How I Can Check My Credit Score for Free?
Credit history is very important. You cannot buy a car or a house without it, and many other doors will be closed for you if you do not have a credit score.
So, what is a credit score? This is a kind of virtual number consisting of three digits. Banks check it to judge whether you can be trusted. This number cannot be less than 300 and more than 900. The credit score cannot be equal to zero, but it can simply not exist. So how to check your credit score and how to get it?
Credit history – how to check it?
You can find out your credit history on AnnualCreditReport.com but only once a year. It’s free. To do this, you need to fill out the form, indicating the SSN number.
If you want to check your credit more often, then you can use the following sites:
- equifax.com ($19.95 per month);
- transunion.com ($9.95 per month);
- experian.com ($ 1for 7 days, then $ 21.95).
The latter site checks the FICO score, which is used by 90% of banks to check your creditworthiness.
In our opinion, it is stupid to subscribe and pay $20-30 per month if you need to check your credit score once a month or several months. Yes, they track “suspicious activity” on your SSN and notify you about it, but suspicious activity is rare. You just need to be careful with your SSN number – do not give it to anyone around. Therefore, you may use the sites CreditKarma.com or CreditSesame.com where you can get information about your credit score for free. Some banks may even give you information on your credit score, even if you do not have an account with their bank. For example, Capital One and Discover banks do this.
By the way, if you check your credit score on the above sites, do not be surprised that the numbers will be different. These bureaus use different formulas to calculate. If you take something on credit, check with the lenders (those who give you money) what credit score they will ask for.
Which credit score is considered good or bad?
An average credit score is 680-719. Your credit score may be below average because you have never had a credit card in your life.
But if you have a credit score of 780-850, you can get the best deals and interest-free loans (for example, Honda dealership has interest-free loans).
Credit score – what does it depend on?
The credit score depends on:
- 35% – the history of payments (regularity and timeliness);
- 30% – the ratio of the credit limit/debt;
- 15% – the duration of your credit history (maximum and average age of your accounts);
- 10% – the types of credit that you use. For example, a home loan looks better for a bank than a credit card in a fancy boutique;
- 10% – based on whether you currently have a large loan and how many hard pull credit requests have been made in the last 2 years.
What is the credit limit/debt ratio? Let’s say you have a credit card with a $1000 limit. So you can’t spend more than 30% of this limit with it. That is, you can spend $300 and then immediately, if possible, top up back.
What is hard pull credit? This is a request that banks make for large purchases (house, car). Soft pull credit requests (done, for example, by telephone companies) do not affect anything.
Credit history – how to start it?
You need to start it step by step. First, you open one credit card (as a rule, you only get a secured card with extortionate interest rates and a pitiful credit limit = $200-500, but you shouldn’t despair!). The meaning of a secured card is that you pay the bank a deposit of $50-200, which you will spend from the card. That is, in fact, you will spend your money. After half a year, you can ask the bank to increase the credit line to $1,000-$1,500. Do not forget to pay everything on time, otherwise, why start all this? Do not remove the cash, only make non-cash payments. If you return the money to the card on time, then you will not pay anything to the bank at all because as many cards do not have annual fees.
Then after six months or a year, depending on your speed, you can try to apply for an unsecured credit card with better conditions or with the opportunity to receive discounts (cashback – money returned to you from purchases).
There is also such a thing as a credit-builder loan. This is like a forced saving account where your money will be kept. You commit to making payments once a month, and in a year you can get your money back and enjoy good credit soon. They say that even in six months it is possible to increase the credit score by 35 units via timely payments.
How to increase your credit score?
- Do not have a large number of credit cards at the same time (ideally, once every 3-6 months)
- Do not close old credit accounts if you do not pay annual maintenance (the “age” of the account increases)
- Never spend more than 30% of the credit limit (and preferably up to 10%).
- If you are making requests for hard pull credit for a car or home loan, try to make all requests very “compact”, within 3 days.
- Increase over time the credit limit on existing cards and open new credit cards.
- Become a guarantor only for the closest people because all their “fails” will be reflected in your credit history.