5-Minute Finance: Checking Your Credit Score

Author: Dan Rafter / Source: Wise Bread

Your credit score is one of the most important markers of your financial wellbeing. A strong score will net you the best interest rates on car loans, a mortgage, and credit cards. A weak score can leave you struggling to get approved for financing at all.

It’s vital that you regularly check your credit score and make efforts to keep it on the up and up.

Not sure how to do this? It’s easy. All you need is five minutes.

What is your credit score?

You actually have several credit scores. FICO credit scores are the ones that most lenders check, but there are even several different FICO scores. The most common one that lenders use today is the FICO Score 8. VantageScore is another type of credit score that lenders use. Both FICO and VantageScore use a scale of 300 to 850.

Each three-digit credit score that you have is generated using the information in your credit reports. They serve as a designation of your risk level, and tell lenders whether you have a history of paying your bills on time and managing your credit well. If you have a strong credit history, your score will be higher. If you have managed your finances poorly, your score will probably be low.

In general, most lenders consider a FICO credit score of 740 or higher to be a good one. A score under 640 could make it difficult to qualify for auto or mortgage loans or earn the best credit card offers.

Why you should check your credit score

Knowing your credit score is important, especially before you plan to make any large purchases or try to qualify for financing. If your score is low, lenders might not approve you for that loan at all.

If they do, they’ll charge you higher interest rates to protect themselves from the increased risk they are taking on by lending to you.

With higher interest rates, your monthly payments on mortgage, student, auto, and personal loans will be higher. Your credit cards, too, will come with higher interest rates, which will cost you if you carry a balance on them each month. If…

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