Creditors always look at credit scores when determining loan amounts, interest rates and other similar details. A higher credit score can reduce your monthly expenses and help you qualify for more perks in the future.
Monitoring your credit score lets you see your progress and track changes made to your score. Most banks and credit unions will give their customers complimentary access to their credit scores as well.
Reviewing your score can help you stay on top of finances and get better terms on a future mortgage or auto loan. But staying on top of your credit score entails that you check your score relatively often.
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Which credit scores do banks use?
The two most common credit scoring systems are the FICO Score and VantageScore. You can approach most lenders with either credit score to see what type of loan you can obtain.
These credit scoring systems fluctuate ever so slightly, but the core tenants remain the same. Basically, paying your debt on time and keeping a low credit utilization ratio can help you improve your score.
How credit scores are calculated
FICO Scores and VantageScores reward similar behavior, but various categories have different weights. Understanding how each credit scoring system breaks down its categories will help you prioritize opportunities to build your credit.
- Payment history: 35%
- Credit utilization: 30%
- Credit age: 15%
- Credit mix: 10%
- New credit: 10%
- Payment history: 40%
- Credit utilization: 20%
- Credit age: 10%
- Credit mix: 10%
- Balance amounts: 11%
- Recent credit behavior: 6%
- Available credit: 3%
VantageScore places a stronger emphasis on payment history and recent behavior while putting less importance on credit utilization. The FICO scoring system has fewer categories, making it a simpler model.
Can I get a credit report through my bank?
Many banks will provide your credit score, but few will let you obtain a credit report. A credit report is a more detailed analysis of your credit. It contains information about your current credit activities and your status.
Some people request credit reports to check for errors and make disputes. A successful dispute can immediately increase your score, but you must find the mistake first in order to make a dispute. You can use the following resources to obtain your credit report.
All consumers have the right to receive a free credit report every year. You can visit annualcreditreport.com to claim your free copy.
Your credit activity will change over time, and some consumers will want updated credit reports several times per year. If that sounds like you, just know that you will have to pay for additional credit reports, but credit reporting companies cannot charge more than $13.50 per report.
You can also do an annual check and then wait until the following year to request another credit report. This delay will allow you to avoid having to pay credit report charges.
Some financial institutions will offer a complimentary credit report. As such, you may be able to get an annual bank credit report without paying a fee, but you might have to pay a small amount for future credit reports until a year has passed since receiving your complimentary credit report. Just remember that all banks are different, and some do not offer this perk at all.
Consumers have a right to know why they were denied a loan. You can reach out to your creditor within 60 days to obtain a report that details the reasons why you were rejected.
The report may provide you with insights into how you can increase your chances for the next loan, but you will also receive your credit report. Detecting lenders and resolving disputes will put you in a better position to obtain a loan from the creditor in the future.
Why you should check your credit score often
Your bank credit score can give you a free snapshot of your credit report. Lenders will look at your credit score when deciding the terms of your loan. Your credit score is usually enough for most people, but you can check your report to find errors and see which credit activity is having a more significant impact on your score.
Monitoring your credit score can also help you if your identity is stolen. A sudden dip in your score could be the result of someone spending your money without your consent. You never know what could happen, so that’s why it’s always a good idea to check your credit if you are getting a new job or a divorce.
What to do if your credit score is low
Panicking about a low credit score is never the answer. The following strategies can increase your credit score and put you in a better position to obtain your loan or get your tenant application approved.
Pay your bills on time
Paying your bills on time is the best way to improve your credit score. FICO and VantageScore have payment history as one of the most concentrated categories. Payment history makes up about 35% or 40% of your score, depending on which system you use. As such, only buying what you can afford will go a long way in terms of raising your credit score.
Manage immediate collections
Debt collections will take a toll on your credit, and their presence will continue to loom as the debt remains unpaid. Repaying your debt will stop the phone calls and put you on the path to credit recovery.
Fix any errors on your credit report
Credit bureaus do their best to update your credit report, but they can easily make mistakes. Reviewing your credit report and disputing errors can provide you with a quick win and instantly increase your credit score. It’s best to look for errors in your credit report before you apply for a loan, rental unit or another opportunity that has a minimum credit score requirement.
Lower your credit utilization rate
Your credit utilization rate will have a more significant impact on your FICO score than your VantageScore, but it will still make up a high percentage of your score no matter what. For context, credit utilization is the percentage of your used credit limit.
As an example, let’s say you have a $1,00 credit limit and you borrow $200 against it. This means you have a 20% credit utilization rate. You can lower your credit utilization by paying debt or requesting a higher credit limit.
Some banks will adjust your credit limit if you make higher deposits into your bank account. Those deposits will indicate that you have more money to pay larger debts.
Reduce applications for new credit
Applying for new credit might be able to give you an additional funding source, but remember that every application you submit will trigger a hard inquiry. Every hard credit check will also reduce your credit score by a few points, especially if you apply sporadically throughout the year.
Essentially, fewer applications mean your credit score is less vulnerable. If you find yourself continuously applying for credit, assess your finances and look for a solution that doesn’t affect your credit score as much.
Building credit creates more opportunities
Increasing your credit score can help you access better loans, lower interest rates, more affordable utility bills and various other perks. Monitoring your credit score and getting your free annual credit report will reveal insights that can cultivate a good credit score.
Building your credit score is a long-term process. However, it’s worthwhile because a better credit score means more opportunities while allowing you to save money in the future.
Can my bank tell me my credit score?
Most banks will allow you to view your credit score. You can usually view it from your dashboard.
Can I get a free credit score from my bank?
You can get a free credit score from your bank, but it may be more difficult to get a free credit report. That’s because not every bank offers the latter.
Is the credit score from my bank trustworthy?
The credit score from your bank is trustworthy. Most banks will obtain your credit score from either FICO or VantageScore.