Over half of all Americans say that they have no idea what their credit scores are. This isn't surprising; until fairly recently, those scores and the factors that affected them were carefully guarded secrets. As consumer credit protections were made stronger by the FCRA and other laws, credit reporting agencies have gradually demystified what makes good credit.
You can now get your credit reports free one time per year. But, to see your FICO score you have always had to pay a fee or sign up for a free trial of FICO's monthly monitoring service. But now, FICO is partnering with banks to give you free access to your score as soon as a bank requests it. So far, Discover, Barclaycard and First Bankcard have signed on to the program, and more banks are expected to join. Discover will provide your FICO score each month on your statement. The service will be offered to Discover It holders starting this month and other Discover card members later on.
What is a FICO Score?
Your FICO score is a three digit number between 300 and 850. The higher your score, the better. The score is affected by a number of weighted factors: length of credit history, on-time payments, types of credit used, the amount you owe and how recently you looked for new credit. The exact formula is kept a secret, but, FICO has shared that some factors, such as payment history count more than others, such as new credit inquiries. FICO is the score used by 90% of banks to determine your credit worthiness. While the score will generally be similar to other credit scores such as your Vantage Score, they will not be quite the same.
Knowledge is Power
Knowing your credit score can help you make financial decisions. If, for instance, you have a score that is too low to qualify for a home loan, you can avoid applying before fixing your credit. That way, your score does not take an additional unnecessary hit through an inquiry for a loan that you cannot afford. By the same token, if you discover that you have an excellent FICO score, you can apply for a larger loan or one at a better interest rate.
By staying aware of your FICO score and your credit reports, you can fix potential credit problems before they rob you of opportunities. See if a financial service that you use will be offering the new free FICO scores. Check your score regularly to ensure that bad entries on your credit record are not dragging it down and that you are taking advantage of the opportunities that you have earned.
Fore more information on how FICO will be offering free credit scores contact our office at 617-265-7900.