From Here to Financial Happiness

Day Thirty Eight Taking Credit

A lofty credit score has become one of America's most coveted status symbols, which is a little sad, because it's all about borrowing money. Your credit scores are based on your credit reports, which are largely a recitation of the money you've borrowed over the years, whether through mortgages, auto loans, or credit cards.

The three major credit bureaus, Equifax, Experian, and TransUnion, take that information and convert it to a numerical score. The most popular scoring system is the FICO score, which ranges from 300 to 850. An average score is around 700 and a score of 750 or above indicates you're considered a very good risk.

You should check your credit reports periodically and especially before applying for a car loan, mortgage, or other large loan. Look for incorrect information, such as payments that are shown as late when they weren't, and check for debts that are listed more than once. Also check for accounts you don't recognize. That could be a sign you're a victim of identity theft.

If you are about to apply for a mortgage or car loan, you should also check your credit score. That might cost you a small fee, though scores are increasingly available at no charge through credit card referral websites (think Credit Karma, WalletHub, and their ilk) and from a variety of financial firms, including Capital One, Chase, and Discover.

Credit scores aren't just viewed by lenders. They're also used by insurance companies when setting premiums ...