My last column looked at factors that contribute to your credit score and noted that lenders rely on that score more than ever.
I suggested you visit AnnualCreditReport.com to obtain free copies of your credit history.
However, it appears I failed to adequately explain the direct relationship between your credit history and credit score. I also was not clear about how you can obtain your credit score. Thanks to several readers who brought this to my attention.
So let me try to set the record straight:
Your credit score is a three-digit number calculated by a computer algorithm based entirely on information contained in your credit history. Almost two-thirds of that score is made up of your payment history and current level of debt.
Your FICO score does NOT consider ANY information related to your race, religion, marital status, age, income, employment history or where you live.
Because your score is created using only information in your credit history, I recommended you obtain your history and look for errors that might be hurting you.
I neglected to mention that access to your credit report is free once a year most everywhere and twice a year in Georgia.
However, obtaining your score is another matter. The three credit companies make money selling these score to lenders, and they are all too happy to sell you yours. Unlike your credit history, your score is usually not free.
However, there are ways to get a look at your credit score with a minimal expenditure:
1. If you apply for credit and are denied based on information in your credit report, then the credit agency involved will always provide a free copy of your history, and typically provide a copy of your credit score.
2. Visit CreditKarma.com and give your name and requested information. In exchange, you will see a number that is not your FICO score but is probably pretty close. Since CreditKarma does not ask for your credit card, it will not charge you for this service.
3. Visit Quizzle.com and get a free copy of your Equifax VantageScore credit score and Equifax credit history once every six months. It does offer credit repair services, but no credit card is required for the free service. CreditSesame.com apparently offers a similar free service.
4. Some credit card companies, notably the DISCOVER card, provide monthly access to your actual FICO credit score at no charge. Capital One card services offers a free monthly “educational credit score” called Experian Plus, while American Express is apparently planning on doing the same. Don’t be surprised if more card companies follow suit.
5. Experian.com offers you a one-time look at your Experian credit score and credit report for just a dollar, but it requires you to sign up for its unnecessary credit monitoring service and then cancel within seven days to avoid recurring monthly fees of t$20.
6. Finally, if you are a glutton for punishment, you can go to MyFICO.com and pay nearly $60 for a one-time look at your three actual FICO scores as calculated by the three credit agencies. Because each agency has different data, each score is unique.
To restate my point from my last column, it’s important to remember that your three-digit credit score is based solely on information in your credit history, and the best way to boost your score is to make all your monthly credit payments on time and keep your debt balances below 50 percent of your credit limit.
The other point I should have made is that credit scoring is weighted more heavily toward recent credit activity and less heavily toward events in the past. Even a delinquent account or a foreclosure will become less of a negative as time goes by.
My advice is to check your credit history for errors. If you find any, get them corrected. Then do your best to make all monthly payments on time. That behavior will automatically result in a strong history, and help you become ready to apply for a home loan when you need it.
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