Your credit score helps determine the terms of your loans and if you'll even be approved.

The pros to having a good credit score

A good credit score means lower interest rates. It shows you have a responsible credit history and that you are a low-risk borrower who is less likely to default on your loans. So when you apply for a mortgage or auto loan, a lower interest rate could save you hundreds, if not thousands, of dollars in interest costs.

A good credit score also allows you to be more selective when choosing your lender. The better your score, the more leverage you may have in getting good terms on your loans. Shop around: Having lenders compete against each other can mean you get a more competitive interest rate and ensures that you know that you explored a wide range of lenders before you committed to one.

The cons to having a poor credit score

Lenders use your credit score to judge how likely you are to repay a loan. A poor credit score may mean your loan application is rejected. But that's just the start.

Your credit score is not only checked by lenders — it can be used when you make other financial arrangements, such as renting an apartment or signing up for utilities. In cities where rental companies can be selective about tenants, a bad credit history can make you an unappealing candidate. Bad credit can get you denied for basic services, such as electricity or a cell phone, if your credit report shows that you tend to pay late.

A poor credit score can even cost you a job! Prospective employers may check your credit rating to judge your degree of responsibility.

Many lenders charge different interest rates, depending on the applicant’s credit score, so even though you might get approved with a so-so credit score, you may pay a higher interest rate than someone with a better credit score.

What about having no credit history?

Sometimes having no credit can be just as much of a problem as having bad credit.

If you have no credit history, lenders have no record to assess your borrowing behavior. In this case, you need to establish some form of credit and use it responsibly to build up your credit rating.

Ways to improve your credit score

Your score is continually changing, depending on how well — or poorly — you manage your credit.

These are some ways to build and maintain a high credit score:

• Pay your bills on time.
• Apply for credit only when necessary. Opening too many credit cards in a short time can be harmful to your credit score.
• The longer your credit history, the better. Canceling an old credit card could hurt your credit score, because it may shorten the length of your credit history.
• Keep credit card balances to less than 50% of the available credit limit on the credit card.
• Make more than the minimum payment on credit cards.
• Have a mix of credit account types, such as revolving (varied monthly payments, such as credit cards) and installment (regular monthly payments, like you make on a student loan).
• Check for errors on your credit report periodically, and ensure you have not become the victim of identity theft.

Ways to hurt your credit score

There are some sure-fire ways to get a low score:

• Exceed your credit limit on your credit cards.
• Open and close too many credit accounts in a short period.
• Make payments past due date or, even worse, default on a loan.
• Write bad checks.
• Declare bankruptcy.

Do you have questions about credit history and student loans?

Explore our FAQs about credit history and student loans.