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.
3. Credit unions
A growing number of credit unions also offer free access to FICO scores, including:
- Pentagon Federal Credit Union
- North Carolina State Employees’ Credit Union
- Digital Federal Credit Union (DCU)
- Pennsylvania State Employees Credit Union
4. Checking accounts
Ask your bank if your checking account allows you free access to your FICO score. A growing number of U.S. banks and credit unions offer free FICO scores with accounts, MarketWatch reports.
5. Credit applications
Whenever you apply for credit, ask the lender who checks your credit score to share it with you. It’s only a one-time glance at your score — not an ongoing way to monitor it — but it’s a useful to see the score the lender is looking at when assessing you for a loan.
This approach won’t work when applying for a credit card application done by filling out a form online. But when applying for a home loan, refinancing, personal loan or vehicle loan in which you work with a company representative, ask the person pulling your credit to share your score. After all, if they can see it why can’t you?
In fact, you have a right (under the Dodd-Frank Act) to see your credit score if you are denied credit or offered a rate “other than the rate that the lender gives its best customers,” MyFICO says.
6. Auto lenders
Vehicle buyers financing purchases through these companies have ongoing access to their FICO score:
- Ally Financial
- Hyundai Capital America (including Hyundai Motor Finance and Kia Motors Finance)
7. Student loans
Borrowers and co-signers of Sallie Mae Smart Option undergraduate student loans can see their FICO scores at no charge.
8. Credit counselors
FICO’s Score Open Access for Credit & Financial Counseling program allows some 30 participating agencies to share FICO scores with people who are enrolled in counseling. (Credit counseling is useful in developing a budget, managing money and getting out from under debt. Read: “Ask Stacy: Where Can I Go for Help With Debt?“)
Unfortunately, FICO does not name the agencies participating in the program. But you can call the National Foundation for Credit Counseling at 800-388-2227 or use the online agency locator to make an appointment and learn more. Before signing up with an agency, ask if you’ll be able to get access to your credit score. If not, look elsewhere.
Also free: A FICO score estimate
FICO’s free credit-score estimator delivers not an exact score but a range — 755 to 805, for example. The accuracy is high if you correctly answer the numerous specific questions (such as “What percent of your total credit card limits do your credit card balances represent?” and “Besides any mortgage loans, what are your total balances on all other loans and credit cards combined?”).
Changing your answers gives you a way to see how you use credit affects your score.
Raise your score
If your score is poor, especially if you intend to borrow money in the future, use these ways to improve it:
- Pay down loan and credit-card balances
- Mend your credit report
- Make payments twice-monthly
- Apply for a credit-limits increase
- Open a new account if you can’t get your credit limit raised
- Become an authorized user on someone else’s cards
- Negotiate to lower outstanding balances
Learn more from “7 Fast Ways to Raise Your Credit Score.”
Confusion? No need
One thing might cause you some confusion when you’re looking for a free credit score: Numerous companies offer other scores that compete with FICO’s.
In particular, VantageScore, a product offered by the three major credit-reporting agencies, TransUnion, Equifax and Experian, is growing in use. VantageScore claims that “More than 6 billion VantageScore credit scores were used from July 2014 through June 2015, by more than 2,000 lenders and other industry participants — including seven of the 10 largest banks.”
You’ll find free access to VantageScore at CreditKarma, Lending.com, Credit.com, CreditSesame, Quizzle, Bankrate and other publishers and financial services. In addition, you may see free access available to several other scoring systems, including The PLUS score (by Experian), TransRisk New Account Score (TransUnion) and EquiFax Credit Score.
These are credit scores, but they aren’t FICO scores. Each has its uses, pros and cons. We have focused on FICO’s scoring system because it is the most-widely used and so, if you choose only one score to follow, FICO’s is a good choice.
Do you know your credit score and do you monitor your credit reports? Share your experience in comments below or on our Facebook page.