Your credit score is undoubtedly the biggest determination point for lenders and banks to lend you money or issue a credit card. There are multiple types of credit score measures but the most common one is the FICO credit score. By subscribing to a credit monitoring service, you can have access to your FICO credit score at all times.
Some banks offer monthly updates on your credit score as well. So check if the bank you work with offers something like this or not to have free access to it. But there are other ways to learn your credit score too.
You can obtain your free VantageScore 3.0 from Capital One or Credit Karma. However, it won’t be enough for you to see your qualifications for an upcoming loan or credit card application. Even if you know your FICO credit score, it’s hard to figure out for certain whether you’ll get approval or not. Since FICO is the most if not all lenders use to review your application, VantageScore doesn’t provide enough information.
The way that FICO and VantageScore computed is very different so making a calculation between the two is inaccurate. You can check our best credit monitoring services post to see your credit score at any given time.
Calculation of Your Credit Score
Regardless of how bad or good your credit score is at the moment, there is always room for improvement. Before you take action to increase your credit score, know what your credit score is made up of first.
At a glance, your credit score is made up of 5 financial points.
- Payment History (35%)
- Amounts Owed (30%)
- Length of Credit History (15%)
- New Credit (10%)
- Credit Mix (10%)
Explanation of Credit Score Calculation
The biggest chunk that determines your credit score is your payment history. Any lender will consider this before lending you a loan or a credit card. It is a compilation of your payments. Your FICO credit score includes all of your credit card and loan payments. So both you and the lenders can see your previous payments including payments made after due dates.
The total amount you owe to banks and lenders can be seen at this part of your credit report. It also shows the available credit to you so you can see how much of your credit is available to you at the moment before making an application.
Length of Credit History
If you’ve been credit active for a long time and using credit for a while now, your FICO score is likely to be higher than someone who begun their credit history excluding other factors. This data gives the lender when your credit accounts were created, how long it has been since you opened certain accounts and the age of all of your current accounts.
It shows all of your recently opened credit accounts. Although it only makes up one-tenth of your credit score, if you have multiple newly opened credit accounts, lenders might approach you suspiciously especially if the length of your credit history isn’t too long.
How to learn your credit score for free?
As we’ve said at the beginning of this post. Your credit card provider might let you have your FICO credit score for free. If this is not an available option, you can only estimate what your FICO credit score might be.
There are many estimators and calculators that you can use but since you’ll have to compile the amounts you owe, the number of accounts, recently opened accounts, etc. it requires a lot of work. Instead, you can use the calculator below to get an estimate of what your FICO credit score might be.
The calculator is made by FICO so you can count on the accuracy.
Recover from Bad Credit
Rebuilding your credit score takes an immense amount of patience and work. First and foremost, you will need a credit card. If you can’t get any credit cards, visit this article to help you get one.
FICO credit score ranges from 300 to 850. Generally speaking, if your credit score is below 580, you considered to have a very poor credit score. The FICO classifies credit scores in five different categories ranging from very poor to exceptional. After you get your estimate from the calculator above, you can see what you’re classified as below.
- 300 – 579 Very Poor
- 580 – 669 Fair
- 670 – 739 Good
- 740 – 799 Very Good
- 800 – 850 Exceptional
Moving on, as an individual who has bad credit, you’ll have to make all of your payments on time. This is not only entitled to your credit cards or loans. The same goes for your electricity bill, water bill, phone bill, etc. All of your payments must be on time.
It is also important to have a credit card that reports to all three major credit bureaus. If your credit card issuer does not provide your payment information to the bureaus, your FICO score is likely to remain the same even after half a year of making your payments on time. While making your payments before the due date of your bills, do not open a new credit account.
After your payments are made on time for about 10 months or so, you’ll see a significant difference in your credit score. From there on, you can get better credit cards to improve your credit score even further. Don’t think of getting credit cards or loans just so you can use them. Each and every new credit account with payments made on time will contribute to your credit score.