Your credit score is a number that rates your past performance as a borrower - whether as a customer of a mobile phone company, a customer of a bank with an overdraft or credit card facility, a borrower of a personal loan or mortgage, or even as the named bill payer in your house.

Credit scores are determined by many factors, such as how much your outstanding debts are, how often you make repayments, how much you spend and how much you earn. It is also determined by your past borrowings, the accuracy of your personal information and how you have performed as a borrower. All this information is gathered and recorded by credit bureaus and credit reference agencies like Equifax and Experian, who banks refer to before deciding on whether to offer you a product or not.

This means that your credit card borrowing is not just a private matter between you and the bank but that the extent of your borrowing can be determined by other financial institutions. What is more, all credit transactions that we make are filed away to potentially be referenced by credit and financial institution across the country.

Your credit score is important because it can mean being accepted or rejected for a loan, mortgage, mobile phone or credit card. With a really bad credit score, you may find it difficult or impossible to apply for these services, and in some instances it may mena you need to pre-pay for your utilities. In short, with a bad credit history it is extremely difficult to get further credit.

As an added incentive to maintaining a good credit score it is not just banks that may decide to do a credit check on you. Private companies and government agencies sometime choose to background check a current employee or a potential employee, and some landlords will credit check potential tenants before signing contracts. A credit score can be used determine a persons financial responsibility and to some extent their level of personal organisation and willingness to face up to challenges.

This is especially true for employees that are being hired or were hired to positions that deal with really sensitive financial issues or those who are directly in contact with money. A good credit history and a credit score is important in determining if they will be able to handle the finances well.

Mobile phone companies and credit card companies also use credit scores to determine the clients that they should target. People who have good credit scores are often those who have the spending power. Thus, they are good people to offer mobile phone packages and credit card services.

In securing a loan, credit scores are used in determining the kind of loan that will fit your credit profile. People with higher credit scores are generally offered higher maximum loan amounts, lower interest rates and a longer period in which to repay the loan.

Those who do not have a good credit score may be refused a loan or at the very least be offered a smaller amount in loan, substantially higher interest rates and a shorter time frame in which they must repay the loan. This is because credit card companies and lenders wish to insure themselves against the risk you might default on the loan or miss repayments. Low credit scores are more riskier and therefore warrant higher interest rates.