The Best Way To Check Your Free Credit Score in 2016?

credit score, from poor to good
Knowing your credit score is critical to your financial success. You can see yours for free in seconds! These websites are your top choice for 2016:

FreeScore360 gives you the most complete look at your credit with scores from all 3 bureaus: Experian, Equifax and TransUnion. Very convenient.
Credit Sesame gives you TransUnion score without entering credit card information. This service is fast, secure and truly free.

Services listed above will not lower your score, and they are guaranteed 100% safe.

But just having your free credit score in-hand isn’t enough if you really want to get ahead with your money.

You must understand how your credit works to truly live your best life. This guide will help you out!

Credit score definition

A credit score is a three-digit number that represents your creditworthiness. It can help lenders understand how risky it is to give you a loan.

The higher your score, the more trustworthy you are in the lender’s eyes.

Higher scores get better loans, giving you more (and better) options for financing.

Your credit score is based on information from your credit report, which includes your current and past credit accounts and what your track record is with each of them.

scoringmodel

Data from your credit report is compiled using a mathematical formula called a ‘scoring model’ (FICO is one example you may have heard of) to create your final credit score.

Three credit bureaus

In the U.S., there are three major companies, called credit bureaus, that deal with credit scores: Experian, Equifax, and TransUnion.

Each of these credit bureaus does the same job – compiling your credit report and formulating your credit score – but they each do them independently.

They each try to collect every piece of financial information from your former and current creditors, past employers, landlords, and other financial information.

But because they work independently of each other, there’s no guarantee that they’ll each collect all of the same information about you.

So even if all 3 credit bureaus use the exact same formula to calculate their version of your credit score, they might have different pieces of information… giving you 3 different credit scores.

calculating-credit-score

For example: you might have a FICO score of 720 with Experian, a 700 from Equifax, and a 730 from Trans Union.

These scores are all fairly close to each other, but the slight differences would happen because some bureaus would have more financial information about you than others.

Credit Scoring Models

In addition to working with potentially different sets of financial information about you, each credit bureau might use a different formula, called a scoring model, to calculate your credit score.

We’ll discuss the different scoring models here to help you decide which credit score is right for you.

FICO

fico

FICO has developed a score system that measures a person’s credit risk. The higher your score, the lower your risk. The company was founded in 1956 as Fair, Isaac and Company, and now FICO scores are used by 90% of the top lenders in the U.S.

In its current form, the basic FICO score has been in play since 1989. But in the 25+ years since it became the industry standard, it has gone through several changes.

As the economy changes and creditors change the types of credit they offer, FICO has had to update the way it does its calculations. The formula in use today isn’t the same formula that was used 20 years ago, or even 5 years ago.

Today, in 2016, the FICO Score 8 is the most commonly used one, but there are other versions being used as well.

Aside from the basic FICO scores, there are also industry-specific scores that are tailored to your potential lenders.

For example, FICO offers Auto Scores for car companies who might offer you financing, and Bankcard Scores for credit card companies.

These industry-specific scores range from 250-900 instead of 300-850, and they offer more precisely targeted information for that particular lender. And of course, all three credit bureaus offer their own versions.

Mortgage-specific inquiries can also tap into older editions of the basic FICO scoring formula, even though there are more recently developed calculations.

We’ve set up a chart of the three main lending types – mortgages, auto, and credit cards – to show you which version of FICO Score is used, where.

ExperianEquifaxTransUnion
Versions used in mortgage lending
FICO Score 2FICO Score 5FICO Score 4
Versions used in auto lending
FICO Auto Score 8FICO Auto Score 8FICO Auto Score 8
FICO Auto Score 2FICO Auto Score 5FICO Auto Score 2
Versions used in credit card decisioning
FICO Bankcard Score 8FICO Bankcard Score 8FICO Bankcard Score 8
FICO Score 3FICO Bankcard Score 5FICO Bankcard Score 4

Keep in mind, however, that the lender always gets to choose what information to use when they’re considering a loan to you. There’s also no real way to know what any given lender might choose to weigh heavily in their decision.

Ultimately there’s very little you can do to control how a lender uses your credit report. But knowing what your industry-specific scores are can be very helpful if you’re preparing to apply for that type of financing.

Vantage

VantageScore credit scores are a collaboration between the three major credit bureaus – Experian, TransUnion, and Equifax – which is basically an attempt to break through the FICO credit scoring monopoly.

The current VantageScore model, VantageScore 3.0, uses the same score range as the FICO score (300-850). It’s calculated differently, though.

VantageScore is gaining more traction, mainly because big consumer credit websites (like Credit Sesame, Credit Karma and others) use this scoring model for their free credit score and credit monitoring products.

Educational

Educational scores are rarely, if ever, used by lenders to evaluate your creditworthiness.

Does that mean they’re completely useless?

Not necessarily.

You can still learn a lot from your educational score.

According to recent study conducted by Consumer Financial Protection Bureau, there is no big difference between FICO scores and educational scores.

For this study CFPB gathered and analyzed scores from 200,000 credit files from each of the major credit bureaus. Here’s what they found:

Most consumers, 80% (FICO vs Educational) were in the same score categories across the different scoring models. This means that the scores consumers receive will usually give them an accurate understanding of how creditors, using another scoring model, would perceive them.

The ‘big three’ credit bureaus use their educational credit scores to enroll customers into credit monitoring, privacy protection and other credit-related products.

Why is my credit score important?

women-wallet-money-credit-cards

Your credit score is a major factor in the decisions your potential lenders will make about the loans they’ll offer you. For that reason, knowing your credit score and how it works will empower you to make better decisions and access better financial options now and in the years ahead.

One thing you need to know: your credit score doesn’t stay the same. Because your financial situation changes from month to month and year to year (as you acquire and pay off debt), your credit score will also change.

Checking your credit score is never a once-and-done thing. You need to check it periodically, especially when you’re considering a major change like buying a new car or buying a new house.

Your score is used as an indicator of “creditworthiness” by the institutions who evaluate you financially to offer you a loan, housing, etc. This means that your credit score has a direct impact on some significant aspects of your life.

Loan Approval

Even if this is your first time doing credit score research, you probably know that your credit scores are used by banks and other lending agencies to make decisions about you as an applicant.

Because your credit score is based on your financial history, including how much debt you currently have and what your payment history is, lenders consider your credit score a good indication of whether or not you’ll pay back their loan.

If you’re considered a ‘safe’ risk, you’ll have access to better loans.

This may mean greater amounts of money, loans with low interest rates, or both.

Typical loans include mortgages, car loans, and personal loans. Anything you’d have to make a payment on is a loan.

Reputable lenders require a good credit history to loan large sums of money.

For those with poor credit and a low credit score, the only options are less reputable lenders like payday lenders, pawn shops, or ‘instant approval’ loans.

If you have to depend on a lessor creditor (ie. ‘no credit check required’), you can be sure that you will pay much more over the life of the loan.

On the other hand, great credit results in lending agencies competing for your business and offering you some great loans.

Interest Rates

High credit scores generally equate to lower interest rates. Lenders save their best loans (the ones with low interest rates) for those who are sure to pay them back.

What this means for you is that the better your credit score is, the less you’ll pay in interest over time (and the more money you’ll keep in your pocket).

But if you’ve got bad credit, you may be stuck with a bad loan, and you’ll pay significantly more over time for the same amount of borrowed money.

Let’s give a couple of examples to show just how important your interest rate is.

Example 1:

You want to borrow $20,000 from a car dealership to buy a new car. If you have a credit score of 720 or more, you’ll get a good interest rate. Over the life of the loan, you’ll end up paying back about $2,000 in interest (in addition to the base $20,000). But if your score is in the 620-690 range, you’ll have to pay a higher interest rate, which will lead to anywhere from $3,500 to $5,000 in interest. And for scores below 590, you’re looking at paying more than $8,000 in interest over the life of the loan.

Example 2:

You want to borrow $200,000 from a bank to take out a 30-year mortgage. If your credit score is above 760, you’ll end up paying about $130,000 in total interest over the term of the mortgage. Interest paid would be around $150,000 for those with scores in the 660-699 range, and it’d be close to $200,000 for those with scores between 620 and 639. If your credit score is lower than 639, you will have a hard time finding approval for a mortgage at all.

Insurance

While loans get the most attention in the credit score discussion, they aren’t the only thing in your life affected by your credit scores.

Home and auto insurance companies also use your credit scores to help determine how much you’ll pay in premiums and other fees.

If a company decides that you are unlikely to make consistent payments, your fees and premiums will be higher. This seems counterintuitive because it will make the payments harder to make, but that’s the way the company protects itself.

For them, charging more up front or on a monthly basis results in more of your money in their pockets if you do stop making payments prematurely. As unfair as it seems, without this system, insurance companies would have a hard time staying in business.

As a result, the best thing you can do for yourself is to work on increasing your credit score. Companies will trust you to make the payments you owe, making it easier for them to offer you lower payments.

Occupation

Depending on your career path, employers may look into your credit as a measure of how responsible you might be.

Accountants, loan originators, military personnel, those in government positions, and even parking booth operators may be subject to credit checks.

If you handle money, those above you in the management ladder need to be able to trust that you can make responsible decisions with it.

And More

Beyond these things, there are many other instances where you credit scores are likely to play a major factor.

Cell phone service, furniture rentals, apartment leases, and a variety of other agreements to make regular payments might require you to have a certain level of credit in order to get approved.

Your credit scores affect your lifestyle on the whole, which is exactly why it is so important to first understand your scores and second to do your best to maintain a high score.

How is my credit score calculated?

Traditionally, your FICO credit scores factor in five major components:

credit-score-breakdown

You can see that each component has its own level of importance.

For instance, someone with very little payment history can still have a great credit score, depending on how the rest of their report looks. But large negatives in any one category may also drag the total score down.

The way credit scores are calculated is a bit of a mystery, and it can be confusing if you have any bumps or missing pieces in your credit history.

Just remember that credit scores are only a reflection of your credit report, which gives the full picture of your creditworthiness.

Let’s take a closer look at the large range of financial activity that factors into your credit score:

Payment History

This is the first thing any potential lender wants to know.

Do you pay your other credit accounts on time? This includes credit cards, installment loans, mortgage payments, and the like. When it comes to late payments, your credit score takes into account the total amount owed, how late the payments were, how many occurred, and how long ago they happened.

Serious negative factors such as collection items, foreclosures, liens, wage garnishments, and bankruptcies also get lumped into this part of the credit score calculation.

Amounts Owed

Credit scores look at the amounts you owe and how your debt factors into your overall financial picture.

This means they take into account the total amount of money you owe to all creditors, how far into the loan you are, and how much of your available credit is in use.

For example, you might have a $20,000 credit card limit, but if you’re only carrying $3,000 on that card and you have $0 balances on your other cards, you’ve got a lot of available credit. But if you’re carrying $17,000 of that $20,000 limit and no other credit cards, you’re in a much different position.

Looking at your amounts owed and comparing them to your total available credit (also called your credit utilization ratio) helps lenders avoid those whom they might judge as ‘overextended.’

Obviously, a low credit utilization ratio sends a better message than a high credit utilization ratio.

Length of Credit History

Longer credit history has a positive impact on credit scores.

Though a lengthy credit history isn’t necessarily required for a high score, factors such as the age of your oldest account, the average age of your open accounts, and even how long it has been since you used certain accounts contribute to your final credit score.

In many cases, the best advice is to leave your oldest accounts open. If you only use them once or twice a year, your credit scores will benefit. Closed accounts do show up your credit report and might contribute to a higher score for a while, but their significance fades over time. It’s better to keep them open.

Credit Mix

Credit diversity plays a different role for different creditors and is more important when your credit report has less total information.

The more types of credit accounts you successfully maintain, the better. However, be sure that you only open accounts that you will actually use. The use of credit cards, installment loans, mortgages, and even retail accounts can factor into your final score.

New Credit

Lenders pay close attention to new credit, especially for those without a lengthy credit history.

Research shows that opening multiple accounts over a short period of time presents greater risk. In fact, just having multiple credit inquiries over a short time can impact your score as well.

Spacing inquiries close together (2-3 weeks max) usually gets treated as a single inquiry, as you aren’t punished for shopping around. Just make sure you don’t seem to be perpetually shopping for new credit. Lenders want to see planned, responsible financial decisions.

How to check my credit score?

credit-check

There’s no one best way to get your credit score, or one best score to get. It all depends on your unique situation and why you’re checking.

In this section, you’ll learn how to choose the right score to check as well as how to check it. First, some general guidelines:

  • If you’re making a large purchase, such as home or car, it’s best to know your FICO score. There’s a high chance your lender will see exactly the same, or at least very similar, score.
  • If you’re in the process of improving or fixing your credit, it’s recommended to track your scores across all three credit bureaus. This will give you the power to find and fix errors much faster. Use websites like FreeScore360.com or sign up for 3 different services offering Vantage 3.0 score (just make sure the data is pulled from different bureaus).
  • Whatever you chose, remember that credit score ranges are much more important than the individual numbers.

If you’re ready to check your credit score, here’s what you need to know.

FICO score

Most credit card companies now give you free access to your FICO scores, updated every 30 days. You should be able to see your score on your monthly credit card statement, online bank account, or mobile app.

This table gives you an idea of which scores are available to which customers:

CompanyScore TypeBureauAvailability
Bank of AmericaFICO 8TUAll credit cards
Barclaycard USFICO 8TUSelected credit cards
ChaseFICO 8EXChase Slate card
CitiFICO Bankcard 8EQAll credit cards
Commerce BankFICO 8AnyAll credit cards
DiscoverFICO 8TUAll credit cards
First National BankFICO Bankcard 8EXAll credit cards
Wells FargoFICO Bankcard 2EXAll credit cards


Contact your bank if it’s not on the list above. According to Market Watch, more than 100 million U.S. checking accounts also offer regular access to FICO scores with no extra charge.

FICO 8 score from Experian is also available at FreeCreditScore.com and Discover’s CreditScorecard.com. Both sites are absolutely free and should not ask you for a credit card number.

freecreditscorecom

To see all versions of your FICO scores visit myFICO.com. This is the official FICO website where you can buy an individual bureau’s score for $19.95 each (or get all three of them for a more complete picture). You can also opt-in for a 3-bureau credit monitoring service priced at $29.95 per month. Make sure to cancel your subscription when you no longer need it.

myfico

Vantage score

Several websites provide Vantage 3.0 scores at no cost, and we’ve compiled a list of them for you.

Registration is fast and easy. You don’t need to enter credit card information. Just answer some basic security questions to verify your identity and you’re all set.

My personal favorite from this list is Credit Sesame. Give it a try!

WebsiteScore TypeBureau
Credit SesameVantage 3.0TU
Credit KarmaVantage 3.0TU, EQ
Credit.comVantage 3.0EX
Capital OneVantage 3.0TU
LendingTreeVantage 3.0TU
myBankrateVantage 3.0TU
myCreditCardsVantage 3.0TU
QuizzleVantage 3.0EQ
WalletHubVantage 3.0TU
Educational scores

FreeScore360 is a great example of services offering high quality educational scores.

freescore360

They give you all 3-bureau credit scores and full identity theft protection, all in one product.

Considering that over 17 millions of Americans are victims of ID theft every year, using reputable credit monitoring can greatly improve your security.

Checking your credit report

Your credit score is important, but ultimately it’s just a reflection of your credit report.

The best thing you can do to understand your credit score and your overall financial standing is to check your credit report regularly.

credit-report-dictionary

How often should you check your credit report?

We recommend doing it every 4 months, with each bureau, to stay updated.

This video will show you how to check a TransUnion credit report for free:

credit-report-yt

Always pay close attention to your credit report. Sure, taking a look at many of your scores will provide you with a lot of perspective about how different creditors may view you. But to know where you really stand financially, you need to know what’s on your credit report.

Is credit score all that matters?

Your credit score is just a tool.

It makes life easier for lenders, and it helps you understand where you fall as a consumer.

But it’s just a number.

It doesn’t define you, and it’s not the only thing you have to offer.

If you find that your credit score is getting in the way of what you want to accomplish, here’s the good news: there are many proven ways of increasing your credit score that are safe, easy, and extremely effective.

But before you can take care of your credit score, you have to know where you stand. Follow the advice in this report, and you’ll be well on your way!