How to Check My Credit Score

Photo by Liza Summer

Originally Posted On: http://iquanti.com/

At one point or another in your adult life, you may have heard about the importance of establishing and maintaining good credit. Your credit score, for better or worse, can impact your ability to take out a loan and how much interest you’ll be charged on that loan. If you’ve never done so before, here’s what you need to know about how to check your credit score.

Your credit score is a numerical value between 300 and 850 that is created based on specific criteria. There are a few different types of credit scores, the most popular of which is FICO. A FICO Score is made up of:

• Payment history (35%):  Whether your previous debt payments have been made on time, were late, or missed.
• Amounts owed (30%):  How much debt you currently have outstanding.
• Length of credit history (15%): Long-term loans and more established credit history are viewed more favorably.
• New credit (10%): Lenders are wary of someone who has taken out many new loans in a short period.
• Credit mix (10%):  A mix of loans (auto loan, credit card, mortgage, personal loan, etc.) gives a higher score in this category.

Creditors use the credit score as a gauge to assess if you’re worthy of receiving additional credit from them, like an auto, home, or personal loan. Having a poor credit score means it may be more difficult for you to borrow money, and lenders may also charge you higher interest rates because the loan is viewed as riskier.

It’s important to note that your credit score and credit report are two separate things. A credit report is a comprehensive report of your credit activity. And it can be accessed free of charge once per year from each of the three major credit reporting bureaus, Experian, Equifax, and TransUnion. Your credit report includes things like your open lines of credit and any missed or late payments.

On the other hand, your credit score is the numerical value attached to the report, but it’s not explicitly shown on the report. There are several ways to check your credit score, many of them free.

• Check with your existing creditor. If you already have a credit card, the company may be able to give you access to your current score for free. In fact, many companies like Discover and Bank of America now advertise they’re providing that information to cardholders.
• Use a free service. Sites like credit.com or Experian offer a free credit score when you sign up for an account. Access to the score may be free, but you’ll receive promotions and be encouraged to upgrade to a paid version eventually.
• Purchase a service for ongoing credit scores. Companies like FICO offer subscription plans that will provide you with ongoing monthly updates to your credit score, plus credit reports and identity theft services. These can range from $20 and up, depending on the site.

If, after you check your credit score, it seems lower than you think it should be, there are steps you can take to remediate the score over time.

• Check your credit report:  Inaccurate information on your credit report is one of the easiest things to resolve to quickly improve your score. If you pull your free credit report and discover information is wrong, you’ll want to reach out to the creditor online, over the phone, or by mail to have the report updated properly.
• Make payments on-time and in-full:  Since payment history is one of the most significant elements of your credit score, making timely payments is critical to raising it. If you find that you can’t afford to pay all of your existing loans, consider debt consolidation or working with lenders to lower monthly payments.
• Don’t apply for credit you don’t need:  It’s important to only apply for credit that you need and are able to pay back. Opening multiple credit cards or taking out multiple installment loans at once may enable you to spend a lot of money, but it won’t be viewed favorably by creditors. It may end up having negative impacts on your score over time.

Your credit score has a notable impact on your ability to take out loans when you need them. Figuring out how to check your credit score and regularly doing so is a vital piece of keeping your financial puzzle together.

Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.