It seems that you can’t turn on the television or scroll through social media without seeing an advertisement for improving your credit score. While it’s clear that credit scores are important, it’s less clear why — and exactly what a credit score is.
Here’s some things to know about credit scores, including how you can find yours.
What is a credit score?
Your credit score is the method that banks and other lenders use to establish whether or not you’re likely to pay back a loan. For FICO scores, it’s usually a three-digit number between 300 and 850, and it’s calculated using information from your credit reports.
What is a credit report?
It’s a history of all of your reported debts and repayments, from loans to credit card bills. Fortunately —and unfortunately — every reported payment and non-payment in your history has been logged through your financial history, and many influence your credit score.
How is a credit score used?
Banks and credit card companies use credit scores to evaluate the risk of lending money or extending credit to an individual. Your credit score can impact your likelihood to get a new credit card, secure a loan for a house, buy a car, take out a business loan or any other large purchase that requires financing.
What impacts a credit score — and what’s considered good?
Any financial information from a credit report can impact your score. Factors will include your payment history, outstanding debt, types of credit accounts you have, any recent credit inquiries and your rate of credit utilization — that is, the amount of credit you’re using related to your total available credit. For FICO scores, any number above 700 is generally considered good and will read favorably when applying for a new line of credit or loan.
Where can I find my credit score?
There are several sources where you can find yours. Keep in mind that while requesting your credit score the first time is usually free, there is sometimes a fee attached when you request multiple times within a year.
Credit reporting agencies: Equifax, Experian and TransUnion are all reputable credit reporting agencies. While they generally offer free credit reports annually, many offer subscription-based services for those who need regular access to your credit score or credit report. (If you’re trying to build your credit score up and want to monitor, for example.)
Credit card companies or banks: Many credit card companies and banks offer free access to your credit score as part of their services. Check your online account, look at your monthly statement, or call customer service to access your score.
Credit score websites and apps: There are several sites and apps that offer free credit scores and monitoring services, including Credit Karma and Credit Sesame. Some top financial management websites — think Mint — also provide your credit score.
Credit monitoring services: For a next level approach, credit monitoring services offer a more comprehensive take on credit monitoring by offering identity theft protection that will alert you at the first sight of suspected fraud. Many companies charge an annual fee for this enhanced protection, and popular services include Experian, CreditWise from Capital One, IdentityForce and FICO Advanced.
Your credit score is an excellent way to stay informed on your financial health, so stay on top of it and keep an eye out for potential errors. A positive credit score enhances the likelihood that you qualify for favorable loan terms and low interest rates — in other words, a strong credit score keeps your financial health strong and can be a key factor in achieving your dreams.
DISCLAIMER – This content is for informational purposes only, it may become outdated, and we make no representations or warranties as to its reliability, accuracy, or applicability to your situation. Enova, Pangea and its affiliates do not provide financial, legal, tax, or accounting advice.
