What Is a Credit Score?
Your credit score is an extremely important part of your financial life. It's a number between 300 and 850 that is calculated based on several factors, including your payment history, credit inquiries, credit usage, length of credit history, and any new credit you have.
- Credit scores are used by lenders and others to evaluate the creditworthiness of an applicant.
- Equifax, Experian, and TransUnion offer annual free credit reports, but not credit scores.
- You can get your credit score for free from credit monitoring websites
- Some credit card companies also provide cardholders with their credit scores.
Think of your credit score as a grade you receive in school. Lenders and other creditors report your information to the three credit bureaus, which affects your score. They also base their decision to extend you credit on this number, which spells out whether or not you get that mortgage or loan. It's also used by others, such as employers, insurance companies, and landlords. The higher your score, the more likely you are to be approved. But a lower score means that you may be denied or, if approved, have to pay more in interest.
This is why monitoring your credit score is so important. Knowing your score means you'll be better prepared when it comes to applying for credit and it also helps keep you in check. But how do you monitor your score? This article gives you the lowdown on your score as well as some of the many sources that provide you with your rating for free.
The Importance of Knowing Your Score
As we mentioned above, you shouldn't go through life without knowing your credit score. This number is updated regularly. It goes up or down usually every month, but it may even be changed more frequently based on who's reporting.
Knowing your score means you're more likely to make better decisions about your finances. Having a lower score may make you more cautious about applying for new credit as there's a good chance you'll be denied. If you have a lot of inquiries and very few accounts, your score drops, and lenders may refuse to grant you a new account. On the other hand, knowing you have a higher credit score makes you a more attractive (and confident) applicant to creditors.
Keep in mind that checking your credit score isn't the same as checking your credit report. Your credit report provides a detailed history of your financial life, including any accounts you have, how often you've paid them on time, any delinquencies, bankruptcy reports, flags and messages, write-offs, and inquiries. The report also includes the dates of any changes to your credit history. You can use this history to account for and report any discrepancies.
You can start by going to the three major credit bureaus, Equifax, Experian, and TransUnion first by logging on to AnnualCreditReport.com to check your report for free. Each agency gives you access to your report once every 12 months. You'll have to pay them if you want your credit score. But why pay when you can get your score for free?
If you sign up for the following free services, you’ll get a broad view of your credit score with each of the major credit bureaus. And if you combine Credit Karma or WalletHub’s free TransUnion credit reports with those from AnnualCreditReport.com, you’ll be in a better position to catch identity theft or other problems in their early stages.
Credit Karma: Best for Scores and Reports
Credit Karma provides free credit scores and reports from TransUnion and Equifax that are updated weekly. The best thing about this service is that you don't have to provide a credit card to register.
The free TransUnion and Equifax credit scores are based on the VantageScore 3.0 model. This is a newer scoring model created through a collaboration among the three major credit bureaus to devise a consistent score from one bureau to the next. It's also supposed to be more accurate compared with traditional FICO scores.
There are other, more specialized credit scores in addition to the FICO and VantageScore, which are used by certain creditors like insurance companies.
You also get free credit monitoring for your TransUnion report, a credit factors analysis that summarizes key details from your credit report, and a free credit score simulator that shows you how various actions, like adding a new credit card or increasing your credit line, may affect your credit score. Credit Karma also offers a free auto insurance score.
Credit Karma says it does not sell information to advertisers, but it does recommend financial products based on your credit profile. If you open an account, it makes money with one of its advertising partners through its website.
Credit Sesame: Best for Personalized Tips
Credit Sesame is another credit monitoring service that is slightly different from Credit Karma. This one gives members access to their VantageScore directly from TransUnion. It also provides personalized tips based on your credit profile and goals. And finally, it gathers all of your credit information and makes money-saving suggestions.
Credit Sesame also gives you options you can use to lower payments if you pay more in fees and interest. The site also provides credit monitoring and alerts in case your profile or identity is compromised. Consumers can also get $50,000 in fraud resolution assistance for free through Credit Sesame. Like Credit Karma, this site doesn't ask for a credit card to join.
Credit Sesame is one of the best free credit monitoring services on the market.
Credit.com: Best for Monthly Updates
You can get two free credit scores by registering on Credit.com—an Experian score and your VantageScore 3.0, which is updated once a month. You have to sign up for a free account, but you won't be required to put in a credit card number to register.
The site also offers a free credit report card that shows how the information from your credit report affects your score and provides tips for improving your score.
Credit.com says it does not sell your data to third parties but does make money if you apply for offers through promotional links on its website.
WalletHub: Best for Credit Alerts
WalletHub provides you with credit reports from TransUnion and the TransUnion VantageScore. To register, you'll need to provide your personal details and the last four digits of your Social Security number (SSN), and you'll have to answer a few questions to verify your identity. The site also asks other questions, such as your annual income, monthly expenses, and credit card debt to complete the registration.
The dashboard shows all of your credit accounts and balances while the credit alert section gives you a report card-style letter grade on the factors that influence your score. For example, the site warns you if your debt load is too high relative to your income or if your credit utilization ratio is too high and hurting your score.
Drop-down menus provide additional details, such as your credit utilization ratio. An easy-to-read version of your credit report shows all of your current and closed accounts, and any negative items, like collection accounts.
A menu bar across the top of the page provides information about financial products and services, such as checking accounts and car loans. WalletHub earns money from some of these companies, which advertise and pay for premium placements on the site.
Get Free Credit Scores From Credit Card Companies
Many credit card companies offer their customers, and sometimes others, a free look at their credit scores, so you have other options than those listed above. We've listed some of the most prominent ones below.
Discover Card customers receive their free TransUnion FICO credit score on each monthly statement. Cardholders who are still establishing their credit history may not see a score until they've made several months of payments.
Keep in mind, though, that the primary cardholder is the only one who will receive a free credit score. You won't receive one if you're an authorized user on the card.
Barclaycard customers get a free FICO score on their monthly statements. They can also see up to two factors that affect their credit score, such as “balances on a bank card or revolving accounts too high compared to credit limits” (in other words, a high credit utilization ratio) or the “total of all balances on your open accounts is too high.”
This information can help you improve your credit score by changing the way you use credit. Barclaycard also provides a chart showing how your credit score has changed over time once you have three months of credit score history.
Capital One Card
Capital One's CreditWise service is available to anyone, whether you're a cardholder or not. Through this service, you can get access to your VantageScore 3.0 every month and be alerted to any changes in it.
One of the key features of this service is its simulator, which allows you to see the factors that will affect your score and overall credit health and by how much. For example, you can see how much of an impact a $1,500 purchase on a credit card or taking out a $10,000 loan will make on your credit score.
First National Bank offers its credit card users a free FICO Bankcard Score 9, which is a score tailored to credit card lending. It is not, in other words, the score a mortgage lender would use when deciding whether you can borrow money to buy a house, but it will still give you some idea of where you stand. Your score is updated once a month.
The Bottom Line
Knowing your credit score is one of the most important things you can do for your financial health. This number tells you just how creditworthy you are before you apply for a loan, mortgage, or other credit product. The higher your score, the more likely you'll be approved. And there's a very good chance that you'll end up paying a lower interest rate.
If you sign up for the free services listed above, you’ll get a broad view of your credit score with each of the major credit bureaus. And if you combine Credit Karma or WalletHub’s free TransUnion credit reports with those from AnnualCreditReport.com, you’ll be in a better position to catch identity theft or other problems in their early stages. If all else fails, you can still access your score through some of the credit card companies we listed above.