How To Look At Your Credit Score
Everyone’s heard the term “credit score,” but that doesn’t mean they know what it is, how to access it or that each person has more than one.
Maybe you’ve been able to avoid the seemingly complicated world of personal finance, but trust me, you can’t hide forever. If you want to apply for a loan, mortgage or credit card, you will need to know how to access your credit score and what it means. Luckily, checking your credit score is not as difficult as you might think. Here is everything you need to know to become an expert at managing your credit.
What Is A Credit Score?
A credit score is a three-digit number that represents your credit history and the likelihood you will repay debt. It considers factors such as how long you’ve had credit, how much credit you have, how much of your credit is used and if you pay your bills on time. Lenders and banks use this number when deciding if they will approve you for a credit card or loan. If they do approve you, they also use this number to decide what the loan terms will be.
How Are Credit Scores Calculated?
Your credit score is calculated using scoring models that gather information based on your credit reports which are generated by the three main credit bureaus (Equifax, Experian and TransUnion®). Two of the most common credit scoring models are VantageScore 3.0® and FICO®.
Your credit score is based off many factors including payment history and the number of accounts you have open. It will never be based off personal information such as race, gender or religion.
Typically, credit scores range from 300-850.
What Affects My Credit Scores?
Though each credit scoring model considers their own unique factors, the FICO® scoring model is an industry standard and is the most commonly used scoring model. Here’s what factors affect the FICO® scoring model:
Payment history is the most important variable that affects your FICO® Score, making up 35% of your total score. This factor looks at your payment record and history of on-time and late payments.
The second biggest influencer of your FICO® Score is amounts owed, which makes up 30% of your overall score. Amounts owed considers how much money you owe on your accounts and how much credit you have available. The closer your balance is to zero, the higher your credit score will be.
Length Of Credit History
How long you’ve had credit makes up 15% of your FICO® Score. The length of your credit history is based off the age of your oldest and newest accounts as well as an average of all your accounts. Typically, the longer your credit history is, the higher your credit score will be.
10% of your FICO® Score is comprised of your credit mix, or diversity of accounts. This factor looks at your mix of loans, credit cards and retail accounts. To have a higher credit score, it’s important to show that you can manage a variety of credit types.
New credit makes up 10% of your overall score and looks at how many credit accounts you have opened recently. Your credit score can be hurt if you open too many credit accounts in a short period of time, so be careful!
How Can I Have More Than One Credit Score?
Because there are many different credit scoring models, it’s possible to have more than one credit score. There’s a chance that one credit bureau may have more information on your credit report than another, or maybe your lender doesn’t report to all (or any of the) three credit bureaus.
You could also have varying credit scores depending on what type of lender you are working with. A mortgage lender will use a different scoring model than an auto lender.
Bottom line – don’t worry if you have more than one credit score because it’s very common! It’s okay to have more than one as long as they aren’t significantly different. If you do spot an inaccuracy or see something incorrect, request a dispute from the credit bureau within 30 days of receiving your credit report.
What Is A Good Credit Score?
Although the guidelines of a “good” credit score can differ from lender to lender, you should know that the higher your credit score is, the better. The higher your credit score is, the less likely you are to pose a risk and the higher chance you will be eligible for better loan terms. Having better loan terms may help you qualify for a lower interest rate and will ultimately save you a lot of money in the long run.
Generally, most lenders consider any score over 670 to be a good credit score. Credit scores ranging from 670 to 739 are considered good scores, while scores ranging from 740 to 799 are named very good. Any credit score that’s 800 and up is exceptional.
Now that you know what good credit scores are, it’s time to see what yours is!
How To Access Your Credit Score
It’s smart to check your credit score frequently so you can work on managing and building it.
Each year, you are entitled to a free copy of your credit report from each of the three major credit bureaus. You can also get access to your credit report within 60 days of being denied credit or if you are on welfare, unemployed or your report is inaccurate.
But what if you’ve already viewed your free reports and you still want to check your score? Don’t worry. We’ve got you covered.
Rocket HQSM allows you to monitor your credit by giving you free access to your VantageScore 3.0® credit score and a report from TransUnion® every week. This score will give you detailed information about your report and include advice for how you can improve your credit score over time.
How To Improve Your Credit Score
Now that you know what your credit score is and how to look at it, it’s important that you continue to build your credit. For more tips on increasing your credit score, visit the Zing Blog.
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