Why Your Credit Score Matters

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Why Your Credit Score Matters

At Credit Karma, we talk about credit scores a lot. It is in our name, after all. But while we cover credit myths, how to improve your credit health and a multitude of other financial topics frequently, we don't spend much time answering one important question: Why should you care? Does this three-digit number only matter when you apply for credit? Can it really affect your day-to-day life? Let's explore why your credit score may matter more than you'd expect.

What is a credit score?

In order to explain why credit scores are important, we need to start at the beginning. Simply put, a credit score is a three-digit number that uses information from your credit report to assess your creditworthiness. Basically, it's an indication of how likely you are to repay debts in a timely manner.

Why does my score matter?

Your credit score plays a pivotal role in your financial journey. As far as numbers go, it's one of the most important digits that'll ever be attached to your name. Here are some key aspects of your life it could impact:

  • Whether or not you're approved for credit. Many people scorn credit, but the simple fact of the matter is that in most situations, your credit score is a deciding factor in whether you'll be approved for a mortgage, car loan, credit card or another type of loan. Lenders want to be paid back, so if your score indicates that you're an unreliable borrower, you may not get the credit you need. And although there are loans available to those with weaker (or no) credit, you probably don't want to rely on payday loans, pawn shop loans or other loans with sky-high interest rates and fat fees.

  • How much you pay in interest. Want to save a lot of money? Improving your credit health can help you qualify for the best rates and terms. It may sound simple or too good to be true, but the higher your score, the less interest you're likely to pay each month and overall. Did you know that if you have a credit score of 650 and get a 30-year, $400,000 mortgage, you could pay over $70,000 more in interest than someone with a 750 credit score and the same mortgage? That's huge! Forget clipping coupons-- your credit score probably has the most potential to save or cost you your hard-earned money.

  • Other factors. If you don't plan on applying for credit in the near future, you may think that your score isn't that important. However, your score doesn't just affect your ability to get favorable loans and great credit cards. If you're looking for an apartment, your score may impact your probability of getting approved, the size of your security deposit and how much you pay in fees. It can also impact how much you pay for home and auto insurance and might even decide whether you're approved for a new cell phone plan. Clearly people other than lenders care about your credit score-- and you should too!

What should I do now?

Even if the credit scoring system doesn't seem fair to you, rebelling against the system by not monitoring your credit health isn't going to change the process. If anything, it may hurt you. At Credit Karma, we think that credit scores matter, so we offer a host of services that allow you to see where you stand in the credit world, get helpful tips for improving your credit health and utilize other tools and resources-- all for free. Try it out and let us know if you have any questions! We're here to help.

All things said, we'd like to end by emphasizing that you are not your credit score. Taking steps to improve your credit health is great and highly encouraged, but never let your credit score define you--it'll only drive you crazy.

About the Author: is Credit Karma's Social Media Manager. Although her specialty lies in creating witty post-it notes, she also enjoys sharing all the financial information she's learned since joining Credit Karma in February 2012. When she's not working, you can probably find her trying out a new dessert recipe or learning/perfecting any musical instrument she can get her hands on. Say "hi" @leejennaa!

Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.

Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

All Comments

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So much devious activity on the search engines now that it is a joy to get a site like Credit Karma!  Thank you so much for your service and info.  We really do appreceiate it all.  If you ever make mouse traps available we promise we will not purchase any other!      RAD AND BEV TUCKER

3 Contributions
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So my FICO credit score is 806 through my American Express Account, 817 through my CitiBank Account, 828 with Experian, and 830 through TransUnion. My scores are "so low" because I have no recent mortgage payments, and "time" since I opened my accounts is too short. Funny! my oldest credit card on their records goes back to 1991, although I have one card I've had since 1984. I have two fully paid for houses, two fully paid for BMWs (paid cash for both) I have 22 open credit card accounts, but my total use is only 4% of my total credit line. The bottom line is that the credit bureaus reward you for being in debt... you get no points for paying your accounts in full. And when I went to the bank to inquire about a Home Equity Loan (HELOC) the bank didn't even use FICO, Experian, or TransUnion. So I take this whole credit scoring account business with a grain of salt.

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I think this credit score thing is a joke, i owe no one, have no morgage, pay bills ahead of time and use credit card for most things which i pay off early every month. But score just dropped. This is a joke just so lenders can rip people off....

Reply by
samoting

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1 Person Helped

Same ol' thing here. I buy something, my score goes down. I pay off the bill in full, the score goes up. No other changes.

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You know what really sucks is when you don't owe a debt that was reported and now it's on your credit score.  Try geting it off.  You have to hope the people that put it on your report will go through the work it takes to get it off.  If they don't want to bother it will stay there and you get screwed for a debt you don't owe.  

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I would like to say that the credit scoring system is complete garbage ! I have a payment record of 100% on time payments to ALL of my accounts going back over 16 years . I currently have no adverse comments on my record and earn a decent amount of income . However , my score is always in the 660 to 680 range . My brother in law has no job and NO credit history other than a REPO AND HAD A 700 CRDIT SCORE and was given a loan ! How is it possible that a person with no job and only bad history can be a better risk than a person with a great track record ? The laws need to be changed to reflect real life and scores that are based on logic ! Why would you loan money to someone you don't know as opposed to someone with a good history ?

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Try getting something off your score. Our bank reversed my sons SS numbers and their credit scores are screwed up. Oldest kid has youngers college loan showing up on his report. Two places all we had to do is call and explain and send in a copy of ID. Not Equifax-they wanted pages and pages of info. After we sent in two different sets of forms they wanted a copy of birth cert., & copy of SS card. They already have Drivers license, so.... Identity theft anyone!

It's crazy.

1 Contribution
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My credit score dropped when:

  - I paid off my mortgage- "age of credit" was reduced!  (big hit- about 50 points!)

 - Shopping for the best cable TV deal- 3 inquiries!

THIS MAKES NO SENSE!!!!! THE SYSTEM NEEDS TO BE CHANGED!

Reply by
lther92

2 Contributions
0 People Helped

Yeah, Icancelled high interest and yearly fee cards that I haven't used and had no intent on using and I had the same issue. Just plain wrong.

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Helpful to 11 out of 19 people

According to CreditKarma, my Credit History is schizophrenic.  TransUnion says I'm 100% (Excellent) and the new the put up here, Experian, says I'm 91.x% (Very Poor). How anyone is supposed to glean accurate information from two wildly diffferent reports is beyond me. Good thing I'm not applying for credit anywhere these days. If I was, I'm sure I would be denied.

Credit Karma Team
Top Contributor
2949 Contributions
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Helpful to 11 out of 11 people

Hi Beel98,

We currently display reports from TransUnion and Equifax. Your creditors are not required to report to multiple bureaus, so one report may contain information about late payments that the other report has no record of. Each bureau is responsible for the accuracy of the information that is reported to them. If it wasn't reported, they won't have it on file. 

Top Contributor
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I have been using Credit Karma for a couple of years now and my credit history is excellent according to them. I have only 10 accounts,[poor] according to CK but my score is reported at over 800 which is hard to believe because FICO says it is much lower. I never have any trouble getting car loans with great rates and I always pay everything off early no matter what. [Credits cards and car loans]. I was told by credit specialists that this is a bad thing so with that info, I no longer care what my score is even though I do follow it. I have never missed a payment or ever been late and always pay much more than the minimum so why should I care what my score is? I think it is only an inacurate way to scare people. Lighten up and enjoy life!

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Just want to say thanks to CK.

I am a 100% disabled vet and through the use of CK my wife and I will finally be able to build our dream home.

We bought property last year and have been able to work on our credit score through CK.

It is very frustrating to watch your credit score go up and down like a rollercoaster, But with CK

you know the areas you need to work on. It takes alot of patience, and can be very frustraiting at times.

Credit is not a short term fix. I have been working on my score through CK's tools for 18 months now and never dreamed I

Would have a score in the exellent catagory. I still have work to do on my score, But should be where I need to be

next year sometime. If not, I know My dream is close through CK tools.

Thanks CK and staff.

To all of you out there, Be diligent, Be patient, and reach for the stars with CK.

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