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Good Question: How Is Your Credit Score Determined?

MINNEAPOLIS (WCCO) -- Your credit score plays a role in so many things; from buying a home to getting a student loan. It even plays a role in getting car insurance.

And it affects millions of consumers.

When you make a purchase, it registers through credit bureaus. Each of them has a FICO score for you.

The best score you can get is 850.

Credit Scores
(credit: CBS)

A credit score is basically a way for potential lenders to determine how risky it would be to give you a loan. So naturally, making timely payments is a must.

Student loan, car loan, mortgage, credit cards you currently have are all accounts that are going to affect your score.

And missing payments on those can make all the difference. In fact, missing a payment or two could cause your score to drop by 100 points or more.

A consumer myth is that checking your credit score online will drop it. But experts say it won't because the government gives you that right. It is the same if you are checking for car insurance purposes.

But your credit score is affected when you inquire about a lending opportunity, like when you apply for a credit card. You can lose between three to 15 points in the process.

The worst thing you can do to your score is declare bankruptcy, which can cost you up to 240 points.

One-third of all Americans have a credit score below 620, which is lower than the standard FHA lending requirement.

On the plus side, the Twin Cities ranks in the top five in average credit scores.

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