Your credit score determines how easily you can access new lines of credit. If you have a good credit score, you may find yourself quickly approved for more credit or prequalified for a loan with a lower interest rate than a friend with a higher credit score. Credit scores are based on a mathematical algorithm that pulls information from a credit report and then compares that information to the same data from millions of other people. The algorithm then produces a number that pretty accurately predicts the likelihood that the credit applicant will pay his or her bills. The higher the credit score, the more attractive the applicant is to lenders. Credit scores run from 300 to 850, with most people landing between 600 and 800 and 13 percent of the population scoring higher than 800.
It is important for consumers to keep an eye on their credit scores. They should check their credit reports at least once a year to ensure that everything is in place and that they’re not forgetting to pay any of their creditors.