How To Check Your Credit Score

The most influential determinant of your mortgage rate is your credit score. The higher your credit score, the lower the interest rate on the mortgage. This is why it’s critical to know your credit score when considering a mortgage.

Here’s the good news: getting your credit report is easy and free! There are three easy ways to check your credit score.

  1. Check your credit card or other loan statement. Many major credit card companies provide your credit score on a monthly basis. You can check your printed statement or log into your account online. Many major credit card vendors even have apps you can download to your smart phone specifically for tracking your credit score.
  2. Use a credit score service. Many websites exist that will provide you a “free credit score.” Some of these are funded by advertising on the site and are therefore free for the visitor to use. One of the most popular of these services is Credit Karma. You can get your scores for free from both TransUnion and Equifax. They have easy-to-read reports and even have tips for improving poor credit. CommonFund has no affiliation with Credit Karma; this is just a recommendation based on previous customers, and we think it’s a pretty good tool when used correctly. Feel free to explore for yourself!
  3. Get a free credit report. You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. You can order yours online at annualcreditreport.com or call their number. Directions for doing so can be found at the Federal Trade Commission website.
Although each credit reporting agency formats and reports this information differently, all credit reports contain basically the same categories of information. Your social security number, date of birth and employment informational used to identify you. These factors are not used in credit scoring. Updates to this information come from information you supply to lenders.

Identifying Information

Your name, address, Social Security number, date of birth and employment are used to identify you. These factors are not used in credit scoring. Updates to this information come from information you supply to lenders.

Trade Lines

These are your credit accounts. Lenders report on each account you have established with them. They report the type of account(bankcard, auto loan, mortgage, etc), the date you opened the account, your credit limit or loan amount, the account balance and your payment history.

Credit Inquiries

When you apply for a loan, you authorize your lender to ask for a copy of your credit report. This is how inquiries appear on your credit report. The inquiries section contains a list of everyone who accessed your credit report within the last two years. The report you see lists both “voluntary” inquiries, spurred by your own requests for credit, and “involuntary” inquiries, such as when lender order your report so as to make you a pre-approved credit offer in the mail.

Public Record and Collection Items

Credit reporting agencies also collect public record information from state and county courts, and information on overdue debt from collection agencies. Public record information includes bankruptcies, foreclosures, suits, wage attachments, liens and judgements.

The FICO Score is calculated from several different pieces of credit data in your credit report. This data is grouped into five categories as outlined below. The percentages in the chart reflect how important each of the categories is in determining how your FICO Score is calculated.

How A FICO Score breaks down

  • FICO Score Breakdown
    • 35% Payment History
    • 30% Amount Owed
    • 15% Length Of Credit History
    • 10% New Credit
    • 10% Types Of Credit Used

These percentages are based on the importance of the five categories for the general population. For particular groups – for example, people who have not been using credit long – the relative importance of these categories may be different.

Will my FICO score drop if I apply for new credit?

If it does, it probably won’t drop much. If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

The Basics

What is an “inquiry”?

When you apply for credit, you authorize those lenders to ask or “inquire” for a copy of your credit report from a credit bureau. When you later check your credit report, you may notice that their credit inquiries are listed. You may also see listed that there are inquiries by businesses that you don’t know. But the only inquiries that count toward your FICO score are the ones that result from your applications for new credit.

Does applying for credit affect my FICO score?

Fair Isaac’s research shows that opening several credit accounts in a short period of time represents greater credit risk. When the information on your credit report indicates that you have been applying for multiple new credit lines in a short period of time (as opposed to rate shopping for a single loan, which is handled differently as discussed below), your FICO score can be lower as a result.

How much will credit inquiries affect my score?

The impact from applying for credit will vary from person to person based on their unique credit histories. In general, credit inquiries have a small impact on one’s FICO score. For most people, one additional credit inquiry will take less then five points off their FICO score. For perspective, the full range for FICO scores is 300-850. Inquiries can have a greater impact if you have few accounts or a short credit history. Large numbers of inquiries also mean greater risk. Statistically, people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries on their reports. While inquiries often can play a part in assessing risk, they play a minor part. Much more important factors for your score are how timely you pay your bills and your overall debt burden as indicated on your credit report.

Does the formula treat all credit inquiries the same?

No, research has indicated that the FICO score is more predictive when it treats loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, inquiries won’t affect your score while you’re rate shopping. In addition, the score looks on your credit report for rate-shopping inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO Scoring formula it wants the credit reporting agency to use to calculate your FICO score.

What to know about “rate shopping”

Looking for a mortgage, auto or student loan may cause multiple lenders to request your credit report, even though you are only looking for one loan. To compensate for this, the score ignores mortgage, auto and student loan inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the Fair Credit Reporting Act (FCRA) is designed to help ensure that credit bureaus furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

  • You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.
  • You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
  • Any company that denies your application must supply the name and address of the credit bureau they contacted, provided the denial was based on information given by the credit bureau.
  • You have the right to a free copy of your credit report when your application is denied because information supplied by the credit bureau. Your request must be made within 60 days of receiving your denial notice.
  • If you contest the completeness or accuracy of information in your report, you should file a dispute with the credit bureau and with the company that furnished the information to the bureau. The credit bureau and the furnisher information are legally obligated to investigate your dispute.
  • You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

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