How do I find my credit score?

How do I find out my credit score? Who wants to know it, and what factors influence its change?

Submitted by anonymous.

A credit score is a representation of how someone managed their debts. It is meant to help creditors understand our financial responsibility. Payments on our loans and balances on our credit cards are two factors that directly influence our score. In today’s world, having a good credit score means greater chances of having access to money (or other services) in less time, with fewer requirements, and at lower interest rates (or cost).

Who calculates credit scores?

There are several companies that have created credit score formulas. How does it work? They collect historical information about us from our credit reports, run it through their algorithm — and wallah! This process results in a final number (credit score) that is compared to see if we are above, at, or below average. Depending on where we fall, we will qualify or not for different loans or services. Financial entities, for example, buy this information from these companies when evaluating the conditions of a loan contract. It is their way of determining the responsibility we assume when managing our debts.

How credit scores are used

Credit scores are primarily used by financial institutions, such as banks and lenders. But in recent years, they’re increasingly used for other things. For example, insurance companies use credit scores to calculate the price of our auto or life insurance policies. Landlords use them to make renting decisions. Some employers even look at credit scores when hiring. All of them see the credit score as a way to measure responsibility. You can see from these few examples that credit scores are really important in our society.

How can you influence your credit score?

To answer this, we will take one of the most commonly used scores, the FICO score, and see how it’s calculated. Although the exact formula isn’t public, the risk experts who put together the FICO score say it’s based on:

• Payment history (whether we pay in time or not) – 35%
• The amount owed (how much of our credit lines we are using, hint: the more you use, the worse) – 30%
• The length of our credit history – 15%
• The types of credit – 10%
• Inquiries (how often we apply for credit) – 10%

You can find your FICO credit score at myfico.com.

In short, we can influence our personal credit score by always paying on time, not using a high percentage of our credit lines, having a long credit history, having a variety of credit, and not applying for credit (or services that require a credit check) often.

However, we cannot do magic.

What do I mean? We can positively affect the factors that influence our credit score over time, but this change doesn’t happen instantaneously. Improving your credit is about changing long-term financial behaviors. And changing behaviors of any kind can be challenging. That is why things like paying our bills on time are always stressful. It’s not complicated; it’s about being consistent.