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Consider two home buyers: one with a credit score of 720, the other with a credit score of 619. Both are able to obtain a 30-year mortgage. But the happy new homeowner with the lower score won’t be so happy to learn that, because of that lower score, he’ll pay over $60,000 more in interest over the life of the loan. Why? Because the mortgage company offers an interest rate of 5.93 percent to the individual with the 720 score  -  and an interest rate of 8.53 percent to the borrower with the 619 score.

The concept works basically the same in any lending situation. What impact would these scores have on a new car loan? A 60-month interest rate almost triples for the 619 score versus the 720 score! Get free credit report today!

All of this information is based on what you did yesterday, last year, maybe even ten years ago. Do something unpleasant while you have a variable-rate line of credit outstanding, and it will take your breath away. Got a low interest rate on your credit card? Carrying a high balance because the rate is low? Go ahead, miss a payment or two and watch the rate climb to the mid- to upper 20s  -  percent, that is! After all, you made a mistake. So it’s makeup time for the lender.

You think that getting your rate hiked for a minor infraction is unfair? That’s not the end of it. Under the policy of universal default if you have an issue with one lender, all your lenders can hike your rates as well. Yes, even though you’re still paying the others on time and as agreed! In fact, some companies even use a deteriorated credit score as reason to escalate your rates to the penalty level.

Yep. Even though you’re paying that loan on time, a change in your credit score (perhaps from too many account inquiries or closing some old accounts) gives the creditor that has a universal default policy full rein to hike up your interest rates. All the more reason to pay all bills on time and keep track of your credit report and credit score on a regular basis.