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There is a simple fact about personal finances. It’s that the higher your credit score, the less it will cost you to borrow money. You can learn your credit rating by going to a site such as www.myfico.com, www.creditkarma.com or www.creditsesame.com. Your credit score is expressed as a three-digit number and the higher the number the better. Lenders usually make decisions about credit based on tiers as follows:
- Between 700 and 850 – Very good or excellent credit score
- Between 680 and 699 – Good credit score
- Between 620 and 679 – Average or OK score
- Between 580 and 619 – Low credit score
- Between 500 and 579 – Poor credit score
- Between 300 and 499 – Bad credit score
If you don’t believe your credit score makes a difference, here are the different interest rates you’d be charged on a mortgage – based on credit score.
760 to 850 5.780% 620-659 7.096%
700-759 6.002% 580-619 8.583%
660-699 6.286% 500-579 9.494%
As you can see from this table if you have a credit score in the low 600s you will pay a lot more in interest than if your score was in the high 700s.
You should also review your credit reports from the three credit reporting bureaus -- Experian, Equifax and TransUnion. You can get your reports one at a time from the companies or all together at www.annualcreditreport.com. The reason why you want to get your reports is to review them as they could have errors that are damaging your credit score.
To keep your credit “good” you will need to keep tack of your loan balances and payment dates and develop a plan for paying off your debts. It’s also a good idea to pay off high interest debt first as this would save you the most money.
5. Protect yourself with insurance
Depending on your age you may still be on your parents’ health insurance. If not, you need to sign up for health insurance. Under the Affordable Care Act (often called Obamacare) everyone must have health insurance. If you don’t, you face the very real possibility of having to pay a penalty. If you don’t have health insurance through your parents or employer you will need to purchase a health plan from either a federal or state-based health insurance Exchange Marketplace.
There are some other types of insurance you also need. If you’re a renter, you should get renter’s insurance to protect against the loss of or damage to your personal property. And, of course, you need auto insurance. Your agent should be able to help you choose your coverage but the important part is to make sure you buy good liability insurance to protect you in the event you were to cause an accident where someone is seriously injured.