Your credit score is a number between 300-850 that communicates your creditworthiness to lenders. The higher your credit score, the more likely you are to be approved for loans with favorable terms and interest rates. A credit score is based on your credit history, and there are five main factors used to calculate that score: payment history, total amount owed, length of credit history, types of credit, and new credit.
There are two companies that lead the credit scoring industry: FICO and VantageScore, though FICO is used by 90% of top lenders. Each company has a credit scoring model that analyzes your credit reports to generate a score. If you check your credit score with both companies, you may notice that they are not the same—this is due to differences in the importance each model places on portions of your credit report.
Your credit report is made up of your credit history and is compiled by three major credit bureaus: Experian, Equifax, and Transunion. While your credit score is not included in these credit reports, it fluctuates based on new information that is included in them.
Checking your credit reports
Checking your credit reports is not always free, but each of the major credit bureaus allows you to access your report once every 12 months at AnnualCreditReport.com at no cost. In certain states and other circumstances, you may be able to access your credit reports more frequently for free.
Credit reports are not perfect, and sometimes errors can occur. Since not all creditors report your information to each of the major credit bureaus, it’s important to check all of your credit reports—you may find differences among them that could impact your credit score.
Ways to check your credit score
While you can pay the credit reporting companies to view your credit score, there are many other resources that will allow you to check it for free. For example, most credit card issuers are a good source of information about your credit score. Some credit companies—like Citi and Discover—provide free access to your FICO score, while others—like Chase and Capital One—provide free VantageScores. Knowing both your FICO Score and VantageScore is a good idea, since there is no way to be sure which score a lender will pull when deciding whether to offer you a loan.
Checking your credit score through a credit issuer’s website is usually quick and simple. Some credit companies that allow you to check your credit score for free without being a cardholder include:
- Creditwise from Capital One (VantageScore)
- Chase Credit Journey (VantageScore)
- Discover Credit Scorecard (FICO Score)
Free credit scores can also be obtained from other sources, including:
Some services may require that you answer some questions about your spending habits or create a free account to sign up, but it’s usually simple to find a way to check your credit scores without paying to see them.
Pros & cons of checking your credit score
Your credit score is important because lenders use it to determine whether you’ll be approved for a loan and what type of interest rate you’ll receive. Before applying for a loan, you can check your own credit score to have a better idea of your financial health and know what type of response to expect from creditors. If your score doesn’t fall into the range you hoped to see, you could potentially wait to apply for the loan and work on improving your credit in the meantime. By monitoring your credit score, you’ll also be aware of potential identity theft as it occurs. If you notice problems or issues with your score, it may be the result of fraud—and you can take steps to fix it, if you’re aware.
A common misconception is that checking your credit score can lower it, but this is incorrect. When you check your own credit score or a lender checks your score as part of a pre-approval process, this is considered a soft inquiry. Soft inquiries (or soft credit checks) do not impact your score because you are not officially applying for any credit when this happens. A hard credit inquiry will affect your credit score, but this occurs when a lender views your score as part of their decision-making process after you apply for a loan.
There is no downside to checking your credit reports and scores for free, and it’s a good idea to stay on top of your finances and be prepared for situations in which you may want to apply for a loan.
If you need any assistance communicating with your financial institutions, Kredit can help.