A Guide to Monitoring Your Credit Score
What’s your credit score? This question is commonly asked by lenders, credit card companies, banks, and even prospective landlords or employers. If you’re being asked about your credit score for the first time, you may not know where to find the answer or why it matters.
What is a credit score and why is it important?
A credit score is a three-digit number calculated from your credit report. Lenders utilize this score to determine your creditworthiness for a new credit card, a loan, or a mortgage. Prospective landlords and employers may want to know your score as well, as a way to measure your level of financial responsibility.
How is my credit score calculated?
There are numerous credit score models used to determine this number. The Fair Isaac Corporation (FICO) score dominates the marketplace, as an estimated 90% of all top lenders use FICO scores to make credit-related decisions.
A FICO score ranges from 300 to 850; a higher number is better, as it suggests less risk. The three national credit bureaus, Equifax, Experian, and TransUnion, all have a FICO score for you, based on the background information that they carry on you, both negative and positive.
A FICO score is based on five components: 35% Payment History, 30% Amounts Owed, 15% Length of Credit History, 10% Types of Credit in Use, and 10% New Credit.
How do I check my credit?
Your credit score is calculated from your credit report, which contains information on all loans and credit cards you have had. It affects everything from your loan approvals, interest rates you’re charged, to your eligibility for an apartment. Here are several options for finding and monitoring your credit score and credit report.
1. Government Credit Report
Thanks to the Federal Trade Commission’s Fair Credit Reporting Act (FCRA), the three national credit reporting bureaus will annually provide you with a free credit report. Federal law ensures that your credit report information is current and correct. A credit report represents a summary of your financial history to pay debts and bills. A credit score is a number calculated from the information found in your credit file; lenders and landlords—among others—will review this to assess your personal “credit risk” at that current time.
To obtain a copy of your credit report, you can go to the central website, annualcreditreport.com, call the toll-free number (1-877-322-8228) or send an Annual Credit Report Request Form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
The credit bureaus will furnish you with a copy of your credit report and from that you can purchase your credit score. It is important to review your credit report for accuracy as your score is based on this information.
Keep in mind, you can obtain this free report only once a year. Be wary of emails, pop-up ads, or phone calls from people saying they represent annualcreditreport.com or any of the three major credit reporting companies. It’s probably a scam.
2. Credit card companies
Credit card companies will offer you a free FICO score based on either your TransUnion or Experian credit report, which can help you track your credit activity including the negative (identity theft) and the positive (a rising score).
These credit cards have the following credit score offerings.
Available when logging online to your account:
- American Express and First National (Experian FICO score)
- Barclaycard US (TransUnion FICO score)
- Citi (Equifax FICO score)
Available on your monthly statement:
- Discover (TransUnion FICO score)
Access to FICO scores:
- Chase Slate card
- Bank of America’s consumer credit card holders
While these FICO scores are free, many of these cards are not. Some will come with annual fees, minimum account balances, and good credit requirements. Consumers with poor credit will likely not have access to them and their offerings.
3. Credit monitoring services
Credit monitoring services will help you keep track of your credit and improve it as well as assist in protecting against identity theft. These services include Identity Force, Identity Guard, and Identity LifeLock along with Experian and TransUnion; however, they come at a price.
- An Experian credit report and a FICO Score costs $19.95, or you can get all three credit bureau reports for $39.95.
- A TransUnion credit score is free (with a $1 credit report), but this brings a free seven-day trial. If you forget to cancel it, you’ll be hit with a $17.95 membership fee.
- True Identity, used for the security of ID theft protection, will charge you $9.95 per month to monitor public records as other services and alerts to see if your information appears. Identity Guard’s Total Protection Plan is $19.99, and you will receive your credit score quarterly.
4. Credit score sites
Credit score sites, such as Credit Karma and Credit Sesame, will give consumers free credit scores from Equifax and TransUnion along with credit monitoring and credit reports. These sites are comprehensive credit sites and offer a lot of assistance with selecting and using credit cards as well as financial tips, education, and identity theft prevention.
A credit card is not required for these sites; you can also check your credit score as often as you desire. However, when you sign up for this type of service, you will have to enter personal information, which the sites will use to calculate your score and provide customized financial offers for you.
Also, these credit score sites don’t use the FICO credit score. Credit Karma uses your TransUnion score, and Credit Sesame uses your Experian score. Neither of these paints a comprehensive financial picture as the scores are based on the bureau’s data that they have on you. Each score will vary across the three bureaus. However, from these sites’ scores, they can help you see your current financial picture and make any necessary improvements or adjustments. Keep in mind that different lenders will look at one number versus the other, potentially limiting opportunities for those who don’t monitor all of their scores.
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- The Simple Dollar: The Best Credit Monitoring Service for 2015
- Federal Trade Commission: Free Credit Reports
- Nerd Wallet: Which Credit Cards Give Free FICO Scores?
- Investopedia: Top Places To Get A Free Credit Score Or Report
- Wall Street Journal: Millions More to See Their FICO Scores
- Annual Credit Report: Annual credit request form