How To Look At Your Credit Score
UPDATED: Dec 15, 2022
Knowing how to check your credit score is important to gain insight into one aspect of your financial health. After all, lenders and other creditors will look at this three-digit number when making a decision on loans, credit cards, and even an apartment lease.
What Is A Credit Score And Why Is It Important?
A credit score is a three-digit number ranging from 300 to 850 that represents your credit history and is an indication to lenders of how likely you are to repay debt. The higher your score, the more creditworthy you appear. In other words, you’re perceived as a less risky borrower if you have a high score because you’ve demonstrated responsible financial behavior.
Your score considers factors such as:
● Whether you pay your bills on time
● How long you’ve had credit
● The different types of credit you might have
● How much of your credit is used from your available credit limit
Financial institutions such as banks and online lenders typically use your score as a primary factor when deciding if they will approve you for a credit card or loan. Your credit score is also an important metric because lenders and creditors use this number to decide what your loan terms will be, including your interest rate.
Credit Score Vs. Credit Report
A credit report displays your personal information and credit history. It includes a record of your loan and credit accounts, how long you’ve had them for, and the payment history for each account. It may also show negative or derogatory marks such as any prior bankruptcies or accounts that went to collections.
Your credit score, on the other hand, is calculated using the information from your credit report. It looks at your current and past credit behavior to factor in what your score should be.
Want to review your credit score or credit report? You can view both and gain insights as to how you might improve your score by signing up for Rocket Money.
What Factors Affect Your Credit Score?
There are two widely used scoring models: FICO® and VantageScore. The FICO® scoring model is an industry standard and is the most commonly used, especially among lenders. Many of the same principles and factors apply for VantageScores as well.
The following factors are looked at in terms of the FICO® scoring model — which are important to understand if you want to know which actions can make a large impact on your score.
Payment History
Payment history is the most important variable that affects your FICO® Score, making up 35% of your total score. This factor looks across your debts in terms of on-time and late payment history.
Credit Utilization
The second biggest influencer of your FICO® Score is your credit utilization, which makes up 30% of your overall score. This ratio compares the amounts you owe to your total available credit limit. The higher your credit utilization, the more it appears you need to rely on credit, which lowers your score.
Length Of Credit History
15% of your FICO® Score consists of the length of your credit history. The length of your credit history is based on the age of your oldest and newest accounts, and an average age of all your accounts. Typically, your score tends to go up the longer your credit history is, since it offers a better insight into your payment activity.
Credit Mix
10% of your FICO® Score is made up of your credit mix, or types of accounts. Credit scoring models look at your mix of loans, credit cards and retail accounts. Lenders want to see you can manage a variety of credit or loan types, so having a good mix of credit could boost your score. Be cautious though to not apply for credit you don’t need, just because you can qualify. Lenders want to see that you are using credit responsibly, and applying for too many credit cards or loans in a given period can hurt your score.
New Credit
New credit makes up 10% of your overall score and looks at how many credit accounts you’ve opened recently. While gaining a new type of credit can improve your score, the more credit applications you submit, the more it could negatively impact your score. While there are some exceptions, multiple “hard credit inquiries” within a short time span could temporarily affect your credit score. Luckily, this does not include preapproved offers, which involve “soft credit inquiries” so you can still feel free to shop around for rates.
How To Understand Your Credit Score
Your credit score is placed into ranges, from poor to excellent. These ranges are helpful when determining the types of loans or credit you may qualify for, as well as potential interest rates.
The following are FICO® Score ranges:
● Poor: 300 – 579
● Fair: 580 – 669
● Good: 670 – 739
● Very good: 740 – 799
● Excellent: 800 – 850
Many lenders won’t explicitly say the score you need to be approved for a loan or credit card, but they do offer minimum credit requirements. For instance, some rewards credit cards will indicate applicants will need a good to excellent credit score, whereas others may consider those with fair credit. There may also be lenders who specifically work with those who have poor credit.
How To Check Your Credit Score For Free
Checking your credit score is useful so you can understand how lenders may perceive you, and work on boosting your score. Many places offer free credit score monitoring, including the Rocket Money℠ app or your credit card issuer.
Looking into your credit history is also helpful to see what is positively or negatively affecting your credit score. With the Rocket Money app, you can check your credit score for free, anytime. You can also get access to your credit report annually from AnnualCreditReport.com or any of the three major credit reporting agencies, and within 60 days of being denied credit or if you are on welfare, unemployed or your report is inaccurate.
When Should You Check Your Credit Score?
It’s best to check your credit score before you decide to apply for new credit, such as when applying for a mortgage, taking out a car loan, or opening a new credit card. Further, it may be a good idea to do it several months before you submit an application. That way, you can see exactly what affects your score and take steps to improve it well before you submit your application. This will improve your chances for approval and a better interest rate.
FAQs About Checking Your Credit Score
Here are some frequently asked questions on how to check your credit score.
How many times can I check my credit score for free?
Depending on the method, you can check your credit score for free as often as you like. Free apps like Rocket Money give you access to your credit score whenever you want. Some places like your credit card issuer will show you your credit score once a month alongside your credit card statement.
Do I have to pay to check my credit score?
No, you don’t have to pay to check your credit score, depending on the service you use. While some companies charge a small fee, you can usually find a free service with a little research.
Do credit checks hurt my credit score?
Checking your credit score won’t hurt it, nor will requesting a copy of your credit history. However, if a lender conducts a hard credit inquiry during the application process — such as when you apply for a loan — then it will affect your score.
The Bottom Line
Your credit score is an important indicator to creditors and lenders what your reputation is like as a borrower. You can request a copy of your credit history through all three credit reporting bureaus. In addition, you can check your credit score for free through places like the Rocket Money app. Having this understanding can help you boost your score and increase your chances of approval. Start tracking your credit score – get started today with Rocket Money.
Sarah Li Cain
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