Three credit report agencies determine your ability to secure a loan: Equifax, TransUnion, and Experian.  A FICO score, a widely known credit score, can range from 320 to 850 and it determines the creditworthiness of a person or the likelihood of that person to pay their bills.  Therefore, your FICO score will determine the interest rate and the maximum amount that the bank will lend you.

In the US, you are allowed to ask for one free credit report within a 12-month period but not a free credit score. You can contact any of the agencies to order your credit score. It helps keeping an eye on your score as it will have direct bearing on whether or not you can secure a loan in the near future.

Before the economic downturn, loans were given out like candy by predatory lenders.  Since the banks put a freeze on lending, you may be surprised to find that your FICO score may not be high enough to obtain a loan, and if it does fall within the parameters of acceptance, your interest rates are going to skyrocket.

Here are three loan examples, along with FICO scores, interest rates, and monthly payments.  These estimates will be based on the highest FICO score and what is now considered the lowest for each loan type in New York.

Car Loan: $17,000                                                             Low End FICO Score

FICO Score: 720-850                                                        500-589

Interest Rate: 6%                                                                 15.755%

Monthly Payment: $517.00                                          $596.00

15 Year Home Equity Loan: $50,000

FICO Score: 740-850                                                        620-639

Interest Rate: 7.963%                                                       12.221%

Monthly Payment: $477.00                                          $607.00

30 Year Fixed Mortgage: $300,000

FICO Score: 760-850                                                        500-579

Interest Rate: 5.676%                                                       10.473%

Monthly Payment: $1,737                                              $2,738

The difference between the high end and low end scores are significant, especially for a 30-year fixed mortgage where a low FICO score costs an additional $1000 per month.

While auto dealerships cannot obtain the funds from the banks to add to their inventories, while banks are not willing to lend money (even though there was a 700 million dollar bailout), and with major companies now laying off thousands of employees – perhaps one’s FICO score has little significance.  However, this is an incorrect assumption.

Depending upon when the economy is revived and when the volatility in the stock market subsides, the best recommendation anyone can offer you at this time is to obtain your credit reports, check for errors, and do all you can to increase your FICO score.  It is that significant to you and your financial future.