Part 12 (2/2)

Total interest .

$2,190.78.

$1,206.84.

$942.44.

30-year fixed $200,000 mortgage .

Credit score .

650.

700.

800.

Interest rate .

5.59%.

4.77%.

4.55%.

Monthly payment .

$1,147.40.

$1,046.07.

$1,019.44.

Total interest .

$213,064.50.

$176,584.89.

$166.998.48.

Bad credit can be a downward spiral: Your money mistakes lead to bad credit, which costs you more money and leads to more debt, which gives you worse credit...and so on. But your credit history doesn't just affect your ability to borrow money. Nowadays it's used by insurance companies, landlords, and even employers: - Some insurance companies use a specific credit score (known simply as your insurance score)-combined with other info-as a gauge of how likely you are to file a claim. A lower score can lead to higher insurance premiums. You can read more at tinyurl.com/iscore.

- When you try to rent a place to live, your prospective landlord may run a credit check (tinyurl.com/lscore). If your credit score is low, she may see you as a high-risk tenant and ask for a bigger security deposit or simply reject your application.

- Current and potential employers can pull your credit report if you give them written permission (tinyurl.com/wscore). This is especially true for jobs where security is important: To some employers, a good credit record shows you're less likely to steal from the company, take bribes, or reveal sensitive information.

As you can see, your credit score can have a very real impact on your life, affecting everything from where you live and work to how much the credit card company charges you for interest. But where does your credit score come from? Let's take a look.

The Anatomy of a Credit Score According to FICO, the company that developed credit scores, certain factors can predict how likely you are to repay the money you borrow. Your credit score tracks 22 specific pieces of info from five broad categories: - Payment history (35% of your FICO score): Do you pay bills on time? If you pay late, how late? How long has it been since you missed a payment? How many times have you had problems? The more responsible you've been, the higher your score.

- Amounts owed (30%): How much credit do you currently have? And of that credit, how much do you actually use? How many of your accounts have balances? The less of your available credit you use, the better your score.

- Credit age (15%): How long have your accounts been open? How long has it been since you used them? The longer you've had accounts, the better your score.

- Account mix (10%): How many different types of credit accounts do you have? (The two main kinds are installment debt like a car loan or a mortgage, and revolving debt like credit cards.) How many do you have of each type? Your FICO score will be higher if you use a mix of different kinds of credit.

- New credit (10%): Have you opened new credit accounts recently? How many? Opening new accounts may ding your score, especially if you open a lot at once.

NoteFor some people-like young adults who don't have a lengthy credit history-the importance of each category may be somewhat different.

The site myFICO.com has a detailed list of what goes into a credit score ( has a detailed list of what goes into a credit score (tinyurl.com/FICO-pie), but the actual formula is a secret. Because FICO makes its money selling credit scores, they're hush-hush about how the numbers are calculated. However, the company shares some basic stats. According to myFICO.com, the median credit score in the U.S. is 723, meaning half the population has a credit score of 723 or above, and half has a score of 723 or below.

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