How to Get Your Free Credit Report in 2017

Knowing your credit score gives you a better understanding of where you stand financially, and therefore can be an incredibly important tool for achieving financial success. So how you can you check your free credit score?

Before delving right in, it’s first necessary to understand exactly what a credit score is, and how it affects you and your finances.

Here’s a quick rundown of the questions this blog post will help you to answer.

  • What is my credit score?
  • Who deals with my credit score?
  • How can I obtain a free credit report?
  • What different scoring systems are available?
  • What about my free credit report?
  • How important is my credit score?

But first, let’s build up your foundation of knowledge and start at the very beginning.

What is credit?

It’s easy to become confused with the jargon and terminology that comes bound up within the financial industry. However, the term “credit” simply refers to your ability, as a consumer, to borrow money. Often, this money is needed in order to purchase a house, car, or another item of significant financial value.

Credit can be granted to you by a number of different sources, such as lenders and banks. Over time, you will need to pay off your credit, by reimbursing the lender with the full amount you borrowed, often in instalments. Depending on how long you need to pay back the full amount, you may also be charged interest.

When it comes to credit, there are four major types to consider: revolving credit, installment credit, charge card and service credit.

When you obtain credit and successfully pay it back, in full and on time, this has a positive effect on your credit rating. A high credit score allows you to borrow more from lenders, as you are considered as a trustworthy and low-risk prospect for them.

What is my credit score?

By analysing your credit files, a credit score is a numerical representation of your “creditworthiness”. It’s a measurement used by lenders to ascertain whether or not you qualify for a loan, service, credit card or mortgage. A credit score is calculated using a mathematical equation called a scoring model (for example, FICO), and its end goal is to tell the lender how likely it is that you are going to be able to make repayments once you’ve borrowed money.

The higher your credit score, the better your “creditworthiness”, and the more reliable you are in the eyes of lenders. A high credit score indicates low risk, meaning you’re likely to get a bigger loan, while a low credit score would indicate high risk, meaning a smaller loan or no loan at all. A low score indicates to a lender that you’re unlikely to be able to make your repayments on time.

Your credit score takes the form of a three-digit number (e.g. 719) and is formed from information from your credit report. Your credit report also details your track record with both past and current credit accounts.

Credit Score Range

Who deals with my credit score?

There are three major credit bureaus based in the US who will deal with your credit score – Experian, Equifax and the TransUnion. These companies create your credit report, which in turn calculates your unique credit score. As you can see, these three companies all perform the same function, but each achieves this in varying ways as they all work independently from one another. As a result, you might get a slightly different credit score from Experian than you would the TransUnion.

This is because each credit union might not have obtained the same information about you in order to devise your credit score. However, these numbers are likely to be very close together. Although all credit bureaus are likely to use the same formula, there are a number of different scoring models that can be used to decide on your credit rating. Let’s take a look at some of these in a little more detail.

Credit scoring models

FICO

The company behind this scoring system, Fair, Isaac and Company, was set up in 1956. They’ve been a leader in the field for some time – the FICO credit scoring system is now used by 90% of US lenders.

The FICO scoring model we know today has been practised since 1989. It has had to evolve to keep up with the fast-paced and ever-changing financial landscape, and FICO 8 is now the system most commonly found in 2016.

Like many scoring systems, the higher your FICO score, the lower the risk you pose to lenders. As well as its more general scoring system, FICO offers industry-specific systems, designed for your targeted lenders; for example auto lending, or credit card decision-making. Slightly different systems (and scores) are used in these types of scenarios.

The numbers within the FICO scoring system range from 300-850. The lowest score is 300, and the range from 300-629 signifies bad credit. If you have fair credit, you will be placed within 630-689, while 690-719 means good credit. Excellent credit ranges from720-850, with 850 being the highest score you can obtain within the FICO system.

Vantage

In order to create a competitor for FICO, the three major credit bureaus teamed up to create the Vantage system. The current model is named Vantage 3.0, and the score is within the same range as the FICO system (300-850), but it uses very different calculation methods.

The Vantage scoring model is becoming more and more popular these days, especially when it comes to free credit reports and free credit scores. Some big consumer websites – for example, Credit Sesame and Credit Karma, use the Vantage system.

Educational

Although rarely used by lenders, educational credit scores do offer some value. An educational score can be very useful for your own research, peace of mind and knowledge. In fact, a recent study conducted by the Consumer Financial Protection Bureau found that FICO scores and educational scores are really very similar. Therefore, obtaining an educational credit score for your own reference can be very useful in estimating how a potential lender may score and perceive you. This empowers you and gives you the opportunity to make any changes to your financial habits that you need to, to ensure a better credit score down the line.

What is so important about my credit score?

Ultimately, your credit score is important because it will determine whether or not a potential lender will give you a loan – and how big that loan is likely to be. Armed with the knowledge of what a credit score is and how a lender will go about assessing yours puts you in a powerful position to be proactive about your finances, both now and in the future.

It’s important to remember that your credit score constantly changes. If it is low right now, that doesn’t mean that it will always be low and you’ll never be able to get a loan. As the years go by, and you either acquire or pay off debt, your credit score will fluctuate to reflect this. Similarly, it isn’t really enough just to check your credit score once and then never again. Checking it at regular intervals will give you a consistent insight into your financial health and how lenders might perceive you. Checking your credit score is particularly important when you’re about to make a big change or purchase – for example, moving home.

What does my credit score affect?

As we’ve already discussed, your credit score will have a direct impact on what kind of loan you are able to get. But it also bears weight on a number of different things, such as:

Interest rates: Generally speaking, the higher your credit score, the lower your interest rates will be. It makes a lot of sense when you think about it; lenders want to give the loans with the lowest interest rates to the candidates most likely to be able to repay on time, every time. So, if your credit score is good, you’ll pay a lot less interest over time. And of course, the reverse is true – the lower your credit score, the more interest you will then have to pay.

Insurance: Fees and premiums are also bumped up if lenders feel you are unlikely to be able to pay them back. It’s a way of that company protecting itself against potential losses and risks. If you can improve your credit score, an insurance company can offer you lower payments.

Employment: Although by no means a general rule, some employers might want to look into your credit score in order to decide how reliable and responsible you are. This is truer of some vocations than others: for example, those going for accountancy or government positions are more likely to have their credit checked than someone interviewing for a barista job.

…and much more. In short, your credit score has a wide-reaching impact across various aspects of your financial life. Your credit score is likely to have a bearing on the following instances: apartment leases, car rental, cell phone contract and furniture rentals. As you can see, if you have bad credit, this has the potential to have a detrimental impact on other areas of your lifestyle – which is why it’s so important to regularly check and try to improve your overall credit rating.

How is my credit score worked out?

Now it’s time to discuss how the systems that potential lenders use actually go about calculating your credit score. Let’s take the FICO system as an example. The FICO system uses the following components to arrive at your credit rating:

  • Payment history (about 35%)
  • Amounts owed (about 30%)
  • Credit length (about 15%)
  • Types of credit (about 10%)
  • New credit (about 10%)

It is significant that the system uses a number of different factors and categories to determine your score. This gives you a better chance of getting a high credit rating. For example, if your payment history is poor but you score highly in other areas of the report, you may still receive a decent score.

The actual formulas used to work out your individual score are a mystery, but these areas should give you a general idea of what kind of things are going to be important in determining your score.

Let’s take a look at each of these individual areas in more detail and break them down.

Credit Score Components

Payment history

This is arguably the most important piece of information of your credit report. It’s probably the first thing any potential lender is going to look at, and as you can see from the FICO system we looked at above, it has the heaviest weighting as a way to score you.

So what does your payment history actually mean? This refers to whether you consistently pay off your other credit accounts on time. These credit accounts can include credit cards, instalment loans, mortgage payments and much more. Your payment history is dictated by the amount you’ve owed, whether you paid enough and on time, how many late payments you have incurred and when they happened. If you have experienced any more serious financial situations such as collections, wage garnishments and bankruptcies, these will appear and be factored into the payment history section of your report.

Amount owed

How much you owe to any current lenders or companies is another way of treating any outstanding debts you have. This section of your credit report considers how many lenders you owe, how much, and how much of your available credit you’re actually using. The more available credit you have, the higher you’ll score in this section. For example, if you have a loan of $10,000 but are only using $1,000 – you have $9,000 available credit, which reflects favourably on you.

Another term used for your total available credit is your credit utilization ratio. Those who are maxing out all of their credit are considered “overextended”, and lenders will want to avoid these kinds of candidates.

Length of credit history

The longer your overall credit history, the better your score is likely to be. When you opened your first credit account, and the amount of time lapsed since you last used these accounts can all have an impact here.

Our advice would be to leave credit accounts open, even if you aren’t using them. Even if you only use them once annually – this will have a positive effect on your credit score.

Credit mix

This is the section lenders may turn to if there isn’t much other information on your credit report. It takes into account the diversity of credit you have, and how many of those accounts you successfully handle. This can include aspects as far-ranging as mortgages to retail store cards.

New credit

If you don’t have a significant credit history, lenders will be paying particularly close attention to any new credit you have. If you’ve opened a number of credit accounts in a short space of time, you are considered as a bigger risk by lenders, as it suggests you may be struggling financially and unable to make repayments. The same goes for if you request a credit check multiple times within a short duration (which is why we advise running your credit check at regular, spaced out intervals).

However, if you’re shopping around for your credit score, don’t worry – several inquiries made in a period of 2-3 weeks or less are treated as one, individual query. This is a sign you’re making sound financial decisions.

Now – onto the most important part – checking your free credit score.

How can I check my free credit score?

It goes without saying that everyone is different, and everyone’s specific financial situation is going to be different. As a result, there isn’t necessarily a “one-size-fits-all”, best way to check your credit. It really depends on your circumstances, but we can present some general best practice tips on how to choose your score, and then how to check it.

Before we get started, some general rules of thumb:

  • For large purchases, (such as homes or cars), FICO is generally the most reliable.
  • Attempting to improve your credit score? Check scores from all three bureaus here for free https://www.annualcreditreport.com
  • Generally speaking, the credit range you fall into is more important than the specific three-digit number.

Below is some more key information on checking your free credit score using the different systems we outlined above.

How to get your FICO credit score

A really helpful recent development is that a lot of mainstream credit card companies, such as Bank of America and Barclaycard US, now allow you free access to your FICO credit score as part of your statement or online banking account. It’s also updated every 30 days, so you can trust it to be current and accurate.

If this isn’t the case for your personal bank, it is worth contacting them to find out as they may well be able to provide your score.

It’s also worth noting that you can obtain your FICO 8 score for FREE from these trustworthy and completely free sites: CreditScorecard.com and FreeCreditScore.com. All of your different scores, from various FICO systems, can be found on the original FICO website (myFICO.com). Scores from an individual bureau costs $19.95, and you can get scores from all three credit bureaus for $29.95.

FICO Score

How to get your Vantage credit score 

Fortunately, many websites offer your Vantage credit score for free. Here are some of the main ones:

Credit.com

Credit Sesame

Credit Karma

Capital One

myBankrate

LendingTree

myCreditCards

WalletHub

Quizzle

Any one of these websites is a great option for quickly and easily obtaining your free Vantage 3.0 credit score, and you won’t even have to enter any credit card information.

Vantage Credit Score

How to get your educational credit score

Reliable educational scores are readily available on websites such as freescore360.com. Scores from all three of the major US credit bureaus are available within this resource, and you’ll also be given complimentary identity theft protection.

How about my credit report?

As we discussed at the beginning of this post, yes, your credit score is important, but ultimately it is just a numerical representation of the information set out in your credit report.

So to really understand your credit score and what it means, it’s essential to get your free credit report regularly, too.

There is some general debate around just how often you should be checking your credit report, but our recommendation would be around every four months. Keeping on top of this will keep you clued into your overall financial health.

So, just how important is my credit score?

In this post, we’ve talked about all of the different types of lifestyle factors that having a very high or very low credit score can affect. So really there is no denying that your credit score is very important, especially when it comes to big life decisions such as buying a house or a new car.

However, credit scores are actually much more helpful for lenders than they are to you. Lenders use them as a tool to ascertain your “creditworthiness” and overall trustworthiness, but at the end of the day – they are just a number. And a number can never tell the whole story.

A bad credit score doesn’t have to be the be all and end all. If you have experienced negative experiences and difficulty getting a loan as a result of a poor score, the good news is that they are a multitude of methods you can use to try and improve your credit score. This is a great resource to find out more about improving your score.

The first step to an improved credit score is knowledge, and you’ve taken that all-important plunge just by reading this post. Understanding the reality of your finances and where you stand is essential for good financial health both now and in the future.

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