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Although consumers for many years have been entitled to a free copy of their credit report each year, credit scores have remained harder to come by. The only way to get a copy of your credit score was to either pay for it or use a credit score estimator to approximate the score.
One of the immediate effects consumers will notice from the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act is increased access to that vital little three-digit number. Consumers who get turned down for a mortgage or car loan or who experience any other “adverse action” based on their credit score will be entitled to receive a free copy of the score the decision was based on. Even being turned down for a job due to a credit check can provide a cardholder with access to their score.
The new stipulation will allow anyone who has faced a credit, loan, mortgage, or any other kind of financing refusal to better understand the specifics of why their application was refused. Many consumers think that as long as they pay their bills on time, all is well in regards to their credit score. Unfortunately, there are numerous factors other than payment history that come into play, so gaining easier access to credit scores can be an important step towards understanding your credit strength.
Unfortunately, the new law limits the free access to credit scores to people who have experienced an “adverse action.” Consumers looking to find out what their credit score is before applying for a credit card, mortgage, or car loan, will still have to pay to obtain their credit score, or use a FICO score estimator.
Of course, getting a copy of one’s credit score(s) can be as confusing as it can be illuminating. The different credit bureaus feature differing credit scores, for two reasons. While all credit score calculations fundamentally are based on the FICO model, both Experian and TransUnion have developed their own slightly different credit scoring model. In addition to the different scoring models, variations can arise from differences in the data each bureau has collected for the cardholder.
Equifax is the only credit bureau that uses traditional FICO scores; scores range from 350 for bad credit to 850 for the best possible credit. Experian calls their FICO-based credit score the Experian/Fair Isaac Risk Model (ranging from 330 to 830) and Transunion has developed its proprietary EMPIRICA model, with scores ranging between 300 to 850.
If you don’t mind paying for your credit score, one of the most reliable methods for obtaining credit scores continues to be through MyFICO.com. The site, sponsored by FICO-score creator Fair Isaac, will provide cardholders with both TransUnion and Equifax report-based credit scores for a fee of $15.95. Between these two numbers (Experian-based scores are no longer being offered), you can get a good sense of where you stand and what to expect from lenders.
There are also a variety of reasonably accurate online FICO-estimators, known as “Fako”s, see e.g. Bankrate.com’s easy-to-use free FICO estimator.
Keeping an eye on your credit score is a vital part of financial management in today’s economy. While many cardholders assume that making minimum payments on their credit cards ensures good credit standing, the truth is that a variety of factors contribute to credit scores, and regular check-ups are necessary to ensure that that little crucial number hasn’t taken a dive. For consumers not concerned about the extra cost, credit score monitoring can also help cardholders protect themselves from any potential identity theft or card fraud.
