One of the best reasons to check your credit report and know your credit score is to be able to negotiate better deals.

Step one is to check your credit score. This a three-digit number (starting at 300 and ranging to 850) used by banks and other lenders to determine who to lend to, and how much to charge.

Your credit score affects your interest rate for any type of loan you may be looking for, from Auto Loans to Home Loans, even to Credit Cards. A higher score means a better deal, lower payments, easier approval and the ability to negotiate with more than one bank.

Always check your credit report and credit score before applying for a loan so you can fix any mistakes in the report and avoid surprises of old bills, past due payments or collections. It also puts you in a position to know if a lender tells you that your credit score is lower than it actually is just to charge you more or offer a higher interest rate.

Credit scores range from 300 to 850, and you want the highest possible score you can get. This is how lenders and banks will judge you. One group adds 1% risk of default to consumers with a credit score of 800 or better, a 2% credit risk for consumers with scores of 750 - 799, and a 5% risk for consumers with 700 and 749 scores. Consumers with the higher risk of defaulting have to pay higher interest rates, and as your score is lower, payments will be higher.

"If you have [a credit score of] 700 or higher, you can be confident of qualifying for the best rates," says Fritz Elmendorf, vice president of communications for the Consumer Bankers Association. "If you're below 680, you're going to have trouble qualifying for the best rate. But you should still shop for the best rate you qualify for," he says.