You Have No Excuse for Not Checking Your Free Credit Score
We live in an age where information is constantly at our fingertips. With a few clicks and Google searches you know how to get in the best shape of your life, how much money you should be saving, and ways to save on your cellphone bill. In most cases, you’ve probably learned the best ways to take advantage of the information that’s available to you. It’s why you no longer have an excuse for having no idea what your credit score is, or what’s on your credit report.
Your credit report and score work hand in hand as barometers for how well you handle your debts. Your credit report includes your personal information, the lines of credit you have (such as student loans, car payments, and a mortgage), the inquiries about your credit (from applying for credit cards or loans), and any public records related to debt collection. Your credit score is a number that summarizes the health of your report. There are a few different types of scores, but the most common is the FICO score, which ranges from 300 to 850. With an excellent score at about 740 or higher, you’re likely to get the lowest interest rates available to you.
Your credit information is collected by three major credit reporting agencies: Experian, TransUnion, and Equifax. Your score is dependent upon a number of factors, including how long you’ve taken out credit, how much money you owe on your loans and credit card bills, and whether you make those payments on time.
Why knowing your credit score is so important
While your credit report is just a small portion of your overall financial well-being, it can play a significant role in how much money you’re able to save when it comes to big purchases. A poor credit report or low credit score can mean that potential employers, landlords, and lending agencies view you as a financial risk, meaning you could be passed over for jobs, incur higher rent fees, lose out on credit card rewards, and have trouble getting a decent loan.
A good credit score and healthy report will help you secure loans for houses, cars, or other items at a lower interest rate. An excellent score compared to even a respectable score can save you hundreds of dollars per month on your mortgage, for example. Knowledge is power, and knowing your score will help you negotiate a favorable interest rate with your lender when the time comes.
Getting access to your credit report regularly also ensures there’s no mistakes on it, which can be a problem more often than you might think. One study released by the Federal Trade Commission in 2013 found that roughly 21% of Americans discovered an error on their credit report that would change their credit score, in most cases improving it. The changes were often small, though a small amount of consumers found an error that, when improved, substantially improved their credit score. A follow-up study, release at the beginning of 2015, found that many of the errors persisted. It’s hard work to correct an error on your report, but it otherwise won’t happen at all.
In addition, knowing your score and checking your report frequently can serve as a safeguard against fraud and identity theft. If you access your report and see that a new credit card was opened or someone applied for a loan using your information, you’re more likely to be ahead of the curve and find ways to cancel the loans or cards before you’re on the line for those costs.
How to get your score for free
You can purchase your credit score from FICO, which will provide you with the number that potential lenders see when they check your credit score. But if you use the proper methods, you should be able to get this accurate information for free.
Annual free report
First, you are entitled to one free credit report each year from AnnualCreditReport.com, which can provide your report from each of the three credit reporting agencies. This is the only free credit report authorized by the Federal Trade Commission and the federal government; the only catch is that your credit changes more frequently than once a year and the free report doesn’t include your actual credit score. However, it will help you establish a baseline for your current credit score and your report’s health, especially if you’ve never checked your report or score before.
On your credit card bills and loan statements
This isn’t a guarantee, but many credit card companies and banks have begun offering the FICO scores to account holders, either through the financial institution’s site or directly on the monthly statements. Access varies, but American Express, Bank of America, Capital One, Citibank, Chase, and Discover are just a few of the banks and credit card companies offering this to their clients. Most of these scores and reports are updated on a monthly basis.
From financial companies
Several companies now offer credit reports and scores for free, though there are several factors you should know. One, if you’re ever asked for a credit card number, it’s probably not actually “free.” In most of those cases, you’ll be automatically enrolled in a subscription plan after a free trial, which can end up charging you each month for the score and report.
Two, you have a variety of scores. “The truth is that because there are so many different scoring models, there is no one real score. It’s not like the SATs,” writes Christine DiGangi for Credit.com. Each of the three reporting agencies has their own score. They’re likely to be in the same ballpark, but could vary by a few points. Along those lines, sites like CreditKarma and others use a VantageScore, which is calculated differently from your FICO score. Since FICO scores are used by 90% of lenders, you might be getting a different perspective on your score than your banker if you use sites like this.
If it’s not time to get another annual report yet and you don’t have access to your FICO score from your bank or credit card company, using the alternative scores isn’t a bad idea, provided you follow the same score over time and you realize it could be different from what lenders are seeing.
WalletHub is just one of the companies that recently began offering free credit reports and credit scores. “We want to use this information to help people improve their financial lives,” Oysseas Papadimitriou, founder and CEO of WalletHub, told The Cheat Sheet in an interview. Papadimitriou believes strongly in knowing the full extent of your financial well-being, which is why WalletHub updates both the scores and the reports on a daily basis. Users will also get a text message and an email whenever someone applies for a credit card in your name – meaning you’ll have to-the-minute alerts that will hopefully protect against fraud. Aesthetically, Papadimitriou also noted that the site doesn’t rely on advertisements for revenue in the same way some other sites do, meaning the page won’t be like a billboard when you access your information.
Here are a few other sites that offer free credit scores and/or reports: