Knowing Your Credit Score Saves You Money

Knowing and understanding what your credit score means is key to opening up your financial options, a fact I thought was well known but apparently not so says a joint study by the Consumer Federation of America and Washington Mutual Bank (where I once worked).

Credit scores are one of the main components (if not the main component beyond cold hard cash) that decide what you will pay for your financing needs, be it a mortgage, car loan, utilities,and those handy dandy credit cards. The survey, which has been held since 2005, showed that while overall many people do not understand their credit scores (if they even know them), things are improving.

But the understanding doesn’t stretch much further than that. For instance, most people don’t know that their credit score is an indicator of risk to the companies that are considering lending them money or granting them credit. Others incorrectly stated that certain demographic factors played into the credit score, such as age, education, and marital status.

According to Washington Mutual Bank, consumers could save $28 Billion annually simply by raising their scores 30 points. That’s no chump change in my book.

If you didn’t know, credit scores can range from 300 to 850, with the higher the number obviously being better for your pocketbook. The national average right now is 693, according to Experian National Score Index–just 7 point shy of the magic 700, which will likely get you a low-rate mortgage.