This post is part one in the “What’s my credit score?” blog series.

Money makes the world go round, but it’s credit that makes that money flow a little easier.

For most of us, major purchases – houses, cars, even student loans – will rely on some form of loan. In San Francisco, for example, the average home price has jumped to $1.3 million – that means even if you have the 20% down payment of $260,000 the rest of the purchase price – more than a million dollars -- will require a loan from somebody else.

Banks and other creditors are in the business of lending you money, but they also want to make money doing it. In the ideal scenario, both sides get what they want: you get a money advance for your purchase or investment, banks make a profit by charging you interest on your loan.

A credit card works the same way – with a card issued by a bank, you can buy things that are outside your immediate ability to pay in cash. The bank charges you interest until you pay your balance in full.

But banks don’t just issue loans or credit to everyone – and they need a process that ensures that more customers pay back their loans than those who default. Once upon a time, loan applications were eyeballed by bank and lender employees to see if an individual application was a “good” risk. Not only was this time-consuming, but it also opened the door to subjective factors that may have had little to do with an applicant’s ability to repay a loan.

That’s where credit reports and credit scores come in.

What does a credit report show?

At the simplest level, a credit report details your entire credit history using information gathered from a variety of sources, including lenders, landlords and utilities. It exhaustively outlines all of your past and present accounts and payments, including credit card accounts, mortgages, student loans – and even inquiries into your credit history by other lenders.

It also details how much you owe, how long each account has been open, and how often any of your payments are made on time. In addition, credit reports include public records like collection actions or court judgments, as well as property tax liens or bankruptcy filings.

This information is compiled by one of three major credit-reporting agencies: TransUnion, Equifax, and Experian. These companies are in the business of compiling an accurate financial history. But mistakes can happen, so checking your individual credit report once a year – and disputing any errors -- makes good sense.

Fortunately, under the Fair Credit Reporting Act, consumers are entitled to one free credit report a year by going to AnnualCreditReport.com.

However, one thing your credit report won’t include is your three-digit credit score.

How is a credit score different?

Your credit score is a three-digit number that tries to answer the question: Given everything listed in your credit report, what kind of a risk are you to creditors and lenders? Essentially, the credit-reporting agencies use their own proprietary algorithms to compare your credit report with a pool of similar credit reports to determine how likely you are to pay back a loan or credit card.

Like most scores, the higher yours is, the better off you are. Credit scores typically range from 300 to 850, especially those based on the standard FICO score. A higher score will often mean better terms (lower interest rates) on a loan or credit card. Some insurance companies also use credit report information to help predict your likelihood of filing an insurance claim and the amount of the claim. In many states, a high (good) credit score can also lower your car insurance premiums.

More than half of your credit score is composed of two factors: payment history (how often you miss payments and how late they are) and your relative debt (how much you owe relative to your credit limit). Other factors include the length of your credit history, how much of your credit is newly opened, and how diverse your credit is (credit cards vs. loans or other accounts).

The same credit-reporting agencies mentioned above will disclose your credit report – just not for free (they’ll likely give you the option to buy your credit score when you ask for the free credit report).

One way to get your credit score for free is MoneyLion’s Free Credit Monitoring service, which lets you quickly learn your credit score from our partner TransUnion after answering a few brief questions. Sign up on your mobile device and you’ll have your credit profile right at your fingertips along with our Credit Score Simulator tool that lets you see how different actions can impact your credit score (like getting a new credit card, missing a payment, etc.). We’ll also alert you of changes in your credit report that may impact your score.

Once you know your credit score, you can work on ways to improve it. Learn how in our post "Five easy ways to help raise your credit score" in our “What’s my credit score?” blog series.