Your credit score impacts your life in more ways than just loan eligibility. Today many businesses, including insurance companies, phone companies, and employers, use a person’s credit score to determine if a product, service, or employment offer should be provided. A high score can mean a lower rate for a bank loan while a low credit score can result in more expensive insurance premiums. Not only is it important to understand your credit score, but it is also important to understand how to improve your credit score and reap the advantages of good credit.

Credit scoring systems are complex and vary among creditors and businesses. Information collected from an individual’s credit report is put through a statistical program that compares that specific information against consumers with similar profiles. It measures how long you have had credit, how much credit you have, how much of your available credit is being used and if you’ve paid on time. The program identifies all characteristics that relate to risk and generates a number that represents a credit score.

The higher your credit score, the less risk you are considered to be. So, the higher the score, the better. The scores generally range from 300 to 850. A score of 660 or higher may mean you are eligible for a loan and possibly a better rate. It is also possible to have no score if you have never utilized any form of credit (or if you have in the past, it was paid off and closed many years ago).

You can obtain your credit score from any one of the three national consumer reporting companies. They are allowed to charge a reasonable fee for the score. Since your score is comprised of information from your credit report, you need to ensure that your credit report is accurate.

If your credit score is low, or you just want to make sure it stays high, follow these steps to improve or maintain your score:

• Pay your bills on time.
• Do not max out your credit limits.
• Do not apply for too many new credit accounts in a short period of time.
• Do not have too many credit card accounts.
• Develop a credit history as early as possible to demonstrate a long record of responsibility.

If you find inaccuracies on your credit report you should:

• Dispute the inaccurate information directly with the consumer reporting agency and with the creditor.
• Tell them in writing what you believe is inaccurate and provide as much proof, including copies of documents, as you can to support your position. The agency generally has 30 days to investigate your complaint.