How important is it for me to get my credit scores? I heard I should check them every year. But doesn't that hurt them, too? I'm totally not understanding this. If you think I should get them, what is the best place?
Checking your credit scores can either be very important or not important at all. It all depends on what you're intending to do in the future.
Essentially, credit scores are shorthand for the financial information that is listed on your consumer credit reports. There are many types of scores — some created by the reporting bureaus that collect all that data and others from private companies. However, the model developed by Fair Isaac Corp. (the FICO score) is what most people think of when referring to such scores. And it's what most lenders use. FICO scores range from 300 to 850, with higher numbers being preferable, as they indicate less risk to the lender. You actually will have
three FICO scores — one each from the three major credit bureaus (TransUnion, Equifax and Experian).
So why would you not care about your credit scores? When don't want to do anything that requires them as part of an assessment process. Consider them as you would a high school grade point average. If you want to attend a good college, you'd certainly be concerned with your GPA, because those institutions rely on it to see if you're the type of student they want on their campus. An anemic GPA can definitely hold you back from being welcomed into the schools of your choice and perhaps from the degree you'd like to attain.
Then again, if you have no interest in going to college at all, your GPA wouldn't matter. It is the same with credit scores. If yours are low, the chances that you'd
qualify for a loan or credit line diminish, but if you have no plans to conduct business with a bank or other lender, your numbers are irrelevant.
I'm a big believer in keeping your options open, though. Even if you have no interest in borrowing money right now and, therefore, don't need appealing scores, it doesn't hurt to see what they are today. That way you have plenty of time to repair any major damage before you do apply for a loan. Checking your reports and scores is also the way to spot errors and fraud.
I strongly suggest that you check both your credit reports and your credit scores periodically. The best place to get your credit reports is from
AnnualCreditReport.com. You can get each of your reports (again, you'll have three — one from each bureau) for free once per year — and checking once per year is usually fine. However, if you ever suspect that something is amiss (like a credit card balance that seems unusually high), you can dispute the error. If your dispute results in a change to your credit reports, the bureaus will send you updated copies after the change has been made.
As for your FICO scores, you can get those from
myFico.com. They're about $20 each. Check those at least a few months before approaching a creditor. Excellent scores are in the mid-700s and above.
Don't worry about what your personal sleuthing will do to your credit rating. Yes, I know that this is contrary to what you may have heard, which is why it's so critical to get the facts about the system straight from those in the industry. When you check your own score, that's known as a “
soft pull” — and it won't affect your credit score at all.
The only time a credit check will impact your scores is when you actively apply for a loan or credit card and a potential lender checks your credit. That would be a “
hard pull.” Hard pulls can temporarily bring your score down a smidge, but even so, they're minor factor compared to the way you manage your bills and how much debt you carry in comparison to the amount you can borrow. Pay on time and in full for a few years, with a few different types of accounts, and your scores will be high — whether you see them or not.
Got a question for Erica? Send her an email.