Credit scores matter. In fact, their importance is growing as they are used increasingly by lenders, insurers, landlords, employers and others to assess the risk of dealing financially with individuals.
FICO (for Fair Isaac Corp., the company that invented credit scoring) claims its scores are used by 90 percent of “top” lenders in the United States. Even if that’s an exaggeration, FICO is indisputably the dominant source for scores. That’s why, even when lenders use several different types of FICO scores, monitoring your approximate FICO number matters. Everyone — even retirees — can benefit from watching their FICO scores to avoid getting hurt by a too-low rating.
The good news is that learning and monitoring your FICO score is become easier and cheaper, as you’ll see below. First, though, here’s some basic information on FICO scores:
- Most range between 300 and 850, with higher numbers being better.
- Credit scores, including FICO scores, are generated by running data from your creditors through mathematical formulas. In the United States, three credit-reporting companies — TransUnion, Experian and EquiFax — have a lock on gathering consumer payment and financial records and turning them into the credit reports used to compute credit scores.
- A crucial step in maintaining a good credit score is keeping an eye on these reports. (Learn how: Read “How to Get Your Free Credit Report in 6 Easy Steps.”)
- FICO produces 60 different versions of its score — 28 of which are in regular use, according to Consumer Reports.
What’s your goal?
What FICO number should you aim for? There are numerous competing credit-scoring systems and even several versions of FICO scores so there’s no universally accepted cutoff between a “good” score and a “bad” one.
Lenders have their individual criteria and strategies for making decisions. In fact, it’s good to know that a credit score alone does not determine the best interest rate. It is just one of several ingredients in recipes that vary by lender.
Still, everyone wants a guideline. A good rule of thumb: Most mortgage lenders reserve their best rates for borrowers with FICO scores of 740 or above. On the low end, according to Bankrate.com:
Buyers below a certain threshold, typically a FICO score of 620, have a better chance of striking oil in their bathtub than securing a mortgage. It’s possible, but it will require some digging.
Here’s another way to rank FICO scores. Using data from Fair Isaac Corp., NerdWallet offers an unofficial range for FICO scores:
- 300-629: Bad credit
- 630-689: Fair credit
- 690-719: Good credit
- 720 and up: Excellent credit
8 sources of free FICO scores
Today, humans not only have sent a robotic probe to Jupiter but they also are able to see their own FICO scores — free of charge. A host of options exist for seeing your FICO score, including:
1. Discover — free to everyone
The simplest, currently, is offered by Discover card. No need to be a customer or cardholder to use Discover’s CreditScoreCard website. MoneyTalksNews’ Krystal Steinmetz tried it and says, “[T]he process is quick and easy. I had my FICO score in hand in less than 5 minutes.”
2. Bank and credit card companies
Other banks, credit unions and credit card companies offer free access but you have to be a customer or cardholder. Customers can see their scores on an ongoing basis by logging onto a company’s website or by checking their monthly loan or credit-card statements. Companies include:
- USAA: Enroll in free CreditCheck1.
- Merrick Bank: GoScore, a free benefit, includes emailed FICO scores.
- First Bankcard (First National Bank of Omaha)
- Bank of America
- Barclaycard US
- Chase Slate card
- American Express
- Wells Fargo: Customers with mortgages, home equity lines of credit, private student loans, personal loans, consumer credit cards and certain auto loans can see their scores through Wells Fargo Mobile banking.