A credit score is a measure of how trustworthy you are to financial institutions. Among the many perks a high credit score provides is a lower interest rate on a loan, whether that loan be for a house, a car or someone's college tuition. A credit score in the excellent range, around 780, could save you more than $10,000 in interest over the course of a 30-year mortgage compared to a score that's only 100 points lower.
Your score is calculated based on payment history, how much you owe, your length of credit history, the types of credit you have and how often you apply for new credit.
But there are a number of misconceptions about what else affects your score. Here are three of the most common, according to Ethan Dornhelm, vice president of scores and predictive analytics at FICO.