American consumers have the freedom to review their credit reports at no charge once a year. This right has been available since 2003. These free annual credit reports do not include credit scores.
It’s important to regularly check your credit reports and credit scores because of the impact credit scores have on your overall bottom line.
A common misconception about credit scores is that checking them will lower them. For example, people believe that if their credit scores reach 750 they will lose a few points.
Is it bad to check credit scores? Not at all, here’s why. lower them.
Credit Scores Are Not Affected by Soft Inquiries
Credit inquiries are records of credit inquirers accessing your credit report. When lenders access your credit report, one or more credit inquiries are posted. This is when you apply to borrow money. These are called hard credit inquiries. They can affect your credit score, but only slightly.
However, when you look at your credit scores, you will notice a different type of inquiry. When you check your credit score, there are likely to be one or more soft inquiries posted to your credit report. Your credit score is not affected by soft inquiries.Checking your credit score is good for your credit, as it protects your credit from any negative influences from soft inquiries.
Check your Scores (Hint: There’s More Than One)
One of the most persistent myths regarding credit scoring is that there is one universally accepted score that changes with credit information. This is not true. Your credit report information is not a single numeric summary that changes like mercury in a thermometer.
There are many credit scores that you don’t know about. However, that doesn’t mean you should not keep track of all your credit scores.
We tend to concentrate on the scores used for lending. These are also known as credit-bureau-based credit risk scores, or credit scores.
VantageScore and FICO have the most important credit scores. They together control about 100% of the US credit score market.FICO stands for Fair Isaac Corporation. This is a publicly traded company. VantageScore is a joint venture between the three credit reporting agencies.
Despite all the rhetoric, thousands of US lenders use both scores. Each year , more than 20 billion are used.
This means that you cannot just look at one score and assume it is the same score from all three credit bureaus. It is important to review as many of your scores and as often as you can.
FYI: Checking Your Scores Is Free
Although there’s no obligation to FICO, VantageScore or any other credit bureaus to disclose your credit scores to them, it’s easy to get scores from trusted sources.
Experian, for example, gives away FICO scores free of charge on its website. Various credit card issuers also give away FICO scores that they use to manage risk. To find out if your card issuer is offering it, check with them.
It is easy to get your VantageScore credit scores for free. Many websites offer free access to VantageScore credit scores for registered users based on Equifax credit reports and TransUnion credit reports. You don’t need to do much research in order to find credit score providers that are free.
You don’t want to make a mistake by obtaining your scores through a devious method. You might be tempted, for example, to ask a friend working at an auto dealership or mortgage broker to pull your scores and reports.
This method has the downside of leaving a hard inquiry on your credit reports. Scoring models may think that you have applied for a loan from a friend’s business, which could cause a slight dip in your credit score. This is a bad way to check your credit scores.
What To Do If Your Credit Score is Below 750
What are you going do with your new scores once you have figured out where and how to check them for free? It’s great to check them, but it’s even better to improve them or maintain them if they are already solid.
If your total score is at or above 750, then you are generally considered to be a good candidate for credit. Lenders will likely be already dumping money on you at extremely low rates or with very aggressive terms and conditions. With a credit score of 750 or higher, you will be the best candidate for lenders and credit products.
However, scores below 695 are considered below the average. In 2021, the average VantageScore credit score stood at 695. The average FICO card credit was 716.
Although 695 and 716 may seem like great scores to some, they are actually average.In 2021, the average VantageScore was 695 while the average FICO Score in that year was 716.
This indicates that you have some upward mobility in credit scores. You should take the time to improve credit reports and credit management to get closer to 800 and 700. It can be time-consuming, but it will pay off in the end. You will eventually pay less for your daily needs, such as insurance and mortgages.
How to Improve Your Credit Score
Even though there are many credit scores available, all of them are based on three credit reports. This means that you don’t need to work on improving scores on dozens of credit reports. You only need to concentrate on three credit reports. You will have many great credit scores if you have three excellent credit reports.
Credit scores are determined using either four or five factors depending on your score type and where it came from. These factors will help you improve your credit scores.If your top score indicates that you have too many credit card debts, then paying extra on your truck loan won’t help your scores. You’ll get a greater return on your investment if your credit card debt is paid off.
These scoring factors will help you answer the question “How can I improve my credit scores?”
Now Might Be a Good Time to Check Your Scores
As long as the source is authorized, it’s never a bad idea for credit scores to be checked. Because you have multiple scores, it is a good idea to compare them with different scoring models and credit bureaus.
You won’t pay anything to check your score correctly and it won’t affect your score. Many credit score sites offer monthly access, so you can check your scores several times per year. It’s a good idea to check your scores frequently, considering how important they are for your bottom line.
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