Your credit score plays a big role in your financial life, and it is easier than ever to check it these days. It’s important for you to know what your score is before you apply for a loan or credit card. Even otherwise, given that your credit score can affect your insurance rates, job prospects, and your renting options, it’s a good idea to check your credit score from time to time.
What is a Credit Score?
Your credit score is a three-digit number, usually ranging between 300 and 850. A person’s credit score tells lenders and credit card providers how creditworthy and reliable they are. So, a person with a low credit score may not be approved for many financial products or may be charged a high rate of interest.
On the other hand, a person with a high credit score will be eligible to get the top credit cards and loans at very reasonable rates.
Types of Credit Scores – VantageScore vs. FICO
The two primary credit scoring models that exist are VantageScore and FICO. Most lenders, however, prefer to use the FICO score. While both types of credit scores have similar ranges (300 – 850), they differ in the way they rank the various factors that contribute to one’s credit score.
Factors Affecting FICO Scores
- Payment history (35%): Making your payments on time contributes heavily to your FICO credit score.
- Amounts owed (30%): The total amount of loans and debts you have in relation to your credit limit plays a role here.
- Length of your credit history (15%): The average period of time for which you’ve had various credit products determines this.
- New credit (10%): This is determined by how often you open new accounts.
- Credit mix (10%): This is based on the range of credit products you have, including installment loans, credit cards, mortgage loans, etc.
Factors That Affect Your Vantage Score
- Payment history: This has the biggest impact on your VantageScore.
- Duration and type of credit and percentage of the credit limit used: This also has a significant impact on your score.
- Total debts or balances: This has a moderate impact on your score.
- Recent credit behavior and inquiries: This has the least impact on your VantageScore.
How to Check Your Credit Score for Free?
Most credit card companies offer free access to credit scores to their customers. While some issuers like Discover and Citi offer access to FICO scores, others like Capital One and Chase offer access to VantageScores. You can check your credit score for free by logging into your credit card company’s website and navigating to the credit score section of the page.