How is it calculated?

FICO score is calculated from 5 different financial ingredients based on your personal credit history. It's important to note, age, sex and race are not factors.

Here's the breakdown:

35% - Payment history. Put simply, "have you paid your bills onetime reliably over time?"

30% - Amount of credit available. "If you have a lot of credit available but not used, that's a good thing," says Greene. The lower the balance on your credit, the better.

15% - Length of credit history. The longer you can show you're a reliable risk, the better it is for your score.

10% - New credit. Don't open a lot of credit suddenly. "When we see many new credit instruments being opened in a small period of time - that's a concern," Says Greene.

10% - Type of credit used. It's helpful if you have different types of credit - a credit card, an auto loan, a mortgage etc.

The higher the score, the more money you save

The higher your FICO score the more money you can borrow and the better the terms of your loan. Here's an example:

On a $300,000 30-year mortgage a score of 760 versus 650 saves you $190 per month or nearly $69,000 over the life of that loan. On a $20,000 36-month auto loan raising your score from 650 to 760 saves $65 per month in interest or $2,300 over the life of that loan.

Pitfalls to avoid

Bankruptcy is obviously the worst thing you can do for your credit score. Someone with a credit score as high as 700 can see their score plummet more than 200 points from seven to ten years.

The next most detrimental thing for your score is a foreclosure or short sale. Keep this in mind if you're contemplating walking away from your mortgage. Your credit score could drop 100-200 points and for up to seven years.