation of America (CFA) and VantageScore Solutions. If you have young people in your household, encourage them to review the Credit Scores as Important to Teens as SATs article.

A credit score is a number that helps lenders and others predict how likely you are to make your credit payments on time. Each person’s score is based on the information in their credit report.

Why does a score matter? A credit score affects whether you can get credit and what you pay for credit cards, auto loans, mortgages and other kinds of credit. Generally a higher score means you are more likely to be approved and pay a lower interest rate on new credit. There are a lot of ways to get your credit score and credit reports and a lot of credit report monitoring services out there. The reality is that most of them are the same services repackaged by different companies. The score that most lenders use is a FICO® score.

Only one website is authorized to fill orders for the free annual credit report you are entitled to under law — or by calling 1-877-322-8228. But that doesn't include a FICO® score, which come at an added cost of about $6 to $16. Other websites that claim to offer “free credit reports,” “free credit scores,” or “free credit monitoring” are not part of the legally mandated free annual credit report program. In some cases, the “free” product comes with strings attached.

Want to rent an apartment? Without a good score, you may not be able to rent the apartment you want. Your score also may determine how big of a deposit you will have to pay for telephone, electricity or natural gas service.

Lenders do look at consumers’ credit scores all the time. They look at scores when deciding, for example, whether to change an interest rate or credit limit on a credit card, or whether to send you an offer through the mail. Having a good credit score makes your financial dealings a lot easier and can save you money in lower interest rates. That's why they are a vital part of your financial health.

Consider a couple who is looking to buy their first house. Let's say they want a 30-year mortgage loan and their FICO® credit score is 720. In 2005, they could qualify for a mortgage with a low 5.5 percent interest rate. But if their score was 580, they probably would pay 8.5 percent or more -- that's at least 3 full percentage points more in interest. On a $100,000 mortgage loan, that 3-point difference would cost them $2,400 dollars a year, adding up to $72,000 dollars more over the loan's 30-year lifetime. Needless to say, your credit score does matter.

To contact an expert in your area, visit, or call 888-MSUE4MI (888-678-3364). 

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