It's important to have a good credit score -- but you might not know exactly what your credit score is, how it's calculated or how it affects you. Your credit score, in a nutshell, is a snapshot of your credit history.
Lenders use your credit score to see what kind of borrower you are. If you have a high score, financial institutions will see you as a good -- or low-risk -- borrower, which means you'll likely get better interest rates on loan products. If you have a lower, or even a bad credit score, you might be viewed as a credit risk. A good credit score, however, can open doors for you, as far as taking out loans and opening new accounts go, such as getting you better mortgage rates. On the flip side, a very bad credit score -- or even just a fair credit score -- can affect your financial well-being more than you'd think.
How To: Get the Highest Credit Score Possible
How to Check Your Credit Score
The best way to check your credit score is to do it for free -- and if you want to check your credit score for free, you have options. Many financial institutions offer free credit score checks to their credit card customers, and you can even get your free credit score online.
Other ways to check your credit score include talking to a nonprofit counselor who can help you or using a credit score service. Many of these services offer "free scores," but make sure you read the fine print because often you have to cancel within a specific time period or you'll be paying a monthly fee for the service.
Alternatively, you can purchase your score from the credit reporting agencies. If you decide to go that route, remember that you don't have to buy the extras, such as identity theft monitoring or credit protection.
Your credit score is based on many factors, like payment history, credit history and new credit you've applied for -- such as credit cards or loans. An exceptional credit score is 800+, a very good credit score is 740 to 799, a good score is 670 to 739 a fair credit score is 580 to 669 and a poor score is in the 579-and-lower range, according to Experian. FICO scores, for example, range from 300 to 850. As a consumer, you have three FICO scores, one from each of the three credit bureaus: Equifax, Experian and TransUnion.
Get Your Annual Credit Report
A credit report reflects your borrowing history that lenders have reported to the three credit bureaus. You are entitled to a free credit report once a year. Your free annual credit report will contain all of your financial information. Be sure to keep in mind that a credit report and score are different; your score is calculated from the information in your report.
Because a good credit score is so important to your financial well-being, take the time to check your credit score -- remember you can get your credit report for free each year and get your free credit score on a regular basis. Make sure there are no mistakes in your credit report, which could drag down your score, because this fiscal snapshot can significantly impact your financial health.
This article originally appeared on GOBankingRates.com: How to Check Your Credit Score