The Importance Of A Good Credit Score

When you want a loan, a little three-digit number can make a big difference. It's your credit score. If it's high, you get a great interest rate. If it's too low, you may not get a loan at all.

Chef Louis Russo has no trouble whipping up a fine meal, but he did run into a problem when he wanted to get a home equity line of credit. His credit score was too low for him to qualify.

Consumer Reports' Laura Washington says your credit score is key to qualifying for a good rate on a loan or a line of credit.

Washington says, "Your credit score is determined by several factors, including how many loans you have outstanding, how close you are to the credit limits on your credit cards and whether you've made your payments on time."

In the chef's case, the problem was he was too close to the limit on his credit cards. His mortgage broker, Nagy Henein, told him to pay down his cards. Then the broker used a new service called "rapid rescoring" to notify the credit bureaus of the chef's payments.

Within 72 hours his credit score had gone up.

Henein says, "We were able to get him the home equity line of credit for a very low interest rate."

Consumer Reports says rapid rescoring can cost you a couple of hundred dollars, but it can be worth it.

Washington says, "We talked to one broker who was able to cut his client's mortgage payments by more than 100 dollars each month."

And now the chef is saving his cash.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.