Your credit score is a tool that lenders use to determine your creditworthiness. And by checking your credit score, you keep an eye on what’s going on behind the scenes.
From outstanding debts, faulty information, and even potentially fraudulent activity, checking your credit score can give you insight into your finances–and how others see your financial future.
Keeping an eye on your credit score is crucial for anyone planning a major purchase (or anyone wanting to be prepared for whatever life throws their way.)
But how do you do it? We’ll explain what you need to know about checking your credit score, what you should do if you discover a lower score than you hoped for, and ultimately how Homebody helps you along the path to achieving your financial dreams. Let’s begin!
There’s more to checking your score than just looking at a number.
For starters, credit scores are numerical representations of your credit risk. The amount of risk is derived from the data on your credit report, including how you handle your debts, how much credit you have, and other many factors–all resulting in a handy-dandy number.
The higher the number of credit score, the lower the risk to lenders–which means better loan terms, less interest, and even a greater likelihood that your job application is accepted for some occupations.
For reference, here’s the basic range of FICO credit scores:
FICO Score Range
300 - 579: Very Poor
580 - 669: Fair
670 - 739: Good
740 - 799: Very Good
800 - 850: Exceptional
It should be noted that there’s another credit score called the VantageScore. Similar in many ways to FICO scores, here’s how VantageScore is rated:
VantageScore Range
300 - 499: Very Poor
500 - 600: Poor
601 - 660: Fair
661 - 780: Good
781 - 850: Excellent
FICO scores are widely used by financial institutions to make decisions about lending, credit, and risk assessment.
Here are some additional features of the key sectors and entities that commonly use FICO scores:
VantageScore is used by the following:
There are plenty of reasons to check your credit score(s), all of which are super important when it comes to your financial life and health:
Checking your credit score and report can help you identify and dispute any errors or discrepancies. This can include inaccuracies such as incorrect payment history, wrongly attributed debts, or even accounts you did not open.
Your credit score is a reflection of your financial health and responsibility. By checking it, you gain insights into areas where you excel and areas that may need improvement.
If you're considering a significant purchase, like buying a home or car, knowing your credit score can give you an idea of whether you're likely to be approved for a loan or what interest rates you might expect.
Regularly checking your credit score and report can help you spot unusual activities, such as unfamiliar accounts or sudden spikes in credit usage, which might indicate identity theft.
Understanding where your credit score stands can help you target applications for credit cards or loans more effectively, increasing the likelihood of approval and minimizing hard inquiries on your report.
A strong credit score can provide you with leverage when negotiating interest rates or other loan terms with lenders. By being aware of your high credit score, you are in a better position to discuss favorable terms.
Regularly monitoring your credit score allows you to see the effects of your financial decisions, track improvements over time, and celebrate milestones as your financial health improves.
By understanding the key factors that that influence your credit score, you can make better decisions about future financial moves, such as when to open or close credit accounts.
Checking your credit score ensures that you're not caught off guard, especially during crucial times like when applying for a rental agreement, loan, or even some job positions that require a credit check.
So, now that you know WHY you should check your score, you should be familiar with the WHAT. Namely, which factors go into calculating your credit score number.
Here's an extensive list of every factor that affects your overall FICO or Vantage credit score.
As you read the through the list, you'll get a feel for what goes into maintaining a good credit score. Look for positive and negative credit-related behaviors you may already be familiar with. As a preview, we’ll be reviewing about what to do if you check your credit score doesn’t look like it should in the sections below.
Payment history
A record of your payments on credit accounts. Late payments on collection accounts can decrease your score.
Common examples:
Credit utilization
The ratio of your current credit card balances to your available credit limits. Lower utilization is seen as positive.
Common examples:
Length of credit history
The age of your credit accounts. Older credit histories can be favorable if managed responsibly.
Common examples:
Types of credit esed
A mix of credit card debt and accounts can positively affect your score. Having only one type can be less favorable.
Common examples:
New credit
Number of recently opened accounts and inquiries. Opening many new accounts and in a short time is viewed as risky.
Common examples:
Public records
Bankruptcies, tax liens, and civil judgments can negatively impact your score.
Common examples:
Total amounts owed
The total amount you owe across accounts. Large amounts can indicate higher risk.
Common examples:
Recent activity
Recent behavior like high credit utilization or many inquiries can impact your score.
Common examples:
Credit inquiries
Hard inquiries occur when a lender checks your credit. Multiple hard inquiries can signal risk.
Common examples:
Bear in mind that both FICO and VantageScore use different scoring models based on the factors above. Similarly, lenders and credit bureaus will weigh your credit history against these factors, so it’s not uncommon to have credit scores that vary between scoring models and importance.
Without further ado, let’s get into how to check your credit score.
There are multiple ways for you to access your credit scores. Here are some of the most trusted methods:
Several banks and credit card companies provide their customers with free monthly or quarterly credit scores as a part of their service. It a free service that's often available when you log into your online account or shown on your paper statement.
Credit expert tip: If you’re looking for an easy way to check your credit score, use each time you log into your bank’s app or site as a way of watching your finances. For most people, you’re already doing it so why not take a peek at your credit score.
You’ll find that improving your credit can be gamified–while it’s not Candy Crush, you can make a game of boosting your credit score through managing your credit card(s) and other financial activity.
In the U.S., there are three major three credit reporting agencies: Experian, Equifax, and TransUnion. By law, you're entitled to one free credit report from each of these bureaus every year. Although the report doesn't always include a free score, you can often purchase it for a nominal fee.
Sign up for your free credit score from an official credit bureau isn’t too tricky. For example, here’s what you’ll need to do for an Experian Report:
Many online platforms offer free credit scores and reports. Popular services include Credit Karma, WalletHub, and Credit Sesame. While these platforms are useful, remember that the scores provided might differ slightly from what lenders see, as they might use different credit scoring models or criteria.
Just a heads up: Be careful when you're checking your own credit score for free anyway, especially online. Make sure you're using a service that people trust. And watch out for those sites who ask for your credit card info in exchange for a "free" credit score service. Stick with places that the recommendations above.
Non-profit credit counselors are great for helping you keep an eye on your credit score. They know all the ins and outs of getting your free credit reports and scores from the big credit agencies. These counselors are like your credit score guides, explaining why your score matters and how it impacts things like loans and money opportunities. They'll go through your credit report with you, flagging any mistakes or issues that could be dragging your score down. This hands-on approach can save you from future money troubles.
Plus, these non-profit credit counselors are like your credit score buddies. They'll stay in touch regularly to make sure you're up to date with your credit reports and to check your credit scores themselves. This is useful because it helps you stay on top of any changes or improvements. And if you're on a mission to boost your credit, these experts can give you personalized tips on what to do. Partnering up with a non-profit credit counselor gives you the tools and know-how to watch over and manage your credit score like a pro, setting you up for better financial success.
It's important to know why your credit scores might not match up across different credit bureaus. These scores can vary because each bureau might be using slightly different info about your financial history.
Also, they could be using their own calculations based on which lenders and which financial products and institutions they serve. So, don't freak out if you see a difference – it's pretty normal.
Most typical variance in credit scores is within 20 points on average, so you’ll still have a good idea of how your credit ranks (Poor > Fair > Good > Great > Perfect).
Just a heads-up: If you're comparing credit scores from different bureaus, don't be surprised if they're not identical. It happens because they might be looking at different things in your credit history.
No one likes a low credit score–not you, and especially not lenders!. If you’re feeling proactive, however, you’re in luck: There are plenty of actions you can take right now that will transform your credit in a matter of weeks.
Here’s a short breakdown of what you can do today:
Start by obtaining a free copy of your credit report from three major credit bureaus here. Look for any inaccuracies, such as wrong account information or incorrect payment histories. If you spot any mistakes, take steps to dispute them.
Consistently making timely payments on all your debts and bills is one of the most effective ways to improve your credit score. Set up reminders or automatic payments to avoid missed deadlines.
Aim to reduce the amounts you owe, especially on credit cards. A good rule of thumb is to keep your credit utilization below 30%. This means if you have a no credit limit or card company top limit of $10,000, try to keep your balance below $3,000.
Every time you apply for a new line of credit, a hard inquiry is recorded on your credit report, which can temporarily lower your score. If your credit score is already low, consider holding off on applying for new credit until your score improves.
If you're having trouble getting approved for a traditional credit card, consider a secured card. With this, you deposit a certain amount of money up front as collateral. Over time, responsible use of a secured credit card issuer also can help improve your credit score.
If you're feeling overwhelmed, consider consulting with a credit counseling agency. These organizations can offer guidance on managing debt and improving your credit. Ensure the agency is reputable and accredited.
While it's not advisable to take on debt you don't need, diversifying the types of credit you have (e.g., credit cards, installment loans, retail accounts) can positively impact your score over time.
The length of your credit history plays a role in your credit score. Closing old accounts, especially your oldest ones, can shorten your credit history and may negatively affect your score.
When you're struggling with debt, you may want to consult a credit counseling professional to discuss your situation. Credit counselors can assist with many financial questions and problems and can also give advice on assessing credit scores and explaining the best strategies for improving credit.
Improving your credit score is a marathon, not a sprint. Continue practicing good credit habits and over time, you should see improvements in your score.
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While it's a good idea to monitor your score regularly, most experts recommend checking it at least once a year, or before making any significant financial decision.
No, checking your own credit score is considered a soft inquiry and does not impact your score. However, when a lender checks it as part of an application, it might.
The checks you have made on your credit score don't impact your credit score. When you check the credit score the requested item appears on the same credit file and history.. The report has been treated as an indirect inquiry. Similarly, soft inquiries have no impact on credit ratings.
Credit Karma is generally considered a trustworthy platform for accessing your credit scores and reports. It provides free access to your credit information and offers valuable tools to help you monitor and manage your credit health. However, it's important to understand a few points:
In the United States, the average credit score stands at 714, as indicated by FICO data sourced from Experian. Additionally, the average VantageScore is reported to be 702. These credit scores, akin to evaluations of your borrowing track record, encompass a scale spanning from 300 to 850.
If you’ve read up to this point, take a bow! Learning about your credit score and all that goes into it may be a bit challenging, but now you're up to speed on how important it is to check your credit score as well as the steps you can take to get the best score possible.
