New Rules on How to Get Your Credit Score
You’ve probably seen the “free credit score” tactic used by a variety of companies on television and on the Internet. The company says if you call or click “here” you will automatically receive a free copy of your credit score. And that comes in handy if you are thinking of taking out a car loan or signing up for a credit card. But the truth is most of these are tricks to get you to buy additional products.
But now thanks to a new rule that went into effect on January 1, 2010, some people will get a free copy of their credit score if they are applying for credit or have been denied credit by a lender. The lenders were allowed to provide consumers with two alternatives; one gave you your credit score and the second came in the form of a letter telling you that you’ve been given a bad loan rate or have been denied because of your poor credit score. Fast forward to July of 2010 and disclosure requirements for lenders got even stricter. The second alternative was completely eliminated forcing companies to give you your credit score.
Currently, if you are applying for a car loan and don’t get it, or get a loan with sky-high interest rates, the lender will have to provide you with a free copy of your credit score – and it will probably be a poor score, thus the reason for the bad loan terms.
These new rules are only relevant for people who have applied for credit or have been denied credit, so if you haven’t done either, you won’t get a free score.
So if you aren’t a part of the above group — how can you get a copy of your credit score? You are permitted ONE FREE credit score per year from all three credit bureaus (Equifax, Experian and TransUnion). If you want an additional credit score on top of your free one, you can buy a report and score package for a one-time cost of about $15. Credit scores are also available for $19.95 directly from FICO, which is the company that many lenders look to when investigating credit scores and credit reports.
That brings us to another issue – credit scores and credit reports are not the same thing. Many people use these terms as if they were identical. As I previously stated, you can receive a free credit report annually, which provides the history of your financial activity, and it may have a score on it but it won’t be a FICO score. So that score could be irrelevant as far as what score a lender is looking at when determining if you qualify for a loan.
FICO determines a formula for each of the credit bureaus. The scores range from 300 to 850. The higher the score, the better, so it’s very important that you pay your bills on time and keep your credit card debt at a minimum. 65% of your credit score is based on “payment history” and “amounts owed.” This means being consistent with timely payments and not exceeding 25% of your available credit line is crucial to a healthy credit score.
Use this as rule to improve your credit score and to improve your chances of receiving credit or qualifying for a loan.
Do you have credit tips for fellow Miss Money Bee readers? Leave your tip in the comments section.