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According to the fine folks at Equifax, the credit reporting agency, depending upon your credit score, small jumps in your credit score can pay you big dividends. Depending upon what credit score range you start in, a few points improvement in your credit score could shift you into the next highest range, and substantially lower your interest rate on any manner of financing. This is especially true if you’re starting in the lower ranges.

For example, the 90 point range from a FICO score of 760 – 850 currently nets you an average loan rate of 5.457%. Stepping down a bit into the next range, which falls from 700 – 759 will put you at an average interest rate of 5.679%. As your credit falls, credit ranges shrink, and their effect on your credit score becomes much greater. That’s why, when your score is relatively low, small moves can pay off for you big time. At the bottom end of the FICO score range it’s actually fairly shocking how much lower your interest rate becomes by raising your score 20 points or so.

The lowest range is between 500 -549. If you have the misfortune to find, or have put yourself, in this range score range you’ll currently be looking at an average interest rate of 10.479%. The next range up is only 29 points wide and gives you an average interest rate of 9.910% a reduction of .569 percentage points. Moving up, the next score range is also smaller, only 19 FICO points this time, from 580 - 599. The interest rate reduction is a drop of .404 percentage points, to 9.506%.

Another 19 point score increase will reward you with the 2^nd largest drop in the whole scoring ladder, a .571 percentage point reduction to 8.935%. That’s nothing, compared with the reward you’ll receive for raising your credit score into the next 19 point range, from 620 – 639. That must really give the guys in the scoring algorithm and risk department the warm and fuzzies, because that 19 point boost in your FICO score moves you from the aforementioned 8.935% rate all the way down to 7.046%! What that means is that a 21 point increase in your FICO score, from 599 to 620 will lower your average loan interest rate down about 2.5 full percentage points.

To give you’re an idea of the impact that could have on your finances, your payment on a $250,000 30 year fixed rate mortgage at 9.506% will cost you about $2,103 for P&I. Raise your credit score 21 points, from 599 to 620, and your payment will drop to $1,671. 21 points difference on a mortgage this small saves you about $500 a month, for 30 years. It's definitely something to think about.

This all points to the importance of knowing your credit score at all times. In this example, if you were trying to get a mortgage or car loan, some work on your credit score in the months before you applied for the loan would pay huge benefits. If you weren’t aware of what your credit score was, however, that blissful ignorance would be expensive indeed.

Remember, you are eligible to receive a free credit report once a year from each of the three major credit reporting agencies. You should definitely take advantage of this, if nothing else. If you stagger your requests, you’ll get a report every 4 months. You’ll be far more informed than most Americans about your credit worthiness, and that should be the minimum that you do. The information from each agency is a little bit different, but you’ll still have a pretty accurate picture of your overall credit health.

If you would like to be a bit more up to date on your credit, and that’s never a bad idea for one who’s concerned about their financial well being, you can check out the services offered by Experian, among others. They are very affordable and will monitor your credit activity and score daily. To ensure you are as informed as possible about changes in your credit score, they’ll send you email and/or wireless alerts when something changes. This alone could easily save you thousands of dollars when financing vehicles or getting a mortgage, but it will also make sure you get the best deals on credit cards and other financing as well. Remember, a small change in your credit score can have a very large impact on your interest rates, depending upon where you start. That’s why you need to know where you stand at all times.

A further benefit of this sort of monitoring is that it helps protect against unauthorized use of your credit, something else that can be extremely expensive. See how you can help yourself get the best rates on financing by ensuring your credit score is optimized when you apply; go here.