Credit Infocenter

Credit Information 101: Credit Scores

July 27th, 2016 · No Comments · Credit Scores

by Kristy Welsh

(Last Updated On: November 10, 2017)

credit information 101 credit scores

When it comes to the knowledge you need to repair bad credit and make the most of your finances, credit scores rank right up there with budgeting and investing. What do you know (and not know) about these all-important numbers? Get this credit information today.

Credit Information 101: Credit Scores

What are credit scores?

Credit scores are three-digit numbers generated by an analysis of what’s on your credit reports. It’s these credit scores that are used to determine your creditworthiness.

Who calculates credit scores?

The Fair Isaac Corporation (FICO) generates FICO Scores. This includes base scores as well as industry-specific scores that creditors use to determine your creditworthiness for a credit card, an auto loan, or a mortgage, for example.

The three major credit reporting bureaus – Experian, Equifax, and TransUnion – generate VantageScores.

Though FICO Scores and VantageScores are both important, it’s FICO that 90 percent of lenders reportedly rely on when making credit decisions.

What goes into a credit score?

FICO and the credit reporting bureaus use algorithms to take what’s on your credit reports and turn them into credit scores. The credit information that’s taken into account includes payment history, amounts owed, credit limits, credit utilization ratio, length of your credit history, credit mix, hard inquiries, and new credit.

Who looks at my credit scores?

Lenders, of course, look at your credit scores any time you apply for credit, be it a credit card, auto loan, mortgage, home equity loan, student loan, or personal loan. But your credit scores may also be considered by landlords, insurance companies, and utility companies.

If you have a low credit score, a landlord may not rent to you, an insurance company may charge you higher premiums, or a utility company may require a larger deposit to turn on service.

How can I improve my credit scores?

If you have bad credit, you should start with DIY credit repair. Beyond that, practice good credit habits, like paying your bills on time, paying down debt, and returning credit card balances to zero every month.

How do I look at my credit scores?

Unlike credit reports, which you are legally entitled to see for free every 12 months through AnnualCreditReprot.com, there is no similar law for credit scores. You can purchase your FICO Score through myFICO.com. And you can purchase your VantageScores through each of the three major credit reporting bureaus.

That said, there are ways to see your credit scores for free. For example, many credit card companies include credit scores on your monthly statements. You can also monitor your credit scores (and reports) for free every month through sites like Credit Karma, Credit Sesame, Quizzle, and WalletHub.

How often should I check my credit scores?

If you’re using one of the free credit monitoring services listed above, you’ll able to monitor your scores every month. The same goes for the scores you might be provided on your monthly statement by your credit card issuers. Otherwise, checking your credit scores once a year should be sufficient. The only exception would be if you are in the middle of the credit repair process. In that case, you might want to see your score every few months to see how your efforts are paying off, particularly if you are improving your score leading up to a big purchase, like home or car loan.

Free credit scores coming soon?

Maybe. Credit scores would be free under the proposed Comprehensive Consumer Credit Reporting Reform Act of 2016. Check it out.

Tags:

No Comments so far ↓

There are no comments yet...Kick things off by filling out the form below.

Leave a Comment