It’s true that credit scores make a massive impact on the financial lives of Americans. However, many people don’t understand what their credit score is and how it works.

The Federal Reserve Bank of New York reported that student loan, automobile, and mortgage balances went up during the first quarter of 2017. While credit card balances didn’t increase, the number of delinquencies did.

Everyone has basic needs, and having poor credit scores certainly makes it more difficult and expensive to get those needs met. Having a good credit score can reduce or drop required utility deposits, make owning a cell phone less costly, and help rent a desirable place to live.

Auto insurers use information from credit files to predict claims Consumer Reports did some digging about credit ratings and auto insurance rates and found that in many cases, having poor credit raised auto insurance rates more than having a bad driving record.

Only Hawaii, Massachusetts, and California are prohibited from using consumer credit scores to set insurance rates. In other states, nearly every insurer is using a collection of various aspects taken from a consumer’s credit file to set their rate. Companies don’t have to tell consumers what their score is, and the FICO score doesn’t help predict how the auto insurer will see the consumer.

Scoring systems penalize consumers who shop around for new credit when the inquiries appear in their credit file. Insurance companies also take points off for what they consider “undesirable credit” in the form of retailer credit cards, credit accounts from auto parts stores and tire dealers, and instant credit offered on more expensive items.

The latest version of the most commonly used credit score is FICO 9, yet many mortgage companies and auto lenders still use FICO 8. While it’s important to understand the basic FICO score, it’s also crucial to know that different lenders and banking institutions use dozens of versions of the same score, depending on their criteria.

The FICO score ranges from a low of 300 to a high of 850. The Auto Scores and Bankcard scores go from 250 to 900. The most reliable way to find out an individual FICO score is to go to myfico.com and pay the $60 fee to see the entire package of information. Consumers can see their whole score, including FICO 8 and FICO 9.

This is especially important when seeking a mortgage or auto loan. The scores available from sites like freecreditscore.com or from credit cards that offer free credit scores as a service to their customers are usually out of date or incomplete. Before seeking a big loan, it’s important to understand what the lender will see.

Credit scores are constantly in flux, so the misconception that checking in with the FICO score once each year is enough is incorrect. Checking credit doesn’t hurt the score.

VantageScores, created by the three big credit bureaus, give consumers an idea of what’s going on in their credit file, and are an effective way to keep tabs on what’s happening. Checking the VantageScores monthly is a smart move.

Avoiding high-interest department store cards and credit lines at individual retailers will help all credit scores look better. There’s a misconception that closing a credit card account will cause harm to the FICO score, but if the card has a high interest rate and low credit limit, paying it off and closing it will probably help the score long-term.

Another way to save money is to keep balances on revolving credit as low as possible. Balances of 30% or higher of the total available credit in the file will cause the FICO score to plummet. Delinquent payments are another surefire way to see a score decrease quickly.

Costs go up on many necessities as credit scores slip. A score of below 620 is considered subprime, and trying to get credit will be expensive. A FICO score of 750 or higher is ideal.