Before you take out a loan, it's a good idea to get your credit score. Here's why.

Whether you're planning to get a car loan, home loan, mortgage or credit card, knowing your credit score can save you money. And knowing how to raise your credit score can save you thousands, especially if you're applying for a large loan, like a mortgage.

What Is a Credit Score?

A credit score is a 3-digit number somewhere between 300 and 850. The higher the number, the better your credit score.

Lenders use credit scores as a sort of shorthand to help them assess your creditworthiness.

Rather than combing through your credit report and determining for themselves how much debt you have and how diligent you have been about paying it off, they use a credit score, supplied by another company, to help them out.

What Is a Good Credit Score and What Does It Mean for You?

The higher your credit score, the less you'll pay to borrow money.

Fair Isaac, the company that pioneered credit scores, uses this example: Say you have an excellent credit score between 760 and 850. You may be offered an interest rate of 6.37% on a $216,000 fixed-rate mortgage. And your monthly payment would be $1,347.

But what if you have just an average credit score, say around 640 to 659? The bank may offer you an interest rate of 7.41%, resulting in a monthly payment of $1,497.

It doesn't seem like such a big difference until you calculate the cost over the life of the loan: The person with the average credit score will pay $54,000 more over the life of the loan than the person with the excellent or very good credit score.

How to Find Out Your Credit Score

How do you find out what your credit score is?

Until recently, the number was kept secret. Now, you can buy it practically anywhere you go to get your credit report.

Unfortunately, while the credit bureaus are required to give you one free credit report a year, they are not required to tell you your credit score for free.

So be aware of companies advertising free credit scores. Most of these so-called freebie credit scores are part of another service you have to buy, such as a credit monitoring service.

One entrepreneurial company does offer a free credit score estimator, however, which may give you a ballpark figure of what your credit score is.

If you want to purchase your credit score, MyFICO, a division of Fair Isaac, offers product called FICO Standard that allows you to check your credit report and credit score from one of the three major credit bureaus for $15.95.

This product is nice because it also comes with a credit simulator feature that lets you estimate how various actions you take, such as paying off a credit card or closing an account, will likely affect your credit score.

See also:

• Want Credit Card Debt Relief? How to Tell if a Debt Management Plan is Right for You
• Need Debt Help? How To Select a Consumer Credit Counseling Service