Credit scores are used to do everything from allow you to get a new car, a new house, a new credit card, and even new insurance. If you have a good credit score, you will then practically have a skeleton key to all the financial doors in your life, and opportunity will open for you, in the shape of low mortgage rates, zero percentage car loans, etc. But if you have a bad credit score, forget about it. Doors will slam shut in your face. And those that do stay open will charge you high interest rates with terrible restrictions.

All this for some number that you may have no clue where it comes from. That is the problem with credit scores. They are so important to our everyday lives, but so few people understand them. That makes them seem so unfair. But in reality, if you do understand your credit score, you can control it, and it will make your whole financial situation seem a lot fairer in the long run.

First, understand, your credit score comes from a relatively complex mathematical formula, or algorithm. It comes from all the information in your credit report, and is relative to the information in the credit reports of the millions of other people in the United States. Credit companies use credit scores because when it comes down to it, they are highly accurate in predicting how likely you are to paying off your debts. See them as the SATs for your bills. The higher your score, the smarter you are about paying them off.

The way the scoring works is this: credit scores go from 300 to 850. Most people have scores between 600 and 800, meaning for the most part, Americans are pretty good about their debts.

Now lets get into the nitty-gritty. Lets say you only have a score at 500. Will that make you lose a lot of sleep? Or better yet, will it make your life that much more expensive than someone with a score of 700? The experts all say yes to both counts. You should be worried about your score because, yes, you are losing a lot of money because of it.

Thats because that seemingly little difference in credit scores200 pointscould mean as much as three a half points more on a credit interest rate. So instead of a 6 percent rate on your mortgage, which the 700 scorer would get, youd get perhaps as high as 9.5 percent as your rate. Over the course of a mortgage, those extra percentage points could cost your thousands upon thousands of dollars.