Many people do not know about the credit scoring system—much less their credit score—until they attempt to buy a home, take out a loan to start a business or make a major purchase. A credit score is usually a three-digit number that lenders use to help them decide whether you get a mortgage, a credit card or some other line of credit, and the interest rate you are charged for this credit. The score is a picture of you as a credit risk to the lender at the time of your application.
Each individual has his or her own credit score. If you’re married, both you and your spouse will have an individual score, and if you are co-signers on a loan, both scores will be scrutinized. The riskier you appear to the lender, the less likely you will be to get credit or, if you are approved, the more that credit will cost you. In other words, you will pay more to borrow money.
Scores range from approximately 300 to 850. When it comes to locking in an interest rate, the higher your score, the better the terms of credit you are likely to receive.