Why do you need to know your credit score?

Whether you know your credit score or not, it’s probably having a major impact on your life right now.

Large companies called credit bureaus monitor your financial habits and use that info to assign you a number. That number tells people how risky you are to deal with and directly affects the interest you’ll pay on things like credit cards, car loans and mortgages.

Why? Banks and other companies don’t like lending people money if they’re not 100% sure they’ll get paid back on time. Even if they do say yes to a person with a low score, they’ll charge a high price to make up for the risk.

Credit scores are also sometimes used as an easy way to judge your overall truthworthiness.

Some potential employers and landlords will check your credit before they make a decision on you. And in many states, auto insurers can use your credit history to decide how much to charge.

Monitoring your credit will let you know whether you're suffering ill effects and how much room you have to improve. Plus, if your score seems surprisingly low, that might tip you off to fraud or a harmful reporting error.

Bill Gates made a splash in 2017 when he bought $520 million worth of U.S. farmland, and he’s continued to invest since. What’s in it for Gates?

Read More

What does a good credit score look like?

First, it's important to understand that you don't have just one credit score. You have many.

Each credit bureau has access to slightly different information about you, and they each use a variety of scoring formulas to judge your trustworthiness for different purposes.

That said, there are two main credit scoring models. The classic FICO model is currently the most popular, while VantageScore is an alternative launched in 2006.

If you're just looking to get an overall impression of your credit health, most any free consumer credit score will do. The calculations share many common factors.

Both FICO scores and VantageScores range from 300 to 850, with 300 being the lowest and 850 being the highest. Here's how FICO breaks down its ratings:

  • 300-640: Low. A credit score in this range suggests you’ve had major troubles, like foreclosures or bankruptcy. You may struggle to get approved for a standard loan or credit card and may need to explore special options.

  • 640-680: Medium-low. You may have a history of late payments, have defaulted in the past or may be borrowing as much as you possibly can. Loans may have high interest rates tacked on.

  • 680-720: Medium-high. Lenders will know you’re trustworthy, granting access to good interest rates and more exclusive credit cards. You may still be locked out of the best products and rates.

  • 720-850: High. With a score this good, you’ll have access to high credit limits, the low interest rates, rapid approvals and premium credit card perks.

How to get a free credit score

1. Check with your bank or credit card issuer

Graphic
Steven Twigg / MoneyWise
Check with your bank or credit card issuer

Many banks and credit card companies offer free credit scores to their customers as a perk.

You can typically find the option on the company website or app.

Some popular banks and card issuers that offer free scores include:

  • Bank of America
  • Citibank
  • HSBC
  • Wells Fargo
  • American Express
  • Barclays
  • Capital One
  • Discover
  • Chase

2. Go through an online service

Graphic
Steven Twigg / MoneyWise
Go through an online service

You can receive free credit scores from a number of online providers such as Credit Sesame, Credit Karma, CreditWise and ImportantScore.com.

These online services provide access to a credit score from at least one of the three major credit bureaus — Experian, TransUnion and Equifax — giving you a quick snapshot of your credit status. (Unlike its counterparts, Experian also offers a credit score for free on its website.)

Signing up will require you to provide a range of personal information. Once you're in, you'll get access to a free credit score along with free credit monitoring.

The provider will likely recommend a number of paid products and services to you based on your score, but they're not compulsory.

And in case you're worried, looking into your credit score this way does not count as a "hard inquiry" into your credit and is not one of the factors that will affect your score.

3. Find out when applying for a loan

Graphic
Steven Twigg / MoneyWise
Find out when applying for a loan

If you're thinking about applying for a mortgage while rates are still at historic lows, you'll receive your credit score as part of the application process.

Applying for personal loans will also net you access to a credit score. If you apply for a loan and your application is denied, the lender is required by law to show you your credit score.

They'll also let you know which of the major credit bureaus provided your credit report. If you're not satisfied with the result, you can get a copy of your credit report at no extra charge.

Are you thinking about saving? Well, stop thinking about it!

Take the change out of your piggy bank and make it work for you.

Acorns is a financial wellness tool that automatically rounds up your card purchases to the nearest dollar and puts those savings into an investment account. It takes the worrying out of investing and matches you with one of five investment portfolios.

Take five minutes to sign up for Acorns today and collect a $10 bonus.

About the Author

Kevin Hamilton

Kevin Hamilton

Senior Associate Editor

Kevin Hamilton is a senior associate editor at MoneyWise. An award-winning graduate of Ryerson University’s school of journalism, Kevin has made his mark at a number of publications including Metro, the Toronto Star, the Huffington Post, Toronto Life and the National Observer.

Disclaimer

The content provided on MoneyWise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.