Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you’re thinking about making any kind of financial move – whether its getting a loan or new credit card or signing up for a new cell phone plan – it's a good idea to become familiar with your credit scores (yes, you have more than one). Your credit scores can have a major impact on whether or not you can get approved for credit or financing, as well as what interest rates you’ll pay. Your scores can even affect your chances of getting a lease for an apartment, and even a job. There are several different ways you can access your credit scores – and many are actually free. What follows is a simple guide to checking – and understanding – your credit scores.
What Is a Credit Score?
A credit score is essentially a numerical representation of your credit report. What exactly is a credit report?You have three credit reports, one from each of the major consumer credit bureaus – Equifax, TransUnion and Experian. Each report contains a summary of your credit history, including the types of credit accounts you have and have had, your payment history, and certain other information such as your credit limits. The information in your credit reports is provided to the credit bureaus by your creditors, such as your credit card company and any lenders you work with. Some creditors report to only one bureau, some report to more than one. For this reason, each credit report may contain slightly different information.You also have multiple credit scores. This is because the credit agencies and lenders have proprietary formulas they use to assign you a score. The two most commonly used scores, however, are your FICO® Score and your VantageScore, both of which run on a scale from 300 to 850.Lenders and creditors will look at your credit scores to decide the likelihood that you will pay back a new loan on time. Someone with a low score represents a higher risk than someone with a high credit score.
Why Is Checking My Credit Score Important?
If lenders look at your credit score, why is checking credit scores something you should do as well? First, it gives you a heads-up on what lenders will see. Whether your credit is good or bad, it’s generally better to know your credit score than to have no idea what type of credit you have. If your score is low, there are steps you can take to build your credit. If your credit score is good, you can focus on maintaining it. Checking your credit can also alert you to potential mistakes or credit card fraud. The sooner you catch a problem, the faster you can resolve it and repair your credit.
What Are the Credit Score Ranges?
FICO® scores, the most commonly used scoring model, range from 300 to 850. Each lender sets its own standards for what constitutes a bad or good credit score. But, in general, scores fall along the following lines:
A poor or bad credit score is 300-579. If your score falls in this range, you may be denied for some loans and credit cards, or offered high interest rates.
A fair or average credit score is 580-669. You may have more financing opportunities but still won’t get the best terms.
A good credit score is 670-739. Some banks may require you to have credit in this range or higher to qualify for personal loans.
A very good score is 740-799, and will likely give you more options for lower-priced financing and the best reward credit cards.
An exceptional credit score is 800-850. With this, you may have your pick of loan options and low interest rates.
5 Steps for Checking Your Credit Score
Many people assume that if you check your credit reports from the three nationwide credit bureaus, you’ll see your credit scores as well. But that’s not the case. When you check your free credit reports (more on how to do that below), they will not contain your scores.Fortunately, there are some simple steps you can take to get them.
1. Determine the Source
There are several different places where you can go to check your credit scores. They generally fall into two main categories.
Free Credit Reporting Resources
Many credit card companies, banks, and loan companies have started providing free credit scores for their customers. It may be on your statement, or you can access it online by logging into your account. In some cases, you have to opt in to get the number. You can also obtain your free FICO® Score through Experian. There are also numerous other sites that offer free credit scores. Just keep in mind that these may be “educational” scores meant to give you an idea of how you're doing credit-wise, rather than a score that a lender would use. Typically, though, educational scores are similar to those used by lenders and can be helpful.
Purchasing Credit Scores
You can buy a score directly from a credit reporting company. Often, these are sold as subscription plans where you receive regular credit score updates (monthly or quarterly), as well as credit checking and monitoring alerts, for a monthly fee.
2. Request Your Credit Score
Requesting your credit score is typically as simple as creating an account with whichever credit bureau or credit score reporting service you choose. Just be sure to read the fine print: Some sites require that you sign up for a credit monitoring service with a monthly subscription fee in order to get your “free” score. You may have the option of canceling by a certain date to avoid fees. But if you forget, you’ll be on the hook for charges.
3. Provide Your Personal Information
In order to get your credit score, you will typically need to provide a certain amount of personal information, such as your name, address, and Social Security number.
4. Verify Your Identity
To make sure you are who you say you are, the site may ask you to verify certain information. For example, you may be presented with a list of addresses or vehicles and asked to choose which you have lived at or owned in the past. This is to ensure you’re not claiming to be someone else.
5. Reviewing the Results
Once you’ve completed the verification process, you should be shown a page with your credit score, along with the range you fall into.
What Factors Affect My Credit Score?
Once you see your credit score, you may be curious about the factors that affect your credit score. Understanding what impacts your number can prompt you to take actions that can help you build weak credit or maintain strong credit.Here’s how a FICO® score breaks down.
Inquiries
If you apply for a new credit card or auto loan, that lender will check your credit, and that may show up on your credit reports as an inquiry.There are two types of inquiries: soft and hard. Soft inquiries, such as getting prequalified for a credit card or loan, won’t impact your score. Hard inquiries, like applying for a loan or credit card, can have a small, temporary affect on your score. Several inquiries into different types of loans or credit in a short period of time, on the other hand, may cause your score to noticeably dip. Fortunately, if you are applying to multiple lenders for the same type of loan, say to compare personal loan rates, it will likely be treated as one inquiry with minimal impact on your score. Inquiries make up 10% of your score
Payment History
Whether or not you’ve paid your bills on time — a.k.a. your “payment history” – makes up a whopping 35% of your score. Making one late payment may not have much of an impact, but several late payments may cause your credit scores to drop.
Types of Credit
Another small but important factor that impacts your credit is the credit mix you have; it makes up 10% of your score. Lenders like to see that you have different types of credit, both revolving (like credit cards) and installment (like a mortgage).
Length of Credit History
How long you’ve had credit accounts also impacts your credit score (making up 15% of your score). The older your accounts, the better. Also, creditors may look at how long it has been since you used a given credit account. So if you have older credit cards, it can be a good idea to use them occasionally (and pay them on time).
Debt
How much total debt you currently have is a major factor, making up 30% of your score. If you already have a lot of debt, creditors may see you as being less likely to be able to pay off additional debt. Recommended: How a Personal Loan Can Affect Your Credit Score
Does Checking Credit Scores Hurt my Credit Score?
No. While it’s natural to worry that frequently checking your scores might cause them to go down, there’s no cause for concern. Checking your own credit reports and/or credit scores does not impact your scores in any way.
How Frequently Should Credit Scores Be Checked?
It can be a good idea to check your scores, and scan your credit reports for any errors or signs of fraud, at least once a year. You can get free copies of your credit reports at AnnualCreditReport.com. Federal law allows you to get your reports for free once a year. Due to the financial issues caused by the COVID-19 pandemic, however, the three bureaus now allow free weekly access.You may want to do additional credit checks any time you plan to make a major financial commitment or decision, or if you have been a victim of fraud and identity theft and want to monitor the situation. Typically, your credit scores update once a month, when creditors and lenders report new information to the credit bureaus.
What Credit Scores Are Used For
Credit scores are important because they influence many aspects of your financial life. Here’s a look at how and when your credit scores may be used.
Taking Out a Personal Loan
If you apply for a personal loan, the lender will check your credit scores to see how responsible – or how risky – you are as a borrower. Higher scores increase your chances of getting the loan, as well as getting a competitive interest rate.
Opening a Utility Account
If you want to open an account with your local gas, water, sewer, or electric company, the utility company may check your credit to make sure you will be a responsible customer and pay your monthly bills on time. If you have bad credit, they may require you to pay a deposit.
Getting a Cell Phone
Even getting a cell phone plan may require a credit check. Again, this is to determine how likely you are to pay your monthly bill.
Learn More About Personal Loans
Personal loans are available from banks, credit unions, and online lenders, and can generally be used for any purpose. There are personal loans available for all different kinds of credit. Some are secured (meaning you have to put up an asset like a car or savings account to secure the loan), while others are unsecured (no collateral is required).If you’re curious about what type of personal loan you might qualify for, Lantern by SoFi can help. With our easy online lending tool, you can compare personal loan rates from multiple lenders matched to your needs and qualifications. You don’t need to make any type of commitment, and checking your rates won’t impact your credit scores*.Research personal loan rates today with Lantern.
Frequently Asked Questions
What steps do you need to take to check your credit score?
Is checking your credit score free?
How frequently should you check your credit score?
Photo credit: iStock/TheRabbitHolePictures
LCPL0522001
About the Author
Susan Guillory
Su Guillory is a freelance business writer and expat coach. She’s written several business books and has been published on sites including Forbes, AllBusiness, and SoFi. She writes about business and personal credit, financial strategies, loans, and credit cards.
