Are you curious about your credit score? Do you know how to check it and understand what it means? Your credit score is crucial in determining your financial health and affects everything from getting approved for loans to renting an apartment.
In this comprehensive guide, we'll walk you through everything you need to know about checking your credit score, including what it is, how to prevent it, what factors affect it, and how to fix any errors on your credit report. Don't let your credit score be a mystery anymore – let's dive in!
Before You Start Checking, You Need to Know the Following:
The three major credit bureaus (Equifax, Experian, and TransUnion) compile credit reports that document your credit history, but these reports usually do not include your credit scores.
You have multiple credit scores instead of one. According to the Consumer Financial Protection Bureau, several factors may affect your credit score, including which credit bureau provides the information, the scoring model, the type of loan, and when it is calculated.
FICO and VantageScore are two of the most commonly used scoring models, but different lenders may use other models, resulting in different credit scores.
Feel free to check your credit score; it won't harm your credit like a hard inquiry.
How to Check Your Credit Scores?
Credit scores are calculated based on information found in credit reports provided by credit reporting agencies like Equifax, Experian, and TransUnion.
These agencies use data analysis models to generate credit scores based on the credit report's data. In addition to credit bureaus, some third-party vendors will calculate your credit scores with the same data from credit reporting agencies. The most common vendors are FICO and VantageScore; they will provide the results to lenders and consumers.
Ways to Check Your Credit Score:
From your credit card issuer, financial institution, or loan statement.
Many credit card companies and financial institutions offer free credit scores to their customers on their statements or online portals. If you have a credit card or bank account, check if they provide this service.
Purchase Credit Scores Directly from Credit Bureaus or Providers.
You can buy credit scores directly from Equifax, Experian, TransUnion, or other providers such as FICO or VantageScore.
Use online credit scoring services.
Some credit score services are offered online, some of which are free, while others may charge a monthly subscription fee to monitor your credit and report your credit scores.
Tips when checking credit scores:
Researching and choosing a reputable credit score service or site is essential to ensure the information you receive is accurate and up-to-date.
Different scoring models may produce other credit scores, so it's a good idea to check your credit score from multiple sources to get a more accurate picture of your creditworthiness.
How to Read and Understand Your Credit Scores?
Credit scores can be confusing, but understanding the ranges can help you determine where you stand and how to improve your credit.
The ranges of VantageScore 3.0 are as follows:
Excellent (781 – 850):
If your credit score falls in this range, you have excellent credit and are likely to be approved for credit products with the best terms and interest rates.
Good (661 – 780):
You have a relatively high approval rate with credit scores in this range, but only sometimes with the best terms and interest rates.
Fair (601 – 660):
You may have difficulty obtaining credit or may only be approved for credit products with higher interest rates and less favorable terms.
Poor (300 – 600):
You may have difficulty obtaining credit or may only be approved for credit products with very high-interest rates and unfavorable terms.
Score ranges may vary depending on lenders and credit models.
To understand your credit score, you must review your credit reports regularly to ensure the information is accurate and up-to-date.
You can also use credit score simulators and monitoring services to track your credit score over time and identify areas for improvement.
Factors in Determining Your Credit Score
Credit scores are based on several factors that reflect your creditworthiness and financial habits. Here are the main factors that determine your credit score and their level of influence:
Payment history (extremely influential):
Your payment history is the most critical factor in determining your credit score. Late payments, defaults, and bankruptcies can significantly negatively impact your credit score.
Age and type of credit (highly influential):
Your credit score may also be affected by the length of your credit history and the nature of your credit mix. If you have a long credit history and take out multiple types of loans, such as credit cards, auto loans, and mortgages, you are more likely to be favored by lenders.
Credit utilization (highly influential):
The credit utilization ratio is also a significant indicator of your credit, representing how much of your available credit you're utilizing. Using too much of your available credit can signal to lenders that you risk defaulting on your debts.
Balances (moderately influential):
The balances on your credit accounts, including credit cards and loans, can also impact your credit score. High ratios indicate you struggle to manage your debts, while low balances signal responsible credit usage.
Recent credit (less influential):
Your credit score can be affected by your recent credit activities, like making formal applications for a new credit card or a loan. Too many credit inquiries in a short period can lower your score, as it may indicate that you're taking on too much debt or having financial difficulties.
Available credit (least influential):
A high amount of available credit can signal to lenders that you're a responsible borrower who can handle credit responsibly.
How to Get Your Credit Reports?
What Are Credit Reports?
Credit reports take records of your credit history, including your credit accounts, payment history, and other negative information like missed payments and bankruptcies. They are maintained by the three major credit bureaus: Equifax, Experian, and TransUnion.
How Do You Check Your Credit Report?
You can check your credit report by obtaining a free copy from each credit bureau once a year.
You can request your credit reports by mail, phone, or online at AnnualCreditReport.com.
You may also be able to obtain your credit report through your bank or credit card company.
Why Should You Check Your Credit Report?
Errors in your credit report can potentially harm your credit score and make it more difficult to get future credit or loans. Remember to routinely check your credit report to avoid inaccuracies and keep it current. Regularly checking your credit report can also help you detect fraudulent activity or identity theft.
What Can Lenders See on Your Credit Report?
Your credit report contains many details that lenders can access, including your credit accounts, payment history, credit inquiries, and any negative information like bankruptcies or collections.
They may also see your credit score based on the information in your credit report. Lenders use this information to determine your creditworthiness and whether or not to extend credit or loans to you.
Errors or Negative Information on Your Credit Report
It's important to regularly check your credit report for errors or inaccurate information.
Pay particular attention to negative information that is inaccurate or out-of-date since it can harm your credit score and potentially lower the possibility of getting approved. Remember to report and correct any errors as soon as they are detected.
Fixing Errors in a Credit Report.
If you find errors on your credit report, you should write a letter disputing the error and include any supporting documentation.
The letter should be sent to the source of erroneous information and the credit reporting agency. According to the Fair Credit Reporting Act, any inaccuracies must be fixed by the information provider and credit reporting agency.
If your written dispute does not get the error fixed, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). It's important to keep copies of all correspondence and documentation.
Negative Information in Your Credit Report.
This information can include public records such as tax liens, judgments, or bankruptcies. This information can remain on your credit report for up to 7-10 years, depending on the type of negative information.
If your credit report leads to a denial of credit, housing, insurance, or employment, you can ask for a free credit report within 60 days under the Fair Credit Reporting Act.
It's impossible to get accurate negative information off your credit report, so be wary of companies that offer credit repair services in exchange for a payment upfront.
Bonus Tip: What's Credit Freeze?
A credit freeze is a security measure that restricts access to your credit report, making it more difficult for fraudsters to open accounts in your name. Potential lenders cannot provide new credit in your name by blocking access to your credit report and scores.
How to Place a Credit Freeze.
To place a credit freeze, you should contact each of the three credit reporting agencies (Experian, Equifax, and TransUnion) individually. You can submit a freeze request online, by phone, or by mail.
Innovis is another credit reporting agency offering the option to place a credit freeze.
It's necessary to review the specific procedures for each credit agency before freezing your credit since they may differ. To freeze your credit with each agency, follow these steps:
Experian Freeze Center
Via Submit a freeze request online: https://www.experian.com/freeze/center.html.
By calling 1-888-397-3742.
Or by mailing a request to Experian Security Freeze, PO Box 9554, Allen, TX 75013.
Equifax Credit Report Services
Via Submit a freeze request online: https://www.equifax.com/personal/credit-report-services/.
By calling 1-800-685-1111.
Or by mailing a request to Equifax Information Services LLC, PO Box 105788, Atlanta, GA 30348-5788.
TransUnion Credit Freezes
Via Submit a freeze request online: https://www.transunion.com/credit-freeze.
By calling 1-888-909-8872 or mailing a request to TransUnion LLC, PO Box 2000, Chester, PA 19016.
Innovis Freeze Options
Via Submit a freeze request online: https://www.innovis.com/securityFreeze/index.
You can submit a freeze request online through Innovis Freeze Options.
By calling 1-866-712-4546.
Or by mailing a request to Innovis Consumer Assistance, PO Box 530086, Atlanta, GA 30353-0086.
Requesting a credit freeze online or over the phone will be effective the following business day. If you mailed it, it would take the credit reporting agency three business days after receiving your letter to activate the freeze. A credit freeze does not expire unless you decide to lift it.
How to Lift a Credit Freeze.
To remove the credit freeze, you must contact each credit bureau and use a unique PIN or password.
You can lift the freeze as often as you need to without incurring any penalties, But there may be a fee. If you lift the freeze online or by phone, it will take one hour to go into effect, whereas a mail request may take up to three business days.
FAQs About Credit Score
Will Checking My Scores Hurt My Credit?
No, checking your free credit scores won't hurt your credit. These checks are known as soft inquiries and won't affect your credit.
However, when a lender examines your application for a financial product, they often conduct a hard inquiry or pull to check your credit, which can harm your credit.
Is It Safe to Check My Credit Score for Free?
Yes, checking your credit score for free on reputable websites is safe. Checking your credit scores won't let them monitor your credit.
Why Should I Check My Credit Report Regularly?
It's important to check your credit report regularly to ensure accurate and up-to-date information.
Your credit report's errors will potentially harm your credit score, making it more difficult to get future credit or loans. You must routinely check your credit report to avoid inaccuracies, identity theft, or fraud.
What's the Best Site to Get a Free Credit Report?
The best site for a free credit report depends on your specific needs. Some popular websites for obtaining free credit reports include AnnualCreditReport.com, Credit Karma, and Credit Sesame.
To get accurate and up-to-date information, always remember to compare these sites to find a reliable one.
In conclusion, checking your credit score regularly is essential to maintaining healthy financial habits. There are various ways to check your credit score, including using a credit score service or free credit scoring site, purchasing credit scores directly, etc.
Don't ignore the errors, such as negative information or signs of identity theft, and report and correct any mistakes as soon as they are detected. I hope this guide is helpful for you in managing your credit score and accomplishing your financial goals. Thanks for reading!
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