Do you know your credit score? If not, you should -- your credit score plays a large role in whether you can get cash, loans or financing from retailers, banks, credit companies and various other financial institutions. If you have an established history of banking and credit card usage -- and if you regularly pay your bills on time -- then your credit score is probably average or good (the average FICO credit score is 723). However, all it takes is a couple credit defaults to cause your rating to plummet. Everyone is entitled to request free copies of their credit reports each year, and this can be done through AnnualCreditReport.com. Or, you can go through a third-party company to learn your credit score. The top three companies for getting your credit score are CreditKarma.com, TrueCredit.com and CreditReport.com. You can also request reports from Experian or TransUnion. Ask the following questions to learn more about your score.
Am I eligible to receive my credit report and score for free?
The federal government requires the three largest credit reporting companies -- Equifax, Experian and TransUnion -- to provide people with their credit reports, free of charge, once per year upon request. If you have not asked for your credit score during the past year, then you are eligible to learn your credit score for free.
Is my credit score good or bad?
Most Americans have a credit score of roughly 723, which is firmly in the "good" credit range of 680 to 740. The best credit bracket is a score of 740 to 850. A score of 620 to 680 is viewed as acceptable. A rating of 550 to 620 is viewed as subprime, and anything below 550 is regarded as poor credit.
Does getting my credit score from a third party hurt my rating?
There are two types of credit inquiries -- the kind that's designed to get more credit, and the kind that's meant to simply get information. The type of inquiry meant to get information has no impact on your credit rating. Most third-party companies fall under this category of inquiry, but always get clarification on this before doing business with a third party.
How can I improve my credit score?
The answer to this question is different for everyone, which is why it's important to chat with a financial planner if you find your credit score to be lacking. In some cases, paying off debts and writing letters to explain late payments can wipe away blemishes that lower your rating. There are numerous long-term approaches for repairing bad credit, such as improved budgeting and making on-time bill payments more regularly. Another option may be closing out credit accounts that are no longer heavily used.
I've barely used credit, so why is my credit score bad?
A good credit score can only be established by showing a lengthy and dependable credit history. For this reason, people who haven't used their credit cards much often have lower-than-expected credit scores. The same is true for people who have just recently opened checking or credit accounts.
Can people get loans with poor or subprime credit scores?
People who have poor credit should not count on being approved for any loans, and those with subprime credit may be approved, but their loan terms will be highly unfavorable. The good news is that people with bad credit can take steps to improve their credit ratings over time. Credit and loan terms start becoming more favorable once people get into the acceptable credit range, but truly advantageous interest rates aren't usually offered until people have achieved good credit.
Why is my credit score lower than expected?
Some people are surprised to see their credit score is lower than anticipated. Several factors can negatively impact your credit score, such as paying your monthly bills late or maxing out your credit cards. Also, applying for too many credit cards can cause your score to take a hit, so it's best not to check your credit report until several months have passed since applying for a card or loan. Ask a financial advisor if you're worried about what seems like a low score given your financial circumstances.
What if my credit report shows debts or accounts that seem unfamiliar?
Identity theft is a growing problem, and checking your credit report is a great way to see whether you may be a victim of ID theft. If you see any unusual charges or accounts on your credit score, contact your bank and other relevant financial institutions immediately. You can likely get these fraudulent accounts closed without being liable for charges, but the damage to your credit report can be much more difficult to correct if not addressed promptly.