The interest rate lenders offer you is directly linked to your credit score. Here's everything you need to know about what your credit score means.

In the market for a new home or car? Then you ought to know your credit score.

What is a Credit Score Anyway?

A credit score is not the same as a credit report. Your credit report simply shows a listing of all of your loans (student loans, mortgage, home equity loans, credit cards, installment loans, etc.), the amount outstanding, and how well you make your payments (whether you are routinely late, pay on time, etc.).

Your credit report also shows whether or not you've been arrested, filed for bankruptcy or been sued by creditors.

Your credit score, on the other hand, is a three-digit number that gives lenders a snapshot of how much you owe and whether or not you pay your bills on time.

Why a Credit Score is Important

Your credit score is the single most important number lenders use to evaluate whether or not you get a loan and what interest rate you will be offered. In essence, the higher your credit score, the lower the interest rate you can get.

In addition, a good credit score can reduce the amount you'll pay for everything from car insurance to homeowner's insurance.

What Is a Good Credit Score?

So what's a good credit score? According to Fair Isaac, the company that invented the credit score, the median credit score in the U.S. is 723.

Generally, banks will offer the best interest rates to people with credit scores above 750. That is considered an excellent credit score. In fact, in most cases, a consumer with a credit score of 770 will be offered the same interest rate as a consumer with a credit score of 800, so aiming for a credit score higher than 770 is not necessary.

A good credit score is generally somewhere between 680 or 690 and 720. And an average credit score is around 650 to 680.

A credit score below 620 will typically get you a high-risk label and require you to go to the sub-prime market (read: much higher interest rates) for a loan.

How to Get Your Credit Score

Unfortunately, while the government now requires the three big credit bureaus to furnish you with a copy of your credit report for free once a year, they do not have the same requirement for credit scores.

You will often see advertisements for free credit scores. These are generally come-ons, that is, you only get the free credit score when you buy a credit monitoring service that you have to pay for each month. There is nothing wrong with these credit monitoring services per se. It's just that the free credit score isn't free.

You can, however, get a free estimate of your credit score at this web site. And you are entitled to a free copy of your credit report once every 12 months. You can obtain that by going to Annual Credit Report.com.

For more information, see also:

• Your Credit Score: How It Can Save You Thousands
• Five Debt Relief Tools
• Need Debt Help? How to Choose a Consumer Credit Counseling Service
• Want Credit Card Debt Relief? How to Tell if a Debt Management Plan is Right for You