How to check your credit rating

How credit scores workIt just doesn't make sense to pay thousands of dollars in interest simply because you didn't pay some bills on time. Those who have a good credit score can save thousands. Here are some tips on how to check your credit rating.

Because lending money involves trust and risk, the credit rating system is designed to evaluate each person's unique financial habits. That is why it is so important to have a good credit score. Your score will determine two things: the amount of credit you are eligible to receive and the rate of interest you are expected to pay.

A very poor FICO credit score number (349 to 619) can impact your life in a number of ways. Most applications for credit cards or loans will be rejected. It is impossible, or very difficult, to buy a house or a new car unless you can afford to pay the entire sales price upfront.

With a fair credit score (620 to 659), you are still a big risk to creditors. You may qualify for small loans and credit builder credit cards. But you should expect to pay very high interest rates. This can add an incredible amount of expense to any large purchase.

Those who have a good credit score (660 and 749) have more opportunities to borrow large sums of money at lower interest rates. They qualify for the best credit cards and all kinds of other benefits like better cell phone plans and cheaper insurance. Landlords also prefer tenants with good credit scores.

Any credit score above 750 is excellent.

Every year you should request a copy of your credit report to ensure there are no mistakes and to see if your identity has been stolen.

"CBC's Marketplace program asked 100 people to look over their credit reports to see if there were any mistakes," according to "More than 40 spotted errors. And in 13 cases, they were serious enough to affect their credit status." If you find any errors, contact the credit reporting agency immediately.

There are three ways to request that afreecopy of your credit report be sent to you by mail. You can call a 1-800 number provided by the reporting agencies TransUnion and Equifax, send a request by mail, or fill out an application online. You will have to provide some basic identification information.

If you are about to apply for a credit card or mortgage and cannot wait three weeks to receive the free credit report in the mail, you can get your credit report quickly online for $15. If you want the report to reveal your FICO score number, make sure you request that it is included in the report, or it may be left out. You will have to pay an extra fee of almost $10 to have the FICO credit score number included, but it is certainly worth it.

Written by Christopher Ibotrain.

Updated July 31, 2009

Most recent Credit Account Management Stories