Why Care About Your Credit Score?

Your credit score is a three-digit number that determines your credit-worthiness. There are three credit bureaus that track and rate your credit history -- Equifax, Experian and TransUnion. Each bureau compiles your credit score using a proprietary formula, that takes into account your payment history, percentage of available credit compared to your total credit line, and the length of your payment history. Your credit score is referenced by potential employers and prospective landlords, among others, and those are just two of the reasons to care about your credit score.

Housing

Your credit score is, of course, a determining factor in whether or not you will be approved for a mortgage. It also determines your interest rate, which can make a difference of tens of thousands of dollars over the life of your mortgage. If you're a renter, your credit score may also be an element in whether or not you are approved for a lease and the amount of your security deposit. Utility companies may also reference your credit score to determine if a deposit is needed when turning on service.

Employment

Prospective employers look at credit scores for several reasons. Financial institutions that are hiring use it to gauge the potential for someone to commit embezzlement or fraud. Employers may also use it to separate candidates that are otherwise equal. Employers may also use your credit score to gauge whether you've been honest about your salary history and if you'll have any significant distractions on the job.

Credit

Any time you apply for credit, your credit score is used to determine whether or not you'll be approved and what the credit terms will be. This includes credit cards, car loans and lines of credit. It's still possible to qualify for credit with a poor credit score, but the interest rates may be high.

Others

Car insurance companies check your credit score, to determine whether or not you're an acceptable risk. They also take your credit into consideration when deciding your insurance rate. Cell phone companies and utility providers may also check your credit score to determine whether or not to provide service and whether you'll need to put down a deposit.