Yasmine's Financial Services

How to Check Your Credit Score

Before you begin, it's essential to know that you have the right to access your credit reports for free once a year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can request your reports through AnnualCreditReport.com, the only authorized website for free credit reports.

To check your credit score regularly, you can use reputable credit monitoring services. These services often provide access to your credit score, credit reports, and additional features like credit alerts. Some popular options include:

Credit Bureaus: Equifax, Experian, and TransUnion offer their own credit monitoring services, allowing you to access your credit score and reports directly from the source.
Credit Card Companies: Many credit card issuers provide free access to credit scores for their cardholders as part of their benefits.
Third-Party Services: Numerous third-party websites and apps offer credit monitoring and free credit scores. Examples include Credit Karma, Credit Sesame, and WalletHub.

What is a Good Credit Score?

A good credit score typically falls within a specific range, depending on the credit scoring model used (commonly FICO or VantageScore). Here's a general guideline:

FICO Score: A FICO score of 670 or higher is often considered "good." Scores above 740 are usually regarded as "excellent."
VantageScore: For VantageScore, a score of 700 or above is generally considered "good." Scores above 800 are considered "excellent."

Benefits of a Good Credit Score:

Access to Credit: You're more likely to be approved for loans, credit cards, and favorable interest rates.
Lower Interest Rates: Lenders are inclined to offer lower interest rates to individuals with good credit, potentially saving you money on loans and mortgages.
Easier Rental Applications: Landlords may favor tenants with good credit scores, making it easier to secure rental housing.
Insurance Savings: You may qualify for lower insurance premiums on auto and home insurance.

What is a Bad Credit Score?

A bad credit score generally falls below a certain threshold:

FICO Score: A FICO score below 580 is often considered "poor" or "bad." Scores in this range may face challenges in obtaining credit.
VantageScore: For VantageScore, a score below 600 is typically considered "poor."

Consequences of a Bad Credit Score:

Limited Access to Credit: Individuals with bad credit may struggle to qualify for loans or credit cards.
Higher Interest Rates: If credit is extended, it often comes with significantly higher interest rates.
Difficulty Renting: Securing rental housing may be challenging, and landlords may require higher security deposits.
Insurance Costs: Auto and home insurance premiums may be higher for those with bad credit.

How Your Credit Score Is Calculated

Several credit scoring models are used by lenders and credit bureaus, with FICO and VantageScore being the most common. These models consider various factors when calculating your credit score. Here's how they typically break down:

Payment History (35%): The most significant factor, it reflects your history of making payments on time. Late payments, collections, and bankruptcies negatively affect this category.
Amounts Owed (30%): This considers your credit utilization ratio, or how much credit you're using compared to your credit limit. High credit card balances relative to your limit can lower your score.
Length of Credit History (15%): The age of your credit accounts, including the age of your oldest account, the average age of all accounts, and the age of your newest account.
Credit Mix (10%): The types of credit accounts you have, including credit cards, installment loans, and mortgages. A diverse mix can have a positive impact.
New Credit (10%): Recent credit inquiries and new accounts opened. Multiple inquiries within a short period can negatively impact your score.

Understanding Derogatory Marks on Credit Reports

Derogatory marks on your credit report can have a significant impact on your credit score and financial opportunities. It's crucial to understand what these marks are, how they can affect you, and what steps you can take to address them.

Impact of Derogatory Marks

Derogatory marks can lead to several negative consequences:

Lower Credit Score: These marks can significantly lower your credit score, making it harder to qualify for loans, credit cards, or favorable interest rates.
Difficulty in Obtaining Credit: Lenders may be reluctant to extend credit to individuals with derogatory marks, or they may offer credit with higher interest rates.

What is Length of Credit History?

The length of credit history, also known as credit history age, refers to the duration for which you've been using credit accounts. It's a crucial factor that credit bureaus consider when calculating your credit score. This measurement reflects the age of your oldest credit account, the average age of all your accounts, and the age of your newest account.

Why Does Length of Credit History Matter?

The length of your credit history is significant for several reasons:

Credit Score Impact: Credit scoring models, like FICO and VantageScore, consider the length of credit history as a key factor when calculating your credit score. A longer history generally contributes positively to your score.
Creditworthiness: Lenders often use your credit history age to assess your creditworthiness. A longer history can demonstrate your ability to manage credit responsibly over time.
Risk Assessment: A shorter credit history may be perceived as riskier by lenders, potentially affecting your ability to qualify for loans or credit cards.
Interest Rates: A strong credit history can lead to better interest rates and terms on loans and credit lines, potentially saving you money.

How to Build Credit:

Building good credit is a journey, and each positive step you take brings you closer to your financial goals. Remember that responsible credit management is the foundation of a strong credit history.

Step 1: Open a Credit Account

To establish a credit history, you need a credit account. Here are some options:

Secured Credit Card: If you have no credit or bad credit, consider a secured credit card. You'll need to make a deposit, which becomes your credit limit.
Credit Builder Loan: These loans are designed to help you build credit. The loan amount is typically held in a savings account, and you make payments to build credit.
Become an Authorized User: Ask a family member or friend with good credit to add you as an authorized user on their credit card account.

Step 2: Make On-Time Payments

Your payment history has a significant impact on your credit score. Always pay your bills on time, including credit card payments, loans, and utilities. Set up reminders or automatic payments to avoid late payments.

Step 3: Keep Credit Balances Low

High credit card balances relative to your credit limit can negatively impact your credit score. Aim to keep your credit utilization below 30%. Pay off balances in full whenever possible.

Step 4: Diversify Your Credit Mix

Having different types of credit accounts, such as credit cards, installment loans (like a car loan), and a mortgage, can positively affect your credit score. However, only open accounts you can manage responsibly.

Step 5: Avoid Opening Too Many New Accounts

Each credit application can result in a hard inquiry, which can temporarily lower your credit score. Apply for new credit only when necessary, and avoid opening multiple accounts in a short time.

Step 6: Monitor Your Credit

Regularly review your credit reports for accuracy. You can access free credit reports from each of the three major credit bureaus once a year through AnnualCreditReport.com. Look for errors and dispute any inaccuracies.

Step 7: Be Patient and Persistent

Building good credit takes time. Be patient and continue practicing responsible credit habits. Consistency is key to maintaining a positive credit history.

Understanding Your Credit Score