Check Your Credit Score For Free

Your credit score is a numeric representation of the way you handle money. It consists of the five main components of your financial life, with each component providing a certain percentage of the total, based on its importance. The figures are based on similar weightings:

Payment history:35%
Amounts owed:30%
Length of history:15%
How many types of credit in use:10%
Account inquiries:10%
Potential lenders use your rating to evaluate how much risk is involved in lending you money. The higher your score, the lower your perceived risk. This little number is a major factor in whether or not you qualify for the best rates on loans or mortgages: Good ratings mean you get good rates and good terms, and the same is true in reverse. That's why it's important to maintain a good rating.

Your score is a number, typically between 300 and 850, though some scoring models can deliver figures outside this range, In general, ratings break down into general categories, though individual lenders may interpret them differently:

750 or aboveExcellent
700-740Good
650-699Fair
550-649Poor
550 and belowBad
If you have an 800, lenders will be rolling out the red carpet and offering all kinds of promotional deals to attract your business, because you present little or no risk to them. If you weigh in at 450, they are likely to lock the door if they see you coming, and if you can find anyone who will lend to you, your interest rate will be astronomical. That means that the people who most need good terms are the ones least likely to get them, but this evaluation is about risk, not fairness. The lower the risk, the better the deals you will get.

Where Does It Come From
The information that goes into that little number comes from a credit report, which in turn comes from one of three major reporting bureaus: Experian, Trans Union, and Equifax. These bureaus collect information on your financial history and package it in an easily usable form. The bureaus cannot use your race, religion salary, employment history, address or other personal information. A low-income person who pays every bill on time can easily have a better rating than a millionaire who consistently neglects payments.

One potential downside of this focus on your financial history is that if you have never or seldom borrowed money or bought items on installment, you may have a low score or none at all even if you have never missed a payment. Young people are often advised to get a credit card and use it carefully, paying every bill on time. If you don't have enough history to establish a score, you will not have a score.

We each have more than one score. Different lenders prefer to use different criteria to rate risk, and request scores based on slightly different weightings of criteria. Your scores are normally quite similar, and if one source rates you significantly lower than others, it's worth a close check to see if there's a mistake.

The FICO Score
The most widely used figure is the FICO Score, issued by the Fair Isaac Corporation. 90% of major lenders use FICO scores to assess customer creditworthiness, making it the gold standard in credit scoring.[1] To get a FICO Score, you must have an account that has been open for more than six months or has been reported to a bureau within six months. FICO generates many different scores for different clients, but the variation will usually be small.

The VantageScore
The VantageScore was introduced in 2006 by the three major credit bureaus as a competitor to FICO. The Company claims that the model is more predictive and can rate more people than FICO's, but the competition doesn't mean much to you: they are competing to get lenders to use their product, which is where they make their money! Your main interest in knowing different scores is assuring that they are not radically different, which could indicate an error.

How to Check
You can check where you stand without spending a cent! Let's look at some of the methods you can use.

Credit Karma, Credit Sesame, and Quizzle
All three of these separate services are completely free. All you have to do is sign up online, answer several questions to confirm your identity, and you have access to your score! You won't even be asked to supply your card information. Additional options, however, can require a small fee. Such options include services to analyze your credit history and look at what might be helping or hurting your credit score.

None of these agencies will give you your FICO score. While it's useful to know what your VantageScore 3.0 might be, FICO is where it's at, and it might be worth it to spend a few extra dollars to know what that is.

Notes