Do you want to buy a home for your family to grow in and make memories? Perhaps you’re looking at a new car or a boat? Or maybe you want a credit card to earn cash-back bonuses on your purchases?

To do all of these things, and for many other financial decisions in your life, your personal credit score will take a leading role.

What is a credit score?

Your credit score is a three-digit number generated by using information in your personal credit history.  Your credit history is contained in your credit report.  The FICO credit score, created by the Fair Isaac Corporation, is the most-used credit score in the United States.  Scores range from 300-850. The higher the score, the less risk is assumed by the lender.  A number of factors contribute to a credit score, including:

● your payment history,
● how much you owe on your accounts,
● length of credit history,
● types of credit you are using,
● new credit such as credit inquiries or recently opened accounts.

Information like location, age, race, income, marital status and employment don’t affect your credit score.  For more details on what makes up your score, visit www.myFICO.com/crediteducation.

How do you find your credit score?

The three major credit bureaus are Equifax, Experian and TransUnion.  They carry reports of an individual’s credit score, and each has their own scoring system.  When you apply for a loan, your bank or financial institution will use one of these services to request your credit score.

You should know your credit score before your financial institution does.  I always recommend you go to annualcreditreport.com because it allows you to obtain one free credit report from each bureau every 12 months. While you’ll have to pay a small fee, you can also request a copy of your credit score from any of the three credit bureaus.

Why should you know your credit score?

Your credit score is one of the factors used by lenders to determine your risk. Your score can affect whether you’re approved for a mortgage, car loan, credit card, as well as what interest rate you’re charged.

Any late payment can have a negative impact on your credit score.  Mortgage.  Car loans.  Credit cards.  And don’t forget student loan payments, collections, judgments and liens will also harm your credit score. For example, if you have a medical bill you can’t pay, I encourage you to call and set up a payment plan as quickly as possible.

It can take many different steps to boost your credit score, but financial experts agree on one major action: paying your bills on time.

While a credit score factors into determining whether or not you qualify for a loan, other things are considered by most lenders, and a high credit score is not a guarantee of low interest rates.

For more information on credit scores, watch this video about your credit score.

Don’t turn your credit score into a credit scare: know your personal score!