How To Check Your Credit Score
Your credit score seems to be an ominous presence, always waiting around the corner, determining all sorts of things about your daily life, from what interest rates you can get on your loans, to insurance policies you’re eligible for. So what are credit scores or ratings and how do they work? Learn how to check your credit score.
Asking for money is awkward at the best of times. It gets even more awkward when you’re asked about your credit history… but that’s just how it works. If you’re applying for a loan or even just a new phone contract, you may be asked to agree to a credit check. A credit check will allow the lender to view your loan or credit history, sometimes with a credit score, which they can then use to make an informed decision.
Checking your credit score or credit rating is a bit different depending on where you live. The general idea of credit scoring, however, is the same around the world. It’s a score that determines how much of a risk a person (or business) is when applying for a loan or line of credit. It can be a good idea to check what your credit score is so that you have an idea of how potential lenders will view your credit-worthiness.
To find out how to check your credit score in your country, check out the following links:
Otherwise, keep reading to learn more.
- What are credit scores, credit ratings, and credit reports?
- What are credit ratings used for?
- How can I check my credit rating?
- What if the information in my credit report is incorrect?
- What factors affect my credit rating?
- Are you credit-worthy?
1. What are credit scores, credit ratings, and credit reports?
If you’ve ever paid ongoing bills, applied for a credit card, or taken out a loan, you will have a personal credit score. This score allows future lenders to determine how likely you are to manage your debts effectively.
Credit scores and credit ratings are often used interchangeably. While they serve a similar purpose, they do have some slight differences. Keep in mind that every credit agency has its own method of determining credit risk; scores, ratings, and terminology may differ between them.
What is a credit score?
A credit score is a number usually somewhere between 0 and 1000 that indicates how ‘credit-worthy’ an individual (or business) is. Each credit agency may have a different scale by which they judge credit-worthiness. Your credit score is calculated through a combination of five main factors: payment history, total amount owed, the length of your credit history, types of credit, and new credit. While there are many credit scoring models, the most common in the US is known as FICO and used by most major financial institutions.
What is a credit rating?
A credit rating is often similar to a credit score but turned into a letter grade instead. These may differ between credit agencies, but a common method of rating ranges from ‘AAA’ (low risk of defaulting on a loan) to ‘C’ (high risk of defaulting).
What is a credit report?
A credit report is a summary of an individual’s (or business’s) credit history, prepared by a credit bureau. It may or may not contain the exact credit score, depending on the credit agency. Your credit report will contain your credit history from many sources including banks, credit card companies, collection agencies, and government departments. Information such as your former and current addresses, national identification number (e.g social security number in the US), and employment history are included in the report.
You can get a free copy of your credit report once per year from the three major credit bureaus in the United States: Equifax, Transperian, and Transunion.
2. What are credit scores used for?
Your credit score or rating may be more important than you think. It will be taken into account when you are looking to borrow money, such as applying for mortgages, loans, and credit cards. It may also be looked at in regards to things like opening bank accounts, phone/internet contracts, insurance, and car finance.
It’s important, therefore, to have an idea of what your credit rating is, how to get a higher credit score, and what to avoid in order to maintain a good score.
3. How can I check my credit score?
All credit rating agencies are obligated to supply you with a copy of your own personal credit report for free. Some agencies may restrict this to one request per year, or charge a fee to speed up the turnaround time. Each credit rating agency has its own unique processes and methods for determining risk. Your credit score, rating, or report may be different depending on the provider.
How to check your credit score in Australia
In Australia, you can request a free credit report from the following credit agencies:
How to check your credit score in New Zealand
In New Zealand, you can request a free credit report from the following credit agencies:
How to check your credit score in the USA
In the United States of America, you can request a free credit report from the following credit agencies:
- TransUnion Phone 1-800-916-8800
- Equifax Phone 1-800-548-7878
- Experian Phone 1-888-397-3742
In the USA, a service called AnnualCreditReport.com has been set up to allow you to easily request your credit report from all three credit agencies at once.
If you spot an error in your report or want to improve your score, consider approaching a credit repair company for help.
How to check your credit score in the UK
In the United Kingdom, you can request a free credit report from the following credit agencies:
- Equifax Phone 0800 014 2955
- Experian Phone 0800 013 8888
- Credit Karma (Online service only)
4. What if the information in my credit report is incorrect?
If the information in your credit report is incorrect, contact the credit agency who provided it as soon as possible. They are obligated to report the correct information, so will help you resolve any issues you may come across.
5. What factors affect my credit score?
While every credit score agency has its own methods of determining risk, the factors listed below are generally believed to contribute to your overall credit score in either a positive or negative way.
The above should be used as a guide only and is not designed to be a wholly accurate representation of how credit agencies determine your credit score.
6. Are you credit-worthy?
Loans are always considered a risk for the lender. Generally speaking, if you have a history of paying off debt in full and on time, then you are likely to be seen as credit-worthy. If you have a history of missed or late payments, then this may affect your ability to borrow in the future.
Checking your own credit score is a good exercise for anyone wanting to get more involved in their personal finances. Not only will you get more familiar with the ins and outs of credit scores in your country, but you’ll also know exactly where you sit on the scale of credit-worthiness. As always, we recommend speaking to a registered financial advisor for advice on your personal financial situation.
