Outside of your Social Security number, your credit score may be the most important number you have.
Credit card issuers and mortgage lenders aren't the only ones who access it. Banks, utility providers, even potential landlords, can access your score to determine how financially responsible you are. How good your score is can determine how much you'll pay for security deposits as well as interest payments.
"Some employers are even factoring your credit score into their hiring decisions because it shows your credibility and trustworthiness," said Jackie Lin-Ham, a certified financial planner at Brewster Financial Planning in Brooklyn, New York.
So even if you're not planning to make a big purchase like a new home or car anytime soon, it's worth making the effort to build good credit.
OK, you get it. So how can you improve your score?
Step one: Find out what your credit score is. Scores range from about 300 to 850. (Some scoring models start below 300.) Where do you want to be? Generally, as long as your score is above 750, you're considered to have excellent credit, meaning you'll have access to the lowest interest rates and also have the best chance of being approved for loans and other applications that include a credit check.
More than 50 million consumers now have "free and regular access" to their credit scores, according to a new report from the Consumer Financial Protection Bureau. That's because many credit card issuers, including Citibank, Discover and Capitol One, now offer free scores on select cardholders' monthly statements or through online access. Credit.com, CreditKarma.com and CreditSesame.com also allow free looks at your score and the reports that influence it.
Step two. Check your credit report for errors or unauthorized transactions. Thirty-five percent of consumers have never examined their credit reports, according to a survey released Monday by Bankrate.com. That may be a costly mistake, say experts. A 2013 FTC study found 1 in 4 consumers spotted errors on their credit reports that could affect their scores.
You can order a free copy of your credit report from each of the three main credit bureaus (Equifax, Experian and TransUnion) once every 12 months from annualcreditreport.com. If you find an error be sure to contact the credit bureau right away so they can address it, because errors can affect your credit score.