How to Check Credit Score (Without Believing the Myths)

When people hear the word “credit score,” it often instills panic in them. However, very few people know exactly what it is. For example, there are lots of misconceptions when it comes around to understanding it and making sense of it. While yes, there are some fundamentals that you should know about credit score and how to check credit score, but most of it is just as simple as making an action plan.

The Basics

A credit score is a number that lets banks, credit card companies and other businesses (like automobile dealerships) know how likely you are to pay back any money that you borrow. As you can probably imagine, a higher score makes it easier to qualify for a loan or lower interest rate.

You might be surprised to learn that you have many different credit scores. There are multiple reasons for that. Some of the common reasons that you may have various credit score are because:

  • Some lenders use different ratings for a different product. This is usually nothing but a marketing scheme but it does happen, and it is essential to make sure you understand what the different scores mean and refer to.
  • There are many different credit reporting sources, and sometimes discrepancies may occur
  • Given the full range of companies, there are also different formulas that may be used which may change your score from place to place.

So, it is possible that you have a different card score and different home loan score. And it is very likely that you get a third and different score online. For this reason, it is vital to keep possibilities of shopping around open. For example, you may get different scores from different places and lower rates from different lenders. A good rule of thumb is to shop around a little, but if you find yourself overwhelmed with too many options, it is best to choose one and negotiate.

The Information That Affects Your Score

  • How close you are to your credit limit
  • How many accounts you have, and also, how old these accounts are
  • How long you have had these accounts
  • How often your payments are late
  • How much credit you have left
  • You can get a more detailed list

Hard Inquiry vs. Soft Inquiry

It is a big myth that people still believe that checking your credit score will lower it. It is just not true, but there are definitely a few things to consider here that might be potential caveats.

Firstly, there is something called a soft inquiry. That is when you check your credit score (often once a year) to get an overall picture of the health of your credit score. This is a smart idea to just make sure that your credit score is what you would expect it to be given your spending history and financial purchases.

A hard inquiry is when an external company runs a credit check on you. They almost always do this when you are applying for a mortgage or a loan. If you are shopping around for many loans, each time you apply, they will run a report. A hard inquiry may have an impact on your credit score, and will probably lower it a couple times. This allows lenders to see how many times you have applied to loans or credit cards and having a hard inquiry run too many times might show you are a risky customer.

Hard inquiries can stay on your account for up to 2 years. The change is often negligible so don’t get too caught up in it, but maybe avoid applying many times within a span of a few months because it may indicate you are short on cash.

How to Check Credit Score

So credit scores come from information in your credit reports. There are credit report companies that take this information and report it to creditors. Examples of big creditors are Equifax, Experian, and TransUnion.

What to Check When You Receive the Score

  • Any general mistakes, such as mistakes in name, address, etc.
  • Make sure all accounts are yours (including any loans, like auto loans)
  • All reports are accurately listed (and none say that you were late when you were actually on time)
  • Making sure nothing appears more than once
  • Accounts that should be closed but listed as open

What Is a Good Credit Score?

The number itself ranges from 300-850, but different companies have different ranges that they might use. If you are wondering what your score means you should check with the company and see what range of numbers they deem right. Since it changes from company to company, it is best to be sure what your number means and what you can do to improve it, if needed.

How to Raise Your Score

If you find that your score is less than you would be okay with, then worry not! There are very many ways you can rebuild your credit. Here are some common ways you can use to restore your confidence:

  1. Firstly, make sure you are always paying your bills on time. And it is crucial that you are doing this every time. A good alternative for this is to set up automatic payments so that you can have a more hands-off approach to making payments. This way, you are not likely to miss payments.
  2. Secondly, make sure that you are not maxing out your credit card or even going close the limit. Surprisingly, credit card companies are always checking how close you are to your credit card limit. To avoid looking irresponsible, it is essential to stay away from even being at risk of maximizing. It would be good not to spend more than 60-70% of your credit limit.
  3. The long-term also matters. If you can prove that you have a long-term history of paying your bills back on time, it will reflect positively on your credit report. If you can consistently show that you are paying your bills on time, it will show that you are responsible.
  4. Only use what you need. While this is good general life advice, it is especially important when you are trying to rebuild your credit. If there are loans you can avoid taking out, that is probably a better idea. Wait a bit until your credit is back up where you want it.

How to Fix Discrepancies

The first step is to make sure that your credit report is always correct. More than just your score, the report matter as well. For this reason, if there is something wrong with your credit report it could adversely affect your score. Make sure you are regularly checking your statement as well.

We would recommend getting a free credit report check from each of these three companies (Equifax, Experian, and Transunion) every 12 months so you can correctly monitor and make changes as needed. Check annualcreditreport.com to make sure everything looks up to standard.

If you find something that was wrong, there are two people you should contact. Reach out to the credit reporting company and creditor that provided the information. Explain what is wrong and why and additionally attach the document which led you to believe so. Even if you are unsure, go ahead and file a claim to get it sorted sooner rather than later. Also, usually credit reports have detailed instructions on what to do if something is wrong.

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