Your credit score is a rather important number. It can determine whether or not you are approved for a loan. It also impacts everything from applying for a home mortgage loan to getting approved for a O% balance transfer credit card. Once you are approved, your current credit score is the main factor that lenders use to decide the interest rate you will get. The higher your credit score, the lower your interest rates — and the lower your payments. You pay less overall when you have a good credit score. While scoring varies according to the specific scoring formula used by the lender, right now it is generally accepted that anything over 720 or 730 is excellent. Anything below 580 is often considered poor. That’s why it’s important to check your credit score to know where you’re at.
How often should you check your credit score?
It’s a good idea to periodically check your current credit score in order to keep tabs on what is happening with your credit. If your credit is worse than you expected, it is a sign that perhaps you should check your credit report in order to find out what the problem is. If there are inaccuracies dragging down your score, you will need to get them fixed. If your problem revolves around poor money and credit habits, you will need to make changes in your finances in order to start improving your credit score.
Checking your credit score online
Unfortunately, it is very difficult to get a free credit score. While you are entitled to one free credit report each year from each of the three major credit bureaus, you are not entitled to a free score. You can keep tabs on your current credit score by going to CreditKarma.com and seeing a version of your score offered by TransUnion, but this score is not necessarily the same score that lenders will use — and it’s only one score from one bureau. It does, however, give you a general idea of the direction you are moving in. Not bad for something that is free.
Get your complete credit score
If you want a more complete look at your credit score, you will have to pay for it. The major credit bureaus offer packages that include credit scores and credit reports from all of the bureaus. This can cost between $40 and $70, depending on which products you purchase. You can, however, usually get just a score from one of the bureaus for between $7.95 and $10.95. You can also go to MyFICO.com and purchase your score. MyFICO offers the score from Fair Isaac Co. Most lenders use a formula based on the FICO score to create their own scores.
Other paid services include CreditReport.com or Equifax Score Power. These companies will give you a free trial initially, but then want to sin up to a monthly subscription. You can must get your score and cancel the service. Just don’t do it too often.
It is important to note that many lenders have their own formulas that give different weights to different factors that make up your current credit score. Therefore, what a bank comes up with when you apply for a mortgage might be different from what shows up at FICO, or from one of the major credit bureaus. Some lenders will look at your different scores from different places, and average them, or take the middle score. In fact, sometimes your score can vary by up to 20 points or more, depending on the source of your score, and what has been reported to the agency.
Factors of Your Credit Score
As noted above, there are several factors that go into the computation of your credit score. If improving your credit score is of utmost importance, here’s a closer look on what you need to be aware of.
What’s Your Payment History?
They will look at the your account payment information on a very specific accounts. Most notably will be your credit cards, retail accounts and your mortgage. Have you filed bankruptcy in the past? If so, that will be reviewed. In addition, they’ll look at if the are any outstanding judgements or liens against you. Take care of all your past due items as this will also have an adverse effect on your credit score.
How Much Do You Owe?
Do you have a lot of credit card debt? If so, this can and will affect your credit score. They’ll look at all your outstanding debt and consider the amount you owe and the number of cards with balances. Don’t forget your credit lines used such as Heloc’s or installment loans.
Length of Credit History
For newbies trying to establish your credit, this one might hurt you. The initial date you opened your account will be considered, in addition to how much activity has been in the account.
New Credit
If your new to the credit scene, it’s now always smart to go and open a bunch of new credit cards trying to raise your credit score. By having too many inquiries, it can actually hurt your credit score. They will look at how often inquiries how been made and the time elapsed from the last inquiry.
Types of Credit Used
Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
Does checking your credit report hurt your score?
This is a common myth and don’t let it be the reason that don’t know what your credit score is. Checking your report with the above mentioned services, will absolutely not hurt your credit score number. The credit bureaus will treat a “self-disclosure” as a nonevent. In fact, you could check your report every week and it wouldn’t hurt your score one bit. Of course, that’s a bit much, but I think you get the point.
The only thing you want to be careful of is using a company that doesn’t get your score directly from the three credit bureaus. Using an outside source could count as an inquiry by an outsider and could hurt your score because technically, the request to the bureaus isn’t being made by you.
Important to Know
In the end, though, it is still important to check your current credit score. While it may not be the exact score that is used to determine your credit, you will at least have a general idea of what your credit worthiness looks like to an outsider.