What is a credit score & how worried about it do you actually have to be?

You see those annoying commercials on TV all the time about how to check your credit score, but what are they actually talking about? Credit scores feel like one of those mystical adult things that you'll never fully understand. Odds are you actually already have a score and don't even know it. So what is a credit score and is it actually as big of a deal as people seem to think?

First off, what is it?

There are a few different types of credit scores, but the one most people are referring to is the FICO credit score. It's a three digit number that represents how reliable you are when it comes to your fianances. It's basically like your money GPA that follows you around. Just like you needed to have a good GPA to get into college, you'll need a good credit score for fiancial stuff that we'll get into later.

What's a good score?

On the FICO scale, scores can go from 300-850. The higher your score is, the better. If you have a score somewhere above the 720-730 range, then you're in great shape. Different places will want different scores, but the mid-700s range is a good place to be.

What is the score used for?

Banks use your credit score to decide if you should be approved for a new credit card or loan. A ton of other places have started taking credit scores into account too. When you apply for a lease on an apartment, your potential landlord will probably ask for your credit score. Insurance companies and even employers have started requesting credit scores on applications. It's basically all about seeing how responsible you are.

How can your score change?

What actually goes into your credit score is a bit of a mystery, but according to Time, it's generally thought to be, "35% payment history, 30% amount owed, 15% length of history, 10% new credit, 10% types of credit used."

The main thing that can change your score is not paying your bills on time. If you miss a payment, that can negatively impact your score. The other thing that affects your number is how much your spending. If you're getting dangerously close to maxing out your credit card, then the bank is going to think there's a higher chance you'll miss a payment.

If your credit score isn't where you want it to be, it's not permanent. You can take a few simple steps towards building it up. The main thing to focus on is paying off any lingering debts or bills. Your score won't change overnight but it will gradually creep up towards your goal.

Where can you check your score?

There's tons of places for you to get a look at your credit score. Websites like Credit Karma offer to show you your credit card for free. If you have a credit card with your bank, check your account or your mobile banking app. Lots of them have added a feature where you can check your score on your phone so it can't get much easier.