What we know is that your credit score is the cornerstone of your financial life—it determines, among other things, whether you will get loans, the interest rates you will pay, whether you will get to rent an apartment, or even be employed. So, knowing your credit score is of much importance. Many are scared that it might go down upon checking. This guide, therefore, is going to help you kill all speculations on how to check your credit score and equip you with effective ways that you can use to check your score without hurting it.
Understanding Credit Scoring
Before getting down to the nitty-gritty of how to check your credit score, it’s important to know exactly what exactly is entailed in a credit score and why it is important
A credit score is just a three-digit numerical representation of your creditworthiness. In essence, it’s based on information in your credit report, which, in turn, is a rather detailed record of your credit history. The credit-scoring model most often applied is the FICO Score, which is on a scale of 300 to 850. The higher the number that comes back, the more creditworthy a person will seem to be in a lender’s eyes.
Why Is Your Credit Score So Important?
A credit scores is a critical factor which lenders use to decide on your loan applications, impacting the terms of loans and credit cards offered to you and sometimes affecting their interest rates. A good credit score can save you thousands of dollars over a lifetime of a loan by securing you a lower interest rate.
Also, your credit scores might even have tentacles with other aspects of your living. Many landlords make credit scores checks before providing their tenancy services, and some employers also look into your credit score when you apply for a job.
Hard Inquiry vs. Soft Inquiry: What is the Difference?
One of the common fears when it comes to checking your credit score is that the credit score could be lowered. This is because most people are confused about two different types of credit inquiries: hard inquiries and soft inquiries.
Hard Inquiry of Credit Score
A “hard inquiry” is what happens when a lender or creditor consults your credit report in the course of his decision-making on your application. So, when you go to apply for a mortgage, auto loan, or credit card, a hard inquiry goes into your credit report to assess your creditworthiness. A hard inquiry can temporarily lower your credit score by a few points, typically staying on your credit report for up to two years.
Soft Inquiries of Credit Score
A soft inquiry, on the other hand, happens whenever you or someone else accesses your credit report for informational purposes only. For example, checking your credit score, pre-qualifying for a loan, or even going through a background check by a potential employer all constitutes soft inquiries. The best part is, soft inquiries are not attached/linked to your credit scores.
How to Check Your Credit Score Without Hurting It
Now that you’ve learned about hard versus soft inquiries, let’s find out how you can check your credit score without hurting your credit scores.
1. Use Free Credit Monitoring Services
Free credit monitoring services let you check your credit scores without initiating a hard inquiry. They offer periodic updates and alerts if there is any significant change in your credit report.
Popular Free Credit Monitoring Services:
Credit Karma: Free VantageScore 3.0 credit scores from TransUnion and Equifax,.
Credit Sesame: Provides free access to your TransUnion credit score and credit monitoring.
Mint: Provides free credit score monitoring, plus budgeting and expense tracking.
In all of these cases, the services are using soft inquiries, so your credit score does not get impacted.
2. Obtain Your Credit Report through AnnualCreditReport.com
According to the Fair Credit Reporting Act (FCRA), you have the right to pull your credit report at no cost once every 12 months from all of the major credit-reporting bureaus: Experian, TransUnion, and Equifax. Pull your free credit reports at AnnualCreditReport.com.
Though a credit report does not bear the credit scores, it bears the detailed credit history upon which the credit score is based. You can check it out to ensure its accuracy and update. You will also look for potential errors or fraudulent activities that can hurt your credit scores.
3. Check Your Credit Score through Your Credit Card Issuer.
Many credit card companies offer free access to your credit scores as a perk to being a cardholder. They do this through their online banking platforms or via their mobile apps. For example, Discover, Chase, and American Express credit card companies provide free FICO Score monitoring for all cardholders.
That’s one more method to check your credit scores without causing any harm, as this credit check is part of a soft inquiry
If you’re having trouble with your credit management and could use some professional advice or assistance, maybe credit counseling services are for you. Often, these services are made available by many nonprofit credit counseling agencies either free or at low cost. A service traditionally offered through some of these programs is a credit report review and analysis. They’ll generally do a “soft inquiry” at least to see your credit scores, which presumes will not have a negative impact on your credit.
4. Recommended Credit Counseling Agencies:
National Foundation for Credit Counseling (NFCC): Provides a network of nonprofit credit counseling agencies across the U.S.
Financial Counseling Association of America (FCAA): Provides a directory to know about accredited credit counseling agencies.
5. Understand the Provided Credit Score
When checking your credit scores, bear in mind that there are credit scoring models, and based on the model applied, the score may vary. The two most favored models are FICO Score and VantageScore, but all of them have a number of versions, and lenders may use different versions depending on the type of loan or credit.
FICO Score
- Ranges from 300 to 850
- More than 90% of top lenders apply this score.
- Features Various versions: FICO Score 8, FICO Score 9, and others; industry-specific versions (for example, for car loans or credit cards).
VantageScore
- Ranges Too: 300–850
- Gaining with lenders
- Not in very widespread use, also created by the three major credit bureaus (Experian, TransUnion, Equifax)
Tip: If you’re getting your score from different services, or from various credit card issuers, be aware of which specific scoring model they’re based on, and how that model could significantly differ from the scores actually used by lenders.
Steps to Improve and Maintain a Healthy Credit Score
Checking your credit score on a regular basis is important. The steps to improve and maintain a healthy credit score are even more critical. Here are some ways to maintain a healthy credit score:
1. Pay Your Bills On Time
What you pay on time—your credit history—stands out as your credit scores’s number one influencer. It is responsible for 35% of your FICO Score. Falling behind or missing payments depresses a credit score. Pay all of your bills on time every time to maintain a good credit score.
2. Maintain Low Credit Utilization Ratess
Credit utilization is the amount of credit you’re using compared to your total credit limit. It is advised you try not to cross the 30% threshold to maintain a good credit scores. For example, if your total credit limit is $10,000, try to keep your outstanding balances below $3,000.
3. Do Not Open Too Many New Accounts at Once
Every time you apply for a new credit account, you create a hard inquiry, which can lower your credit score. Opening lots of new accounts over a short period can make it look like you’re more of a risk to creditors and further damage your credit score. Cautiously shop for new credit.
4. Keep Old Accounts Open
The length of your credit history accounts for 15% of your FICO Score. Shortening your credit history by closing old accounts could potentially lower your credit score.
If you have old credit accounts in good standing, it’s generally a good idea to keep them open so you have a longer credit history.
Inaccuracies on your credit report may lead to serious dents in your credit score. Prominent errors include wrong account information, accounts that do not belong to you, and dated information. Routine scanning through your credit report enables you to detect and dispute such errors in good time, thus protecting your credit score.
What to Do If Your Credit Score Plummets
If you find your credit score plummeting into the abyss at any given time, you must take up action and do damage control on what caused it to happen. Here are the things you should do:
1. Check Your Credit Report
Step one: Pull your credit report from all three major credit bureaus. Be on the lookout for any negative items, such as late payments, high credit card usage, and new accounts. Pay special attention to errors or fraudulent behavior that may have occurred.
2. Dispute Any Errors
If you find any sort of inaccuracy on your credit report, you have the right to dispute it with the credit bureau. You can do this online, by mail, or over the phone. The credit bureau is obligated to investigate your dispute and correct any inaccuracies within 30 days.
3. Paying Down the High Balances
If high credit utilization is behind your score drop, attack those current loan balances to bring them down as quickly as possible. You might also try making multiple payments on your credit cards each month to reduce credit utilization.
4. Avoid Taking on New Debt
If your credit score has fallen, then you should refrain from taking in more debt till you resolve the problem. Focus on improving your existing credit situation before applying for new credit.
5. Seek Professional Help if Needed
If the reason for the drop in your credit score is not apparent to you, and the solution for an increased credit score seems out of your reach, hire the services of a credit counseling organization. A credit counselor can review your credit report, identify what dropped your score, and provide a personalized plan to help your credit score increase.
Importance of Building Credit responsibly
A good credit score is constructed by using credit in a responsible manner consistently. You need to learn how to use credit wisely; decide consciously and stay out of pitfalls like many others, which may damage your credit score.
1. Start with a Secured Credit Card
If you have no credit history or are working to rebuild your credit, a secured credit card is a good place to start. A secured credit card needs a cash deposit to serve as collateral, you get a credit limit that is typically the same amount as your deposit. As you make purchases on a secured credit card and pay your bill on time, you will be able to build credit — and ultimately, graduate to an unsecured credit card.
2. Credit-Builder Loan
Another way a person could gain credit or establish a credit history is to become an authorized user on someone’s account. The loan amount is held in a secured account while you make payments. Once you have finished paying off the loan, the funds are then received by the borrower, after which his positive history in paying off loans starts to be reported to bureaus in credit, thereby building up his credit rating.
3. Authorized User on Someone’s Account
If you have any close family member or friend who has good credit, then request that he add you as an authorized user for one of his credit cards. As an authorized user, you inherit the credit history of that person. This may assist you in rectifying your credit. Keep in mind that the primary user must be responsible when handling his account; otherwise, it could also impact your credit report.
Conclusion
It’s always a good idea to keep tabs on your credit score, though the good news is that you can do this without impacting your credit. Free credit monitoring services, requesting your credit report from AnnualCreditReport.com, or many tools your credit card issuers provide their customers can provide you with a clear picture of where you stand without pulling a hard inquiry.
It is not only important to monitor one’s credit score, but it is also very critical to look at ways through which one can improve and maintain the same. This may be in the form of bills pay and in time, maintaining low credit utilization rates, avoiding unnecessary applications for credit, and checking your credit report for any errors to ensure a healthy, good score.
Remember, your credit score is really one of the most powerful tools that can open the way for great credit and financial opportunities. However, it requires prudent management with timely attention. Now, by utilizing the majority of directions presented in this report, you will be able to go forth in the future knowing your credit score and more in control of your financial life than you’ve ever been.