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Your credit score is arguably the most important number in your financial life, and these days it's easier to check than ever.
Before you apply for a new credit card, personal loan or mortgage, it's important to know your score, since it will give you insight into what products you may qualify for and what interest rates to expect.
Checking your credit score doesn't hurt your credit, and even if you're not applying for credit, it's smart to get into the habit of checking it regularly.
In fact, the simple act of checking your credit score is one way you can improve your credit. If you notice a dip in your score, it may alert you to potential fraud or errors on your report. Checking your score monthly may help you catch issues early and get a head start on resolving them.
Below, CNBC Select breaks down everything you need to know about your credit score.
A credit score is a three-digit number, typically ranging from 300 to 850, that is the result of an analysis of your credit file. That magic number tells lenders your potential credit risk and ability to repay loans. Credit scores consider various factors, such as payment history and length of credit history, from your current and past credit accounts (more on that below).
Credit score ranges vary based on the model used (FICO versus VantageScore) and the credit bureau (Experian, Equifax and TransUnion) that pulls the score. The ratings typically include bad/poor, fair/average, good and excellent/exceptional. The rating you receive depends on the credit score you have. Below, you can check which rating you fall into, using estimates from Experian.
FICO and VantageScore credit scores have some similarities: In both, scores range from 300 to 850 and payment history is the most influential factor in determining your score. But they differ in exactly how they weight and rank several other factors.
Credit scores are calculated differently depending on the credit scoring model. Here are the key factors FICO and VantageScore consider.
- Payment history (35%): Whether you've paid past credit accounts on time
- Amounts owed (30%): The total amount of credit and loans you're using compared to your total credit limit, also known as your utilization rate
- Length of credit history (15%): The length of time you've had credit
- New credit (10%): How often you apply for and open new accounts
- Credit mix (10%): The variety of credit products you have, including credit cards, installment loans, finance company accounts, mortgage loans and so on
- Extremely influential: Payment history
- Highly influential: Type and duration of credit and percent of credit limit used
- Moderately influential: Total balances/debt
- Less influential: Available credit and recent credit behavior and inquiries
Credit expert John Ulzheimer, formerly of FICO and Equifax, recommends checking both your FICO and VantageScore credit scores to get an accurate picture of what your lenders will see. After all, you never know which score your prospective lender is going to pull. Plus, checking your credit score is free, so you can only benefit from reviewing it.
There are many common misconceptions about what does affect your credit score. "Consumers sometimes focus on things that simply don't matter to their scores. The most common is information about your wealth," says Ulzheimer.
"Income, balances in retirement accounts, equity in your home, net worth ... anything that defines how much money you have or how much you're worth are not considered by your credit scores."
Other factors that don't affect your credit score include race, religion, nationality, gender, marital status, age, political affiliation, education, occupation, job title, employer, employment history, where you live or your total assets.
Your credit score is different from your credit report. A credit report is a more holistic view of your credit that shows detailed information about your credit activity and current credit situation. Credit reports detail personal information (name, address, Social Security number), credit accounts (payment history, credit limit, account balance), public records (liens, bankruptcies, foreclosures) and inquiries into your credit. The three main credit bureaus who issue reports are Experian, Equifax and TransUnion.
"Your credit scores are a proxy for the health of your credit reports," says Ulzheimer. "So if you're not going to take the time to pull and review all three of your credit reports, then at the very least you should check your credit scores."
Update April 20, 2020: You can now receive 3 free credit reports each week for the next year
Most credit card issuers provide free credit score access to their cardholders making it easier than ever to check and know your score.
Some issuers, such as Citi and Discover, provide free FICO Scores, while others, such as Chase and Capital One, provide free VantageScores.
You can check your credit score in less than five minutes by logging into your credit card issuer's site or a free credit score service and navigating to the credit score section. There will typically be a dashboard listing your score and the factors that influence it.
FICO and VantageScore will pull your credit score from one of the three major credit bureaus, Experian, Equifax or TransUnion.
Here are some free credit score resources that you can access, whether you're a cardholder or not:
- CreditWise from Capital One: Free VantageScore from TransUnion
- Chase Credit Journey: Free VantageScore from TransUnion
- Discover Credit Scorecard: Free FICO Score from Experian
These resources also provide insight into the key factors affecting your credit score, simulators on how certain actions may affect your credit and helpful tips for improving your credit score.
The higher your credit score, the more cards you can qualify for (and often with better interest rates).
If you have an excellent credit score, you'll have better qualification odds for a premium credit card, such as the Chase Sapphire Reserve®, one of CNBC Select's top-recommended travel rewards card, compared to someone with fair and average credit.
Meanwhile, if you're new to credit or are looking to rebuild poor credit, we recommend looking into a secured card, such as the Discover it® Secured Credit Card. This card allows you access to a credit card after you put down a refundable security deposit.
For rates and fees of the Discover it® Secured Credit Card, click here.
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