Investigating individual‐based habitat settlement decisions is a central theme in ecology, yet studies that quantify density‐dependent habitat selection or tie fitness to resource selection decisions remain rare. We quantified habitat selection in golden‐mantled ground squirrels (Callospermophilus lateralis) across two spatial scales (home‐range placement, and occurrence within the home range) by using 11 consecutive years of data on individual space use, and we used resource selection functions and multilevel modeling to address how habitat preferences may be influenced by density or linked to fitness outcomes. Squirrels preferred dry meadow over other habitat types (wet meadow, aspen, spruce, and willow) at both spatial scales. Squirrels were more likely to use dry meadow that contained shorter vegetation and vision‐enhancing prominences such as rocks (“perches”). The use of dry meadow at each scale was not influenced by changes in density. The use of dry meadow did not lead to increased litter size, pre‐hibernation mass, or survival. However, squirrels that experienced a greater number of perches or lower local densities had higher survival rates. Our results suggest that a lack of visual obstruction, probably facilitating detection of predators, drives habitat selection in this system. Surprisingly, squirrels maintained their preference for dry meadow as density increased, and they experienced reduced survival as a result. This work furthers our understanding about the causes and consequences of changes in habitat use, informing wildlife management and conservation.