Just the Basics: What Is a Credit Score, and Why Do You Need to Know Yours?

What is a credit score, really? And which one matters the most?

Your credit score is a number that generally ranges between 300 and 850. It’s like a grade that tells lenders, credit card companies and others how well you manage money and repay debt.

Now the complicated part: You don’t have just one, definitive score. You have several, and they come from several sources.

Which Credit Score Should You Pay Attention To?

Choosing the “most important” one is a little like choosing the best grub from under a log. They’re too unique to compare, and you don’t really like any of them all that much, anyway.

FICO scores are the most commonly used credit scores.

It was created by Fair Isaac Corporation, a software company that uses information from credit reporting agencies Equifax, Experian and TransUnion. They’re the prom queens of credit scores.

But tons of little, lesser-known agencies may mine your credit history to report to lenders, too.

Each agency uses its own grading system, so your scores will vary — sometimes slightly, sometimes significantly.

How to Use Your Credit Score

Well, this is a real bummer. You want to stay on top of your game and keep an eye on your credit score. But what, exactly, are you supposed to look at?

Most important to know: The score you pay to see online — or the one you find for free — isn’t the same one your lender sees. Yup, that surprised us, too.

Your free credit score is helpful to get an idea of your creditworthiness, but don’t count on it to make important decisions based on obtaining credit, like how much house to buy.

Instead, use your credit score as a guide to make sure you’re managing your money well.

The three national bureaus are each required to give you a free credit report (not including a score) once every 12 months. Take advantage of that to check for errors or identity theft throughout the year.

You can also keep an eye on your credit report and score through free sites like Credit Sesame.

If you’re rejected for a loan, shop around. Different lenders may see different scores or use different guidelines to assess your creditworthiness.

If you continue to face rejection or know your score(s) sits below 650 — considered “good” by most lenders — take these steps to improve it.

Dana Sitar is a former editor with The Penny Hoarder.