While you shouldn’t care how people think of you. You definitely should care how financial institutions think of you! Your credit score will impact just about every financial event in your life, so it’s important to take good care of it. Do you want to buy a house, get a loan, purchase a car, apply for a new credit card? Yup, you guessed it, your credit score places a big role in each case.

Okay, so we know that a credit score is a very important indicator, but how much do you really know about how it works and how it is calculated. It seems like for something that will have such a large impact on people’s’ finances, they should have a better understanding of the entire concept. The more you know about your credit, the better you’ll be able to build it. Here’s three essentials.

1. Your credit score is plural

People talk about your credit score in the singular. However, you actually have multiple scores. And they may even vary a bit. Different industries have created different credit score indicators, thus, your multiple scores. Before you get scared, know that you don’t have to track them all. They are move in the same direction, so they shouldn’t be far off from one another. They also use the same type of metrics. Good financial history is correlated with a high score, and bad financial history correlates to a lower score.

2. Scoring Changes

The scoring models that our scores are based on is constantly changing. This is because the financial institutions are always improving the best way to judge your financial responsibility. The majority of decisions are based on your FICO score from the Fair Isaac Corporation. Scores range from 300 as the worst to 850 as the best.

Another type of credit score is the VantageScore. It ranges from 550 to 900, but more recently adjusted to match the FICO model. This score has more emphasis on the past two years, versus looking over a longer period. This can favor people with shorter credit histories

These scores are then used by the major credit bureaus. There are three main credit bureaus including Equifax, Experian and TransUnion. credit score

3. Parts of your score are weighted differently

Depending on what lender is evaluating your credit score, they may use different scores to determine what your financial risk level looks like. Each score places different emphasis on parts of your financial history and finance practices. For example, FICO bases 35% of it’s calculation on how reliable you are at paying off your debt in time, 30% on how much money you owe/total debt, 15% on the length of your credit history, 10% the type of credit accounts you have, and 10% on how much new credit you have.

The FICO credit score estimator is a great tool for understanding the foundation of your personal credit score.