Keeping track of your credit score is absolutely essential. Credit score is a 3-digit number between 300 and 850. Think of it as a numerical representation of your financial health. It gives you a pretty good picture of how creditworthy you are. Lenders and credit card companies will use this score to decide whether or not to extend you a line of credit.
It is especially important to check your credit score before applying for any loan, mortgage or credit card. This will give you an idea of your chances of getting approved as well as your potential interest rate.
There are four main ways you can check your credit score. Two are free.
Several financial institutions including credit card companies, loan companies and banks offer their customers a free look at their credit scores. It is usually listed on your statement. If your score not listed on your statement, log in to your online account to access it.
Few financial institutions and online credit monitoring sites offer an online tool on their website that allows users to check their credit score for free.
All the three major credit bureaus – Equifax, Experian, and TransUnion – will give you access to your credit scores for a nominal fee. You can also purchase access to your credit scores directly from FICO. You are entitled to a free copy of your credit report once a year from each of the major credit bureaus. However, access to credit scores is not free.
Some sites offer monthly subscription services that allow customers to access and monitor their credit scores.
Your credit score is calculated using specific information from your financial history. A certain percentage is assigned to the different aspects of your finances.
Payment history accounts for 35% of the total score. Consistent on-time payments will earn you the highest score under this category.
Credit utilization ratio accounts for 30% of your credit score. Using only a small amount of the credit available to you will help build your score in this category.
Length of credit history can add up to 15% to your score. Keeping old credit cards open increases your credit age, adding additional points to your score.
Types of credit in use adds another 10% to your score. Used a variety of credit lines is better for your score than using just one type.
Account inquiries make up 10% of your score. Too many credit inquiries can result in multiple hard credit pulls, lowering your score.
They only include information regarding your payment history, loans, current debts, and other relevant financial details. The information reflected on your credit report is used to calculate your credit score.
This is because each of the three major credit bureaus uses a different type of scoring model. This affects your score with that agency.
If you find any information on your report that is inaccurate, you can file a dispute with the appropriate credit bureau and ask them to fix it. You should also inform your credit card issuer or lender about the inaccurate entry.
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