Your credit score can be friend or your enemy, and by maintaining good credit, your score can actually put more money into your pocket.

Credit bureaus compute your credit score-the three.digit number ranging from 300,850 based on your credit history-using methods modeled after the Fair Isaac Corporation (FICO). The higher your credit or FICO score, the less you'll pay in interest and the more you can effectively manage and accumulate wealth.

Whether you're applying for a car loan, credit card or mortgage, your credit score determines if you'll be approved for the loan, how much credit will be made available to you and how much the loan will cost you over the duration of the deal.

"A low credit score means that you will pay a higher interest to borrow money and/ score in the 70 or receive credit," says Carla J. Cargle, a Texas-based financial advisor and founder and CEO of Genesis One Wealth Builders. "Since the interest rate is higher, this results in a higher payment. A higher payment means there is less money available to invest toward saving, retirement, etc."

Experts encourage those who are hovering around a fair score of 620-650 to strive for a higher score. "You want to maintain a credit score in the 700s, that would be a great score. It gives you more bargaining power, which could be the difference of a 5 percent or an 8 percent rate," says Brian Scott, a financial education specialist with Consumer Credit Counseling Service in Atlanta. "However, 620 would probably be the minimum score that you would want to have when applying for a loan."

The difference in scores considerably affects rates and your monthly payments. For instance, on a $150,000, 30-year, fixed-rate mortgage, according to myfico.com, if your score is between 620-639, with a 7.55% rate you'll pay $1,054 a month. With a 680-699 score, you'll pay $119 less with a $935 payment on a 6.36% rate. If you have a favorably high score of 760-850, you'll pay $896 a month on a 5.96% interest rate, with a total savings of $56,880 over the life of the mortgage.

Another reason to manage your credit wisely to earn a high credit score is to make a difference in employment and insurance premiums.

"There are various levels of employment and industries that do check your credit to determine if they want to hire you or not," says Cargle, author and developer of The Financial Truth, a financial empowerment program. "As well, now insurance companies are also requiring a credit check. It is something they use to determine how much your insurance premiums are going to cost, your auto insurance and homeowners insurance."

Scott adds, "If you're trying to get a job, it's not so much the credit score, but they're looking at the activity that's taking place, the payment history and probably your employment history as well. Credit reports can determine whether you're able to rent an apartment and whether you're able to get your utilities turned on without having to put down a deposit."

Raising your credit score is a bit like losing weight-there is no quick fix, and it takes time. However, the better you manage your credit to maintain a high score, the more cash you will have to put in the bank.

What's In A Credit Score?

When you apply for credit--whether a credit card, ear loan or a mortgage--lenders want to know what risk they'd take by lending money to you. The Fair Isaac Corporation (FICO) scores are the credit scores most lenders use to determine your credit risk-the higher the score, the lower the risk. You have three FICO scores, one for each credit bureau--Equifax, Experian, and TransUnion. Listed below are the determining factors used to calculate your credit score from your credit report. According to myfico.eom, this data is grouped into five categories with percentages that reflect how important each of the categories is in determining your score.

35%   Payment history
30%   Amounts owed
15%   Length of credit history
10%   New credit inquiries
10%   Types of credit in use

For more information on
credit scores,
visit www.myfico.com.

COPYRIGHT 2005 Johnson Publishing Co.
COPYRIGHT 2005 Gale Group