Credit: What You Don't Know Will Cost You Dearly

Are you getting ready to purchase an automobile, a home or other big ticket item that requires bank financing? You had better determine your credit rating before you apply for a loan.

Armed with the knowledge of your credit rating you are then in a position to know what the likely interest charges will be. Without that information, you are an uninformed customer that will likely be paying more for your purchase. It is not just a few dollars more, the interest charges can be substantial. Remember capitalism is about optimizing profits. Bank and lending institutions are experts. Look at the earnings they report every year.

For instance, the cost to finance a new automobile over a period of of just 36 months could be as much as $100 dollars per month between the lowest and highest rates. That's $3,600 of your money! Of course it can be more if you finance for longer periods of time. Since 60 months is probably typical for a new vehicle - do the math!

Thinking about a new home or a home equity loan? The savings available by negotiating the lowest rate, even ¼ of a percent lower, are substantial. The costs of not knowing can cost tens of thousands over the life of the loan.

Want to learn more? Read on. Not interested? It's your money and the banks love to deal with the uninformed.

First obtain your credit report. This step is simple and there is no charge. Go to annualcreditreport.com and enter the information requested. They will ask a few personal questions to establish your identity and in seconds a report will be available. You will then have a credit report, but you will not have the score and evaluation needed which banks and lending institution use to determine your credit rating and hence the interest rate you will be charged for a loan.

To obtain the numbered rating and an evaluation, you must purchase one of two possible reports. Your FICO score or your "VantageScore" is available for a small fee. FICO is $14.95 and "VantageScore" is $5.95. Most banks use the FICO score, but the "VantageScore" is becoming more popular. Complete explanations of these scores, where they come from and how they are developed are available in many locations throughout the Internet so a detailed explanation here is not necessary.

What is important is that this information will ultimately determine the total cost of your loan. Make sure it is accurate. You can contest problem areas or mistakes or you can simply be aware of problems and detail your circumstances to the loan official you will be talking with.

A friend of mine applying for a new car loan had a score that was less than optimal because the "VantageScore" stated that there was no mortgage payment noted and they were concerned about a lack of history. Duh! He owned his home free and clear!

When he pointed out this fact to the banker. There was an immediate $25 dollar per month drop in the payments over the 48 auto month loan which amounted to a savings of $1,200. If he had not known about the importance of a credit report, the bank would have increased their profits at his expense.

The bottom line is that it is important to maintain good credit and just as important to monitor your profile. It will determine the amount of interest you pay on large ticket items as well as the credit cards you use everyday.

A final thought - if you are paying a high interest rate on your credit cards and you have a better than average credit score, you can call your credit card company and request the rate be reduced. If they are unwilling, suggest to them that you will be moving your account. It's likely the rate will be reduced.