Getting To Know Your Credit Score

If you don't know your credit score, it's time you two got a little better acquainted. Order your score whenever you check your credit report. You'll have to pay a small fee but the knowledge is worth it.

Your credit score is a number between 300 - 850 which summarizes your financial history. You probably have 3 credit scores, one from each of the top credit reporting bureaus. The score is a statistical rating of your credit "worthiness" or ability to pay. It can help or hurt you get a loan for a car, credit for a couch, or lower rates on your insurance policy. Many people pay more attention to the overnight sports scores than they do this critical number.

According to a recent national survey by the Consumer Federation of America and Providian Financial, only one-third of American consumers correctly understood that credit scores indicate your risk of not repaying a loan. Your credit score comes from your credit report, and is prepared by a credit bureau using a proprietary formula. Among many factors the formula assesses:

Amount of debt you owe

Your pattern of making payments

Length and stability of credit history

What type of debt you have - from credit card to mortgage

Your credit score is a snapshot of your credit risk picture at a particular point in time. Credit scores are indicative of past credit history, patterns, and behavior but they change all the time as new information is added to your credit report.

Getting to know your score and the basics of credit management make for a healthy financial life. First, you'll have a better idea what to expect whenever you apply for credit. Second, should you discover there's a problem, you can take steps to fix it. But you won't know any of this if you don't ask. Though you're entitled to a free credit report from each credit bureau every year, they don't contain your credit score. So you will need to order your credit score for an additional fee. Paying a little extra to learn the truth can be well worth it.

Watch Out for These Top Credit Score Pitfalls

Not checking your credit report can cost you a lot of money on interest rates, denied loans, higher insurance premiums and more.

Late payments negatively affect your credit score. Payment history is the first thing lenders evaluate.

Your credit score, is exactly that – YOUR credit score. It is not your spouse's, your mother’s, your father’s or anyone else’s. Each person with credit in this country has a credit file. You are responsible for keeping that credit report clean and up-to-date. Remember that report errors are common. You should check your credit report at least two times a year to make sure your credit score is an accurate representation of your financial life.