UPDATED: 1/24/2017 When consumers get their credit report for free, some are surprised it doesn’t contain their credit score. However, there are ways to get a FREE credit score.
Free credit score warning
The three digit score is a staple in the consumer financial industry, yet it doesn’t come with our free credit reports. It’s mystifying, but the excuse has always been that your score will be good if your report is clean. Many consumer advocates are trying to change that. That push is working, and there are ways to get a free credit score.
Your credit score is an important tool in calculating the price you pay for a mortgage, bank loan, credit card, and even insurance premiums. It’s a coveted number, and consumers pay money to learn their score. Before we get to the secret way to get a free credit score, there is a warning.
When you research free credit score online you are bombarded with companies who advertise a service. While they may use the word free, be careful. There are lots of gotchas in the fine print.
Most companies offering a free credit score also enroll you in a trial for credit monitoring services. That trial period may end up costing you if you don’t cancel in time or properly follow the cancellation instructions.
Even worse, the Consumer Financial Protection Bureau found enrolling in these free trials may not even give you a meaningful credit score. The government agency found about one in five consumers may not get the same score from the free trial as they would if obtained from a lender. The consumer watchdog advises against paying for credit monitoring.
Secret to getting a free credit score
While many companies will advertise a free score, you’ll pay for it. Here’s the secret to truly getting a free credit score. Check with your credit card company to see if they provide the number for free. Often, it’s an option hidden in your online bank account menu.
The Consumer Financial Protection Bureau says 50 million consumers have regular access to their credit scores through monthly credit card statements. Typically, you just have to go online and look at your account to see the score.
“Consumers’ credit information is the foundation of their financial lives,” said CFPB Director Richard Cordray. “Access to these scores provides an opportunity to engage consumers around their credit reports. Once consumers see their credit scores, they can be motivated to learn more about their credit history, check their full credit report, and take action to improve their financial lives.”
The agency hopes more banks make the scores available for their consumers too.
You’re also entitled to a free credit score if you are denied a loan or adverse action is reported. If you give a creditor permission to pull your credit, they typically share it with you as well.
When you apply for a car loan or mortgage, the creditor usually pulls your credit score and provides you with the results.
How your credit score is calculated
When you get your score, it can vary depending on the reporting agency. They all use a different but similar sliding scale.
Your score calculates your ability to pay your credit payments on time.
An ideal score is between 700 and 800+ points. Here’s how your score is calculated:
1. Payment history = 35%
Whether you pay your bills on time is the bulk of your score, so don’t pay your bills late.
2. Amounts owed = 30%
This is calculated by the amount of money you owe versus the amount of credit available to you. Spread your debt among multiple credit cards so you’re not using more than 20% of your available credit.
3. Credit history = 15%
Don’t close your credit card with the oldest credit history. This will hurt your score. Keep those accounts open.
Establishing a good credit history can really help your score, because it shows you are consistently responsible.
4. New credit = 10%
This is where you have to resist temptation to open a new credit card at every store just to save an extra 10 or 20% that day on your purchase. Every time you open these new credit cards, you impact your score. Try to keep the new lines of credit to a minimum.
5. Credit mix = 10%
You need to have a good mix of credit. If you just have credit cards, you’re not doing a good job in this arena. You need to have a mortgage, a car loan, and credit cards. That gives you a good mix of credit so you can earn the maximum number of points.
Free credit report
While your credit score is harder to get, that’s not the case for your credit report. You have free access to your credit report once a year through Annual Credit Report. Only access your report through this website. The other companies who advertise this feature will charge you. It’s free. Don’t pay or hand over credit card information.
While you’re allowed a report once a year for free, there is a trick to keep track of your credit year round. That’s a great way to find mistakes early before they become a problem. Keeping tabs on your credit all the time for free also helps spot identity theft.
While your credit score and report are the top talked about consumer reports, there are at least 9 others. Companies make big bucks selling your personal information. There are reports on your prescription history, insurance claims, and your rental history.