A FICO score is the statistical representation of the information contained in your credit report. Your score is the product of this information being processed through a complexed mathematical formula, resulting in a numerical score within the range of 300 and 850. Banks use this number to determine the risk involved in all types of loans; the lower the risk, the lower your interest will be.
The most important thing you can do to maintain a high FICO credit score, is to make all of your bill repayments on time. By keeping up with your bills, you will demonstrate a positive financial reputation, resulting in a higher score and more respectable interest rate. On large loans, such as mortgages, having higher credit status can save you hundreds of dollars each and every month.
The average American FICO score, which is viewed by lenders as a fair / good level of credit, is approximately 700 to 725. This average US credit score falls on the higher end of the scale, thus making most Americans eligible for standard federal interest rates . Those who find themselves below the average mark, will be subject to a higher interest rate to counter out the increased risk that payments will be missed or late.
Consumers who manage to maintain a credit score that is above the US average will be rewarded with the lowest interest rates and most favorable loan terms. It really does pay (literally) to stay on top of your credit.
It is absolutely essential, for anyone interested in maintaining a healthy FICO score, to frequently check their credit report. By checking your credit report online, you will be able to detect any errors, fraudulent activity, or out of date information, which could be negatively affecting your score. There are several website which offer this service for free, so be sure to check your score and check it often!