I’d like to pay more than I have to — said no one, ever. But if you have a low credit score, you’re likely paying more for all sorts of things, like your car, your home and even student loans, than those with a higher one.
If you’re not even sure where you stand, then you may be thinking, I need to know how to check my credit score. It’s not that difficult and should be a regular part of your financial routine — but first, you have to understand why your credit score is important.
WHAT’S IN A CREDIT SCORE
Your credit score is the number that a lender will use to gauge how likely you are to repay what you borrow. Credit scores usually range from 300 to 850; the higher the score, the better your credit. And when you have good credit, lenders are willing to charge you lower interest rates or better lending terms because they feel more confident you’ll pay them back.
If you have a score over 700, that’s generally considered to be good. Anything below 500 is considered poor.
Your credit score is affected by a number of factors, but these are thought to be the most impactful:
- Your payment history: When you pay your bills on time, it can benefit your score, while late payments can hurt it.
- How much credit you’re using: This is known as credit utilization. If you have a credit limit of $20,000 on your cards and you have a balance of $3,000, then you’re not using that much of your available credit — just 15% — and this is good for your score. If you have a credit limit of $2,000 and a $1,500 balance, you’re using 50% of your available credit, which is a lot — and that can bring your score down. Pro tip: This is why some people give the advice not to close old cards. If you have the credit available but don’t spend it, you can positively impact this part of your score.
- Length of your credit history: Typically the longer you’ve had a line of credit, the better.
- Inquiries on your credit report: When you apply for a line of credit or a loan, the lender will place an inquiry to check your credit history. Lots of inquiries — even those that a landlord would make when you’re moving into a new apartment — could be bad for your score. If you’re checking your own credit report, however, that doesn’t count against you.
- Mix of credit that you have: This is typically a smaller factor, but looks at the types of credit you have, including credit cards, car loans, mortgages and even home-equity loans. Having different types of credit to your name can help your score.
WHO’S KEEPING SCORE
There are three main credit bureaus that keep track of your score: Experian, Transunion and Equifax. They calculate your score using information in your credit report, which they also keep track of. The report offers a history of all your credit activities to date, including when accounts were opened, your various loan amounts, outstanding balances and repayment history.
Want to know what’s on your credit report? You can request your report from all three credit bureaus for free, once per year, via AnnualCreditReport.com. Here’s a trick that allows you to monitor your credit on a regular basis: Space out your requests with each bureau. In other words, you can check your TransUnion report today; then your report with Equifax in four months; and then with Experian in another four months.
HOW TO CHECK MY CREDIT SCORE
While checking your credit report with the credit bureaus is free and pretty standard, you typically have to pay to check your score with them. You can, however, check your score for free through websites like Credit Sesame and Credit Karma. In addition, many banks and credit cards now offer scores for free to customers. If you have a score over 700, that’s generally considered to be good. Anything below 500 is considered poor.
However you check it, it’s a good idea to know your credit score, and work to improve it.