It is a common misconception that credit scores can be obtained from the three national credit bureaus. However, the credit reports from these do not contain credit scores. So, how do we check credit scores which predict your ability to repay a new debt? It, directly and indirectly, affects different aspects of our life. Here, we navigate through the process involved in checking the credit scores.
Credit Score: A Quick Look
Banks, credit card companies, and certain financial institutions use credit scores. A credit score reveals your risk profile and the likelihood of repaying a loan. Equifax, Experian, and TransUnion are the three major bureaus that gather, analyze, and distribute the information in the credit markets.
The scoring models adapted for calculating credit scores revolve around FICO and VantageScore. While the algorithm used for both may be different, the major factors taken into consideration are the following for both:
- Payment history
- Amounts owed
- Credit history
- New Credit
- Credit mix
Why is checking credit score important?
In short, it is no secret that your credit score is directly linked to your insurance premium rates and approval of auto loans. Therefore it is important to keep a tab on your credit score. It must be a routine to check your credit scores regularly.
Also, it doesn’t hurt to keep a regular track of your credit score. In other words, it only helps you to maintain financial discipline. This is because a credit score gives an idea about the following.
Let’s you identify your financial position
Keeping a tab on the credit score either alerts you to improve your score or helps you analyze your financial habits. Following the right financial practices is a prerequisite for a stable credit score.
Helps you build a strong credit history
Though it can’t be compared to the age-old adage of making hay while the sun shines, periodical checking of your credit score will aid you in building a strong credit history, picking the shortcomings at every step. In addition, having a good credit score will help you get a similar credit-based insurance score which directly impacts your insurance premiums.
Be aware of the changes in your score.
If you are in the habit of checking your credit score regularly, then it becomes easier for you to understand where you have gone wrong then. This will allow you to take urgent action to recover the lost score points.
You become eligible for better offers.
With better credit scores, you are eligible for credit cards that offer rewards and other discounts. Meanwhile, a strong credit score can also be used to cut down on credit card interest rates.
Detect inaccurate information
Besides knowing your current credit position, checking your credit score regularly can help detect any errors in the score. This will help in reporting fraudulent activities sooner and picking any unfamiliar accounts in your report.
Credit Report v/s Credit Score
The three major credit bureaus, Experian, Equifax, and TransUnion, each provide one free credit report each year. You can access these at www.annualcreditreports.com. However, one must keep in mind that accessing your credit report does not give you a credit score.
A credit report includes bill payment history, repayment status of your current loans, bankruptcies, collection accounts, and types of credit accounts. On the other hand, the credit score will include credit utilization, payment history, accrued debt, length of credit history, past credit inquiries, and credit utilization.
In general, a credit score is a three-digit number designed to represent your credit risk which defines your credibility on timely payment of bills. On the other hand, credit history is the record of how you have managed your credit accounts.
Where can I get my credit score from?
Your credit scores are provided by banks, credit counselors, credit bureaus, credit score services, and credit scoring websites.
How can I check my credit score?
There are different ways to check your credit scores.
- The simplest way to check your credit score is by associating with your credit card company, banks, or loan providers. They either provide it through your statement or give access to it by logging in to your respective account.
- FICO or other credit bureaus, Equifax, Experian, and TransUnion, can also provide credit scores.
- A free credit scoring website or other credit score service can give you the s me These websites you to sign up for their subscription to gain access to your scores.
- Credit counselors can also help you with the same for a fixed fee or otherwise.
Does regular tracking affect my credit score?
When it comes to credit score inquiries, there are soft credit inquiries and hard credit inquiries. The soft credit inquiry pulls your credit records for 12 to 24 months, but they are not visible to any lenders or financial organizations that issue loans during that time.
However, a hard credit inquiry is capable of influencing your credit score. This is required while applying for a car loan, personal loan, mortgage, or credit c rd. This will be visible to the lenders and will affect the scores by 4 or 5 points.
Staying on track is the most essential factor while handling credit scores. Improving and maintaining your credit scores will result in better financial health. A soft inquiry of your credit score regularly will help you achieve it.