Checking your credit score is an important part of good financial management. Your credit score determines how much you will pay for a loan, the interest rate you’ll receive, and whether or not you pass verification for a job. It’s also important to pay attention to your credit score because it can affect how much you are paid in wages and taxes. The goal of this article is to provide every possible step so that you can better manage your finances by understanding what a credit score is and how to check it.
What is a Credit Score?
A credit score is a numerical representation of your creditworthiness based on your financial history. It’s calculated by taking into account information like how many revolving accounts you have and the percentage of those accounts that are paid in full each month. Your credit score can range from 300 to 850, with higher scores being better.
How to Check Your Credit Score
A credit score is a number that indicates the level of risk associated with lending money to an individual or business. A credit score is not just a yes/no answer to whether or not you’re going to get approved for a loan, it’s also not just used by lenders. It’s used by many different parties in the process, including employers and banks, so it can be hard to know exactly how to check your credit score. Here are some things you can do to get started:
- Visit a Free Credit Score Site: Free credit score sites are offered by a variety of websites. Just be aware of the terms before you sign up for one! Some free sites offer educational scores that aim to give you an understanding of how your FICO® Score is, so this can help guide your decisions on how to manage it. You can get yours from sites like Experian, Credit Karma, Credit Sesame or Transunion.
- Check with you Credit Card Lender: Some credit card companies and car loan companies now offer complimentary credit scores to their customers. You typically have to opt into this feature and then check your new score online or by getting it on your monthly statement.
- Try a Non-profit Credit Advisor: If you want the full report of your credit score, one option is to get it for free from a credit counselor. To find an accredited non-profit agency near you, visit the National Foundation for Credit Counseling’s website.
What Causes Changes in Your Credit Score?
A change in your credit score can happen for many reasons, including missing or late payments, job termination, new loans, and so on. Credit scores are calculated by analyzing the information in your credit report to determine how trustworthy you are of being able to pay your bills. When you make a payment on time and in full, this is considered an excellent score. When you miss payments or have balances that exceed 30 percent of available credit, it will affect your score negatively.
Factors That Affect a Credit Score
The three major factors that affect your credit score are:
- Payment history
- Credit utilization
- Length of your credit history
Payment history is the most important factor because it shows how consistent you are with paying back loans and debts.
Credit utilization is the second most important factor because it measures how much debt you have and at what percentage of your total credit limit you’re using this debt. It also looks at any missed payments or late payments.
The length of your credit history is an important factor as well because it’s looking at how long you’ve had a good credit score. The more years you’ve had a good credit score, the higher your score will be.
How Long Does it Take for Credit Changes to Happen?
Credit scores are updated every 15-30 days. However, you should check your credit score regularly so that you can spot any changes in your score and work to improve it.
To check for changes in your credit score, the first step is to visit one of the free credit score websites mentioned earlier. They will provide you with a snapshot of the information they collect from credit bureaus. They will also let you know if there have been any recent changes to your score or if there are any areas where you need improvement.
Once you have an idea of what areas in your life require improvement, then it’s time to make those changes. You can do this by changing up your spending habits, paying down debt, increasing repayment rates on loans and credit cards, or raising your income (if applicable).