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Your credit score is the most important factor in determining what rate you will pay when you borrow money. Your credit score, quite simply, could cost or save you hundreds or thousands of dollars a year, depending on how much debt you have.

Lenders view your credit score as a representation of your creditworthiness or how likely you are to repay debt. What many people do not realize is how many different credit scores there actually are. Credit scores are derived from many components in a credit report including the length of your credit history, your total current debt, recent credit inquiries, and the number of late payments or defaults you have made.

Here is a short overview of the the most common credit scores:

FICO Score

FICO is the most commonly used credit score and has been in use since the 1970s. As previously discussed here on the Lending Club blog, FICO stands for Fair Isaac Corporation, which is the company that created credit scores. A credit score is based primarily on a credit report. There are three different credit bureaus that produce credit reports – Experian, TransUnion, and Equifax. Creditors choose what bureau(s) they want to report to and often only report to one or two of the bureaus. As a result, an individual can have three different FICO scores because the bureaus have information that is inconsistent with each other, in addition to the fact that they use different formulas. In fact, according to myfico.com, "30% (of people) have FICO scores that vary by as much as 50 points across their three scores." FICO scores range from 300-850.

VantageScore

This is a new scoring model created in 2006 by the three major credit reporting companies. Like FICO scores, VantageScores can vary across the three credit agencies, but according to the FAQ, "gaps among the results generated via VantageScore are diminished because the credit scoring model itself and the underlying credit characteristics in the algorithm are the same at all three CRCs." VantageScores range from 501 to 990.

Experian PLUS score

Experian claims to use a "similar" formula as other lenders when calculating their PLUS score, where PLUS stands for Plan, Live, Understand, Succeed. A PLUS score ranges from 330 to 830. Note: The Experian PLUS score is different than the Experian Scorex PLUS, which is not available for consumer purchase.

TransUnion TransRisk Account Credit Score

The proprietary TransUnion score ranges from 300 to 900. TransUnion also offers separate Home and Auto Scores which range from 150 to 950.

Equifax Score Power

This is the name Equifax gives to the FICO score based on Equifax's credit report.

It is important to note that even if the score ranges are similar, the score themselves are not comparable. A 760 FICO score is not the same as a 760 Vantage Score or a 760 PLUS score.

In addition to all these scores, there are some other custom models which may emphasize a particular part of a credit report.

While you can get your credit report for free once a year, you must pay an additional charge to see your credit score. If you decide to pay the fee to see your credit report, make sure you are ordering the one you need.

In December, 78-year-old Paul Navone donated $1 million to Cumberland County College in New Jersey. He still has millions left. Navone has been a factory worker most of his life and never earned more than $11 per hour. His financial discipline has been praised in blogs and on the news. JD Roth from Get Rich Slowly calls Navone a "real personal finance hero." What is his secret?

Navone embodies the tips that I wrote about in the seven steps to wealth from The Millionaire Next Door - The Surprising Secrets of America's Wealthy. Here's another look at the seven steps and excerpts from The Press of Atlantic City that describe how Navone lived these principles:

1. They live well below their means – Despite a net worth in the millions, "he still frequents flea markets and rarely buys anything at full price. His wardrobe is almost entirely second-hand, he said, except for 'maybe the socks.'"

2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth – Navone told Newsday, "I don't know when I buckled down and got serious about making money. It just grew into my lifestyle. With age, it got more serious. I never denied myself anything, but I certainly never spent on something outstandingly lavish." He set aside money and invested it in stocks and bonds. Along the way, Navone also bought rental properties in Millville and Atlantic City.

3. They believe that financial independence is more important than displaying high social status – "Navone - who has neither a phone nor a television at his home - is a multimillionaire." He has never taken advantage of his wealth in the way most people might - large houses, fancy cars, lavish vacations. He drives an old-model SUV and lives in a small house in Center City Millville."

"…And he still goes to the High Street McDonald's in Millville every day, where he announces bingo on Wednesday mornings for a group of seniors who meet there regularly."

4. Their parents did not provide economic outpatient care – "The middle of five children born to immigrants from Italy's Piedmont region, Navone grew up modestly in Depression-era Vineland. His family was by no means wealthy - 'poor as church mice,' he said - and his father worked as a laborer laying railroad ties while his mother was a homemaker. While his father was away at work, he said, Navone and his siblings cultivated half of the five-acre parcel in south Vineland they shared with another family, growing vegetables like sweet potatoes for sustenance."

"Paul never inherited money," [his broker] said last week. "Paul started from zero. He just worked hard."

5. Their adult children are economically self-sufficient – "Navone never married and has always lived alone."

6. They are proficient in targeting market opportunities – "In the interim, he regularly worked 60-hour weeks. He made enough money to buy several rental properties throughout his life, either in Millville or Atlantic City, although he never owned more than three properties at any given time. The rental income, he said, was what enabled him to save his paychecks for a rainy day. 'Very seldom did I have to dip into my weekly wages,' he said."

7. They chose the right occupation - "As his wealth increased, he continued living frugally. He also never aspired to rise through the professional ranks, preferring to remain a wage earner. 'Time and time again, it was proven that salaried people made less than hourly workers,' he said. 'I never wanted a title. What good is a title?'”

Paul Navone's example is inspiring. Few of us have a desire to live as frugally or invest as much as Navone, yet we can still learn from his life. By carving out a portion of your income and investing it in a disciplined manner, you can enjoy the huge benefits of compounded returns. The earlier you start the better. Peer to peer lending through Lending Club can be an important part of your investment portfolio. Lenders are currently earning an average of 12.18% on over $5 million dollars.

Brandon Hanson recently shared an experience which reminded me how even the very financially savvy can get burned by "free" credit reports:

"I hate credit checks - specifically, the 'say-it's-free-but-really-it's-not' kind. I went on to [a site] promising a free credit report to get, surprisingly enough, a free credit report. Although I'm usually aware enough to identify the catches, one must have slipped by, as a couple of months later I realized an errant recurring charge had been on my credit card statement starting from a month after I secured the credit report. Luckily, my wife peruses our statements for things like this…"

Three years ago the Fair Credit Reporting Act was amended to require each of the credit reporting companies (Equifax, Experian and TransUnion) to provide you with a free copy of your credit report every 12 months. Most people are aware that they can get free copies of their credit report, but there is often confusion over where to get it. A Google search will turn up hundreds of sites that offer free credit reports but nearly all of these come bundled with extras you must pay for. Some of these sites seem to use deceptive or confusing tactics as they provide you a "free" credit report bundled with options you may not want or need.

So, where you can you get your free credit report? The only authorized site to get your free credit report is AnnualCreditReport.com. After verifying your identity with AnnualCreditReport you have the option to select which nationwide consumer reporting companies you want a credit report from – Equifax, Experian and TransUnion. After that you are directed to each individual company which you have selected, where you verify your identity again.

According to Bankrate.com, "the FTC has required the agencies to make the process simple, uncluttered with advertisements and as minimally intrusive as possible." However, based on my own experience, you will be presented with several opportunities to purchase additional items including credit scores and credit monitoring. If you click through your options too fast, you may purchase some of these options and also accidentally sign up for unwanted monthly emails from the agencies. Here's a quick look at some of the offers you will receive even when ordering via the official free credit report website, AnnualCreditReport.com:

TransUnion

When you receive your free credit report, it does not include your credit score. TransUnion offers to sell you this credit score for "just $7.95." In fine print they also disclose, "Our Credit Score may not use the same credit scoring model used by a lender when making a lending decision." Typically, when someone talks about their credit score, they are talking about their FICO score. On another page TransUnion features, "VantageScore, the only credit score developed and used by all three national credit bureaus." As reported in a recent USA Today article, "TransUnion and the other bureaus are trying to wrest control of the credit-scoring market from Fair Isaac" by promoting their own credit scores. There can be a significant numeric difference between a FICO score and other credit scores offered by credit reporting agencies.

Experian

Experian offers to reveal your Experian Credit Score for only $5.95. Again, this is not your FICO score. Experian also offers Triple Advantage Credit Monitoring (the same credit monitoring package Brandon accidentally signed up for). To avoid the add-ons you have to click on the boring, grey "no thanks" button at the bottom of the page.

Equifax

Unlike TransUnion and Experian, Equifax attempts to sell you your actual FICO score. The price is $7.95. They also attempt to sell credit monitoring for $7.95/month. Here, to avoid the add-ons, you click on the text link at the bottom of the page which reads, "No Thanks, I Don't Want To Know My Score."

With a better credit score, you will obtain a better rate on a P2P loan at Lending Club and more favorable credit everywhere else. That makes it very important to monitor, maintain, and fix your credit. The best place to start is with a free credit report through AnnualCreditReport.com. Many will also find value in ordering credit monitoring services and viewing their FICO scores. However, my caution is click carefully to avoid accidentally ordering these services if you don't want or need them.

Mike Smith's post about clipping coupons prompted me to write about how I 'clip' coupons – online. I can't remember the last time that I've used a coupon at the grocery store register but I almost always use coupon codes when I purchase something online. Nearly every major retailer has a place within its online shopping cart for a "coupon code" that gives free shipping or a percentage or dollar value off the total purchase.

Online coupon codes are very easy to find. For example, I recently purchased a Dell computer. A quick Google search for Dell coupons saved me a couple hundred dollars off my final purchase. Here is a small sample of some current coupon code deals:

Target
10% off your online order until December 31st (type in TGTAFTSA at checkout)

Bloomingdale's
25% off your online purchase until December 19th (type in DEC25 at the checkout)

REI
$20 off your order of $100 or more until December 24th (type in HOLIDAY7 at the checkout)

JCPenney
Free shipping and other offers

Kohls
15% off online order (type grcp5007 at checkout); 30% off if you use your Kohl's credit card and type GIVETHANKS at checkout until December 15th

When I am about to make an online purchase, I always head over to Google and search for online coupon codes before checking out. More often than not I've been pleasantly surprised and have been able to save money on something I was about to purchase anyway.

Another way to increase online savings is through sites that give users a percentage of their purchase back, such as Upromise, Ebates and FatWallet. These sites earn money as affiliates of various online retailers and then split that money with users in a "cash back" program. I signed up with Upromise years ago, registered my credit cards with them and forgot about it. A year later when I checked my account, I found that I had accumulated almost $200. You can earn additional rewards by clicking through from their online store to their partner stores such as Wal-Mart, Kohls, Target, Best Buy, Barnes and Noble, Circuit City, Sears and others. These rewards, however, can only be redeemed through a 529 college savings plan. As with supermarket loyalty cards, you do give up some privacy in exchange for these rewards. I've never used Ebates or FatWallet, but they offer a similar incentive – purchase through their site and they will give you a percentage of the purchase back. Unlike with Upromise, you do not need a 529 account to redeem your reward.

Typically I am able to find current codes by just typing the store name and “coupon code” into Google, but here are a few websites that also maintain updated lists:

• Coupon Mountain
• Coupon Cabin
• Current Codes
• Rather Be Shopping

The potential savings are not limited to online stores. You often find bonuses and rewards by searching for the term “referral” or “affiliate” with the name of the company you are doing business with. For example, a couple weeks ago Lending Club enhanced their referral program to offer $25 to new members who are referred by current members. Searching for Lending Club referral or Lending Club affiliate reveals several websites with links that will help you receive this bonus:

• Personal Loan Portfolio
• Rateladder
• DebtKid
• My Money Blog

Before completing any online transaction, I always do a quick search to see if there are any discounts, coupons, bonuses, referral programs or rewards. This has allowed me to save literally thousands of dollars over the past few years.

Please share in the comments if you know of any other good websites or programs for coupon codes or if you have any other online savings tips or tricks.

For most of my non-student adult life I've worked as a salaried employee. I'd given little thought to how my hourly rate varied based on the length of the pay period until I read Brandon Hanson's recent article – Paid Twice a Month versus Every Two Weeks.

This hourly rate variance is especially significant when you are starting or leaving a job. In the article, Hansen explains mathematically how the payroll policy of the new or old employer can greatly affect the amount of those initial/final paychecks. He writes, "I've been exposed to two payroll systems: the once-every-two-weeks kind and the twice-a-month kind. Each has its own nuances and quirks, but only recently did I realize how they could impact my personal finances in dollars, not just monthly planning differences."

When Hanson started a new job where he was paid twice a month instead of every two weeks, he was surprised by his first paycheck. “I had worked exactly two weeks, but I had been paid less than 1/26 of my salary. Why? Because I started in the midst of a long pay period." Determined to figure out how the length of a pay period could impact an employee’s bottom line, Hanson did the math and found that you can receive a temporary raise of over 20% or a temporary pay cut of almost 10% for no other reason than when you start a new job or leave an old one.

Although it is probably impractical for most employees to time the start of a new job to take advantage of this temporary pay increase, Hanson uses the article to argue that employers should pay their employees an average hourly rate during their first or last pay period.

In the end, however, there are many more factors when determining what your time is worth as Mike Smith explained in an earlier article here on the Lending Club blog. Factors like your commute and jobs with long hours all play a role in how much you ultimately make per hour.