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Credit scores are very important, but most of us don’t learn about them in school. As a result, many people are unsure about the best way to get their credit score, which one to look at, and how often to check it.
Before we dive in, it’s worth noting that while your credit score is derived from the information on your credit report, they have very different rules governing them and your access to them. One of the biggest differences is that the Fair Credit Reporting Act (FCRA) entitles you to receive free copies of your credit reports from each of the three major credit bureaus (Equifax, Experian, TransUnion) every 12 months. These free reports are available at AnnualCreditReport.com.
However, under this law, consumers are not eligible for free credit points. The law says that although you have the right to request an estimate, you will have to pay for it. The main reason for getting your report for free but having to pay for your score is that the FCRA was adopted to correct abuse by credit reporting agencies, not credit scoring companies.
This means that if you want to earn points, you may have to pay; however, there are many ways to get your credit score for free. In fact, you may already have free access to your account.
Now let’s look at how you can access your credit history.
Ways to Check Your Credit Score
Don’t know how to access your credit history? Here are a few options you have:
While paying a reasonable price for a result is good, getting it for free is even better.
As credit scoring has become more important, widely known and discussed, many lenders have found that free assessments are a great way to attract and retain customers.
Several credit card issuers offer free monthly assessments and reports if you are a customer, and some offer them even if you are not. Examples of the latter are Capital One (CreditWise), Chase (Credit Journey) and Discover (Credit Scorecard). You can also get a free FICO assessment from Experian.
Some of these free options may only give you reports from one credit bureau – and may give you your VantageScore instead of your FICO. For example, CreditWise uses your TransUnion report and Credit Journey uses Experian, both of which provide VantageScores. On the other hand, Discover Credit Scorecard uses Experian and gives you a FICO score.
A relative newcomer to the world of scoring (unlike FICO), VantageScore has proven to be a worthy addition. While there are a few key differences in how the scores are calculated, both give consumers a good idea of where they fit in the credit world. And knowing where you stand is half the battle.
Another source of free FICO scores is the FICO Score Open Access program, which allows customers of certain lenders to view their scores and learn about the factors that affect them. More than 200 banks, credit card issuers, auto lenders and mortgage lenders are members of the program.
And the guys at VantageScore are struggling to catch up with FICO in terms of sales. Therefore, they offer you a free estimate through a number of websites and credit card products.
If you need your score because you’re in the market for a mortgage, car loan, or new credit card, you can purchase your FICO score (the one that most lenders use when making lending decisions).
You can buy FICO points directly from the myFICO website. Some Equifax products also include FICO scores, but only where specifically stated.
There are also many financial websites that offer credit monitoring for a monthly fee; they usually give you your score and have regularly updated reports.
How to understand a credit score
A credit score is simply a numerical score that evaluates the degree of risk you pose to lenders. When you apply for a new loan, lenders may look at your credit report and credit score to assess how creditworthy you are, which helps them determine your level of risk.
If you have a high credit score, the lender will see that you are less likely to default on your loan and may offer you lower interest rates and better terms. If your credit score signals that you are risky, you will receive a higher interest rate to offset the risk.
And when you apply for an apartment rental, a new insurance policy, or a utility installation, your landlord or agency may check your account to determine how reliable you are.
What affects your credit score
Let’s take a look at a few factors that affect your credit score so you can learn how to keep it good and high:
- payment history. A solid history of timely payments helps improve your credit score, while late payments hurt it.
- Outstanding Balances. Your credit utilization ratio is how much of the total available credit you use. By paying off outstanding balances, you lower this ratio, which helps your credit score.
- Length of credit history. The longer your credit history, the better. If possible, try to keep your old credit accounts open.
- Applications for new credit accounts. Hard requests may temporarily affect your credit score, but it will recover over time.
- Types of credit accounts (mortgage, car loan, credit card). Lenders would like to see that you have experience managing multiple types of loans at the same time.
How often should you check your credit score?
You don’t need to get hung up on your account. However, if you are planning a large credit purchase in the future, you may want to check your account three to six months before you go to the finance manager’s office. This will allow you to shop with confidence, giving you time to correct any mistakes on your credit report that could lower your score, or take some positive action, such as paying off the balance, to improve your score.
Keeping a close eye on your credit score gives you an idea of how lenders treat you and what types of loans and interest rates you might qualify for. If you notice that your score is dropping, you can always review your credit report to see what recent activities have hurt it and how you can improve it.