When you apply for a credit card, mortgage, car financing, or other type of loan, your lender will base your approval and interest rate on your credit score.  Your credit score is a number assigned to you by one of the credit bureaus, and it is based on your credit history.

Your credit score can range from 300 to 850.  The higher the score, the more likely you are to be approved for a loan with a good interest rate.  Having a very low credit score can impact more than just your credit-worthiness.  Potential employers sometimes run a credit check, and insurance companies may charge you more if you have a low score.

In general, anything over 680 is considered very good by most lenders.  A score over 700 is excellent, and if your score is this high, you can expect to be offered the best interest rates available for the type of loan you are trying to get. Most lenders consider a score between 620 and 680 to be good enough to approve you for most loans.  You may not get the best interest rates available, but you are “average” as far as your credit history goes.

It may be more difficult to get a loan if your credit score is between 580 and 620, but you should qualify for a higher-interest loan.  If you are applying for a mortgage or car financing, you are likely to have to have a sizable down payment with a score in this range. If your score is under 580, you will most likely only qualify for special loans for people with bad credit.  This is the range that could preclude you from being hired by some employers.

No matter what your score is, there are things that you can do to raise it.  Get copies of your credit reports to be sure that there are no errors contributing to your low score.  If there are errors, contact the credit bureaus and have them removed from your report.  Start making every payment, including utility, medical, and dental payments, on time.  Pay more than the minimum on your credit cards, and stop charging new items if possible.  If it’s not possible for you to pay more than the minimum on your current credit cards, call the issuing companies right away to see if they will work out a payment plan with you.  Once you have an account paid off, close the account so that it does not negatively impact your credit score.

If you have had a bankruptcy, severely delinquent account, foreclosure, or something else that has drastically lowered your credit score, time will eventually help your score to go up--as long as you make all payments on time and don’t overextend yourself financially.  Once sufficient time has passed, which might range from a year to seven years depending on your history, contact the credit bureaus again to make sure that your score has gone up appropriately.

No matter what your credit score is, if you are having trouble paying your bills, you should seek the advice of a credit counselor.  A counselor can look at your budget and credit history, and make suggestions on how you can change your habits to meet your obligations and raise your credit score in the process.  Your credit is very important, and it’s essential to your financial future to get it under control.