How to Check Your Credit – CBS News | Vette Leader

POOR CREDIT RATING
It’s important to understand your credit score, what it means, and what factors affect it.

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If you’re planning to take out a loan or credit card—or just want to get better interest rates in general—your credit rating almost always plays a role. Checking your credit score can help you learn more about your financial well-being and what you may qualify for.

You can use several different resources to check your credit, including a credit reference agency, bank statement, credit scoring service, or nonprofit credit advisor. There are also several online tools already available to work out the numbers for you.

Your credit score can determine your ability to pay for important life goals like owning a home or attending college. It can affect whether you are approved for credit cards, car loans, or mortgages, and the interest rates and terms that lenders will allow you. Employers, insurers, and landlords may also reference your credit score when assessing whether you are financially responsible and trustworthy.

It’s important to understand yours credit-worthinesswhat it means and what factors influence it. Here’s everything you need to know.

How Do You Check Your Credit?

There is more than one way to check your credit score. In fact, according to the Consumer Financial Protection Bureau, there are at least four:

  1. Check your bank, credit card, or loan statements. Many financial institutions offer free credit scores to their customers. You can often find your score on your monthly statement or by logging into your account online. You may need to subscribe to the service to receive your results.
  2. Use a free credit score service. Make sure you understand a company’s terms before signing up for their credit scoring service. While some scoring services offer free credit scores, other scores are only available to customers who pay monthly fees for their credit monitoring services.
  3. Buy credit reports from a credit agency or other provider. You can purchase credit scores from any of the three major credit bureaus – Equifax, Experian, and TransUnion. Your scores are also available through other paid providers such as FICO and VantageScore.
  4. Contact a nonprofit advisor. Credit officers can often give you your credit report and score for free and review the details with you. The National Foundation for Credit Counseling is a valuable resource for finding a credit counselor in your area.

Checking your credit is actually easier than you might think. With FICO, you can get a report from up to three credit bureaus, or a plan to help you monitor your score regularly.

What does your credit score tell you?

When getting your credit score, keep in mind that there are many credit scoring models, and accordingly, you are likely to have multiple credit scores.

FICO and VantageScore are two widely used scoring models, but these scores break down even further. According to Debt.com, there are at least 16 different FICO credit scores, and many of them are industry specific.

Your credit score may vary by website or bureau. Don’t pay too much attention to the exact credit score number. Instead, focus on the credit range your score falls within, as this will help you know where your credit stands and whether it’s bad, fair, good, very good, or exceptional.

Understand your creditworthiness

Here are some roadmaps to help you better understand your credit score.

A good FICO score is between 670 and 739, while a good VantageScore is between 720 and 780. Conversely, a FICO credit score is considered fair or bad if it falls below 670. In this sense, a VantageScore between 658 and 719 is fair, and scores of 600 or less are considered either bad or very bad.

Credit Score Ranges

FICO

  • Poor: <580
  • Mass: 580-669
  • Good: 670-739
  • Very good: 740-799
  • Exceptional: 800+

Vantage Score

  • Very bad: 300-600
  • Arm: 601-657
  • Mass: 658-719
  • Good: 720-780
  • Excellent: 781-850

In general, if you have good or better credit, you have a better chance of qualifying for loan products with favorable interest rates and terms. Lower scores typically make it harder to qualify for loans and credit cards, and you’re likely to pay higher interest rates. As such, you could end up paying off thousands more debts over the course of your lifetime.

If your credit rating is below average, you should take action improve your credit score before applying for a new loan.

What factors affect your credit score?

When you get your credit score, you should also see a list of up to five factors that affect your credit score. The main factors that determine your FICO credit score include the following:

  • Payment history: 35% of your credit score
  • Amounts owed: 30% of your credit score
  • Credit history length: 15% of your credit score
  • Mix of credit types: 10% of your credit score
  • New credit: 10% of your credit score

What is bad for your credit score?

As you can see from the rating factors above, some aspects of your credit history can significantly affect your credit score. The elements that hurt your credit the most are:

  • Late or missing payments: Making payments on time is one of the best credit habits to track since your payment history accounts for the largest percentage of your credit score. According to FICO, missing even one payment can cause your credit score to drop by up to 180 points, depending on how long the payment is late and your credit history.
  • High levels of debt: Your credit utilization percentage — the amount of your available credit that you use — accounts for up to 30% of your credit score. The rule of thumb is to keep your credit utilization below 30%. The lower the better.
  • Negative Account Information: Certain information on your credit report can severely affect your credit score for years. Bankruptcies, foreclosures, garnishments, charge-offs, and settled accounts are examples of negative account information that can remain on your credit report for up to seven years or more.

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