Finding Your Creditworthiness Is Easier Than You Think
Lenders know all about your credit score.
A good score means they should give you a competitive rate or you might go elsewhere. A bad score means they can crank up your interest rate and make your money work for them.¹
Do you know what your credit score is and where it comes from? It shouldn’t be a mystery. So how do you find out what your score is before getting gouged for the foreseeable future?
Reports and scores.
Let’s start by fleshing out the concept of credit scores. Certain companies collect information on you—like payment history, the number and type of accounts you have, whether you pay your bills on time, collection actions, outstanding debt, and the age of your accounts.² This debt rap sheet is called your credit report. Its goal? To determine how reliably you’ll repay lenders if they lend you money.
Data from the credit report gets run through an equation. Each algorithm is slightly different at each credit reporting company, but they all spit out a number that’s supposed to estimate how likely you are to pay off a loan. High scores mean you’re “credit worthy”, low scores mean you aren’t. Pretty simple, right?
How do I find my personal credit information?
Despite what you might think, credit reports are actually easy to find if you know where to look. The government mandated that the three major nationwide credit reporting companies (Equifax, Experian, and TransUnion) offer you a free credit report every 12 months. All you have to do is head over to annualcreditreport.com and request your report.
Credit scores are a bit less straightforward. The government doesn’t mandate free credit score disclosures, but there are still ways to find them for free. Some credit card providers, banks, and lenders participate in FICO Score Open Access Program, making it a breeze for regular people to check their credit scores.³
Keeping up with your credit report and credit score might feel like one of those necessary evils, however nurturing and maintaining them can pay off. What should you do once you get your report and score and you don’t like what you see? That’s what we’ll cover next time
¹ “The Side Effects of Bad Credit: How Bad Credit Affects Your Life,” Latoya Irby, The Balance, Apr 2020, https://www.thebalance.com/side-effects-of-bad-credit-960383
² The Federal Trade Commission, Sept 2013, https://www.consumer.ftc.gov/articles/0152-credit-scores
³ “Where To Get Your Fico® Scores,” Fico Score, https://ficoscore.com/where-to-get-fico-scores/