Even if you don’t know the answer to that question, financial institutions do. Or at least they know where to find the answer - it’s in your credit score.

Your credit score is a number between 300 and 850 that lenders and credit card companies use to determine your creditworthiness, or how likely you are to pay your bills. The higher the number, the better.

The score is a quick way for lenders to gauge how you pay your bills, how much you owe, how much credit you have available, the length of your credit history and what kinds of credit you have (loans, utilities, cell phones, credit cards and so forth). If you’ve ever been approved for instant credit, it’s probably because you have a high credit score.

Why does this number matter? If you have good credit – generally a score 720 or higher – you can get more from your money. You can qualify for the best rates on auto loans, credit cards, auto insurance and mortgages.

In fact, your score is critical to purchasing a home. According to Fair Isaac Corporation, credit scores are included in about 75% of loan applications for homes. Fair Isaac should know. They developed the credit score and are the reason that it’s called the FICO score.

Get your free credit report

For years, the numbers were hidden from consumers, but now you can see what lenders and other institutions know about you. You are entitled to get one free credit report per year, thanks to the Fair and Accurate Credit Transactions Act of 2003.

To get your free credit report:

visit www.annualcreditreport.com

How can you make it better?

You can improve your score, but it’s a gradual process, “a bit like losing weight,” reports Fair Isaac. Nevertheless, the company outlines ways you can strengthen your credit rating.

What not to do

• Don’t miss payments or pay your bills late.
• Don’t move your debt around instead of paying it off. Moving your credit card balances onto a card with a lower interest rate will help you improve your credit score only if you also pay off the amount of debt you transferred.
• Don’t close unused credit cards just to improve your score. Closed accounts stay on your record and may affect your rating. In fact, owing the same amount but having fewer open accounts may lower your score.
• Don’t open a number of new accounts in a short amount of time. Opening too many accounts is an especially bad strategy if you don’t have a long credit history. Apply for only the credit accounts you need.

What to do

• Pay all your bills on time.
• Keep balances low on credit cards, cell phone bills and other accounts.
• If you have missed payments, catch up and stay caught up. The longer you pay your bills on time, the better your score.
• If you find that you have to miss a number of payments, you may have a credit problem. If so, get help from a reputable credit counselor.
• If you failed to pay off an account and it went into collection, pay it off as soon as you can. These accounts hurt your score and remain on your report for seven years.
• Check your credit report and find out what the credit-reporting agencies are saying about you. Look for mistakes. If you see lines of credit that you did not open or home addresses that are not yours, you may be a victim of identity theft. If so, you will need to contact the credit-reporting agencies immediately.