By M Katie Helle, CPA

When you hear the word “credit score” you may be wondering what it means and how does it effect me? Your credit score is simply a calculated number that relates to how likely you are to repay debt.  This score is very important as banks and lenders use this number to decide whether they will give you a credit card or loan.  There are several factors used to calculate this number:

  • Payment history
  • How long you have had established credit
  • The types of credit you have (credit cards, loans, mortgages, etc.)
  • Credit limits and how much of the credit you are utilizing
  • Hard inquiries on your creditfrom lenders and banks

There are three main credit bureau agencies that create your credit score – Equifax, Experian and TransUnion. Your credit score will range from 300-850, with the higher the better. It is not uncommon to have different scores with each agency since scores are calculated with their own models. Each credit bureau offers a free annual report where you can monitor your credit to ensure there is no fraud or identity theft. You can get your free credit report here.

There are other free and helpful websites you can use regularly to keep track of your credit score. Intuit Mint not only provides your free credit score, but it also allows you to track bills and create budgets. Credit Karma offers free monitoring and insights to what effects your credit score.

No matter what avenue you use to monitor your credit, it’s important to continually keep track of this information. Knowing your credit score will make the process much easier when the need arises for a loan.