Your credit score is one of those numbers that follows you around, that everyone talks about, that makes a massive difference in your life, and most people don’t know how it affects them. Your credit score is a rating attached to you by a ratings company that banks, landlords, credit card companies and even government agencies use to determine just how trustworthy your finances are.
Someone with a great score and history of good credit can walk into a bank and take out large loans easily and at low interest rates, simply because their credit score says they can be trusted. If, on the other hand, you have been through a bankruptcy, defaulted on loans and had your house foreclosed, your credit rating is likely to be bad and most banks will be careful about loaning you money, and they will charge you a much higher interest rate. As you can see, having a good credit score can be important and can directly save you money.
One of the reasons people don’t know much about their credit score is that there are multiple different rating systems, all of them run by competing credit rating companies and all of them on different scales and often measuring different things. For example, FICO Credit, one of the most popular systems in the US, rates credit scores from 350 to 850, with 620 being the line between good and bad according to creditguard.com, which is another 3rd party site. It seems totally random and difficult to figure out. Most people don’t even know how to find out their own credit scores.
You are in luck on finding out what your score is though. Congress passed a law that created an official website called AnnualCreditReport.com that all three of the major credit rating companies must work with. You can get a free credit report once a year from that site, although you still have to be careful as numerous other companies try to imitate the site and get you to buy your credit scores. The problem of imitator sites has become so bad that the Federal Trade Commission warns consumers to be aware of fake sites.
Knowing your credit score is important not just so you know what kinds of loans you can get and how much interest you might be paying for them, but also so that you can check the credit rating agencies and make sure that your credit score is accurate. If a credit rating company accidentally adds a bankruptcy to your credit history you would never know until your bank suddenly doubled the interest rate on your credit cards. If you get your credit report you can challenge it and make sure that your credit report accurately reflects your real credit history.
As you can see, knowing your credit report is important to everyone for a variety of reasons, from knowing what kind of loans you can get and how much you are likely to be charged in deposits and interest to being able to fix any errors on your credit score.