Your credit score is a three-digit number that determines so much of your future, and there are three different kinds with different ranges that mean different things. Not only will your credit score determine whether you can borrow money or not, it also determines the rate you’ll pay when you borrow. Buying a home with a 620 FICO score can potentially cost you thousands more a year in interest payments than if you bought the house with 800 FICO.
FICO, the most commonly used yardstick, gives out scores on a range from 300 to 850. If your score is above 760, generally speaking, you’ll have access to the best rates available — you have excellent credit. 700-760 and you’re safely in “Good” territory, though some say that 725 is the lower bound for a “Good” score. Below that, in the 625-699 range you have the “Fair” credit scores: you’re a person of average creditworthiness, which isn’t a great thing but not a bad thing either. Anywhere below that, and you’ll need to take significant steps to improve your score, and your financial health.
Credit Karma is a great tool for getting and understanding your credit score. Keeping your credit score high not only promotes financial well-being by keeping your spending in check, it also helps your financial health over the long haul by securing your financing when you need it at the best market rates. Bad credit can lead to a debt trap, where you have access to only downmarket products with exploitative rates — these keep you in debt, rather than helping you grow your wealth.
You can get your FICO score from any of the three major credit bureaus: TransUnion, Experian or Equifax. You can check each for free once a year. After that point, you’ll need to pay for access to your credit score. This won’t negatively affect your score, though. Only repeated checks on your credit in an effort to access more credit can lower your score — it might look like you’re desperate for money that you might not be able to repay.