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How to check your credit score

Why checking your credit score is critical when applying for a mortgage

by Jonathan Trout ConsumerAffairs Research Team
Realtor showing couple new home

Introduction

You’ve made the decision to relocate, found an apartment or house and now it’s time to start the rental or purchasing process. One of the most important things a lender or management company looks at is your credit score. Do you know yours? If not, do you know how to get it? Here’s a quick and dirty explanation of why your credit score matters and how you can keep track of it.

Couple reviewing documents with lender

Why your credit score matters

Your credit score gives your potential lender an idea of how likely you are to make monthly payments on time and if you’ll responsibly use any new credit. When it comes to purchasing or renting a home, your credit score helps determine how much money your lender will loan you and what kind of interest rate you’ll get.

Your score is a number between 300 and 850, with a national average score of 670.

Lenders typically report your account information to credit bureaus every month. This means your credit score can change monthly depending on the information on your credit report. Things that will cause your credit score to drop include the number of late payments, the number of open installment loans and your average credit card limit.

Here’s an example from Fair, Issac and Company (FICO) of how your credit score can impact the homebuying process: Two people are set to buy a house, one with a FICO score of 620 and one with a score of 760. Each person is borrowing $280,000 for a 30-year, fixed-rate mortgage. The person with the 620 credit score would qualify for an interest rate of a little more than 5 percent. The person with the 760 score would get an interest rate of around 3.5 percent.

Woman checking credit card statement online

4 ways to get your credit score

So, how do you check your credit score? Here are a few options:

  1. Check your credit card statement - Many major credit card companies provide credit scores for free on your monthly statement. If they don’t list it on your statement, log into their website to check your account.

  2. Talk to a non-profit counselor - It’s free to speak with a non-profit credit or housing counselor. They can get you a free credit report that shows your score and help you understand the details. Use the Housing and Urban Development’s (HUD) counselor finder to find one in your area.

  3. Use a credit score service - You’ve probably heard of credit score services offering “free credit scores.” Some sites get their funding through advertising and don’t charge a fee. Others require you to sign up for a credit monitoring service with a monthly subscription fee. These sites advertise their monitoring service as a free trial, so be careful to cancel your subscription after the trial is over, or you’ll be charged. You can get free credit scores from the following companies:

    • Credit Karma

    • Credit Sesame

    • Credit.com

    • Quizzle

    You can find out a little more about these and other credit reporting companies on our Credit Report Sites buyers guide.

  4. Buy it - You can buy your credit score from a credit reporting company or from FICO at myfico.com. Most lenders pull your score from the three major credit bureaus: Experian, Equifax and TransUnion. You can buy all three of these for around $40. If you buy your credit score, you won’t have to buy add-ons like monthly credit protection, identity theft monitoring and other services.

    Some credit score companies give you what is called an “educational” credit score rather than the score a lender would use. The Consumer Finance Protection Bureau explains the difference between the two on their website. Your educational credit score is most likely close to what a lender would pull when you’re looking to buy or rent a house, but it’s not guaranteed. Make sure you find out what kind of score you’re getting before making the purchase.

Credit report and calculator on table

Get your annual free credit report

Curious to know how your credit score is determined? Take a look at your credit report. It’s important to note your credit score will not be on your free credit report. Your credit report is a document that details how your credit score is determined. It shows things like your credit history and how you handle borrowed money. This information is put through a credit scoring model from FICO to determine your credit score. So even though your actual score isn’t on your free credit report, you can estimate your credit based on the information your report provides.

Thanks to the Fair Credit Reporting Act, you get one free credit report every year from each of the major United States credit bureaus: TransUnion, Experian and Equifax. You can do this by going to https://www.annualcreditreport.com/index.action and requesting your credit report online. You can also have one mailed to you.

Woman with calculator and documents

Conclusion

It’s good practice to keep track of your credit score, even if you just take advantage of your free annual credit report. Knowing your actual credit score lets you know what kind of loan to expect from your lender or how likely a property manager is to rent you an apartment or house.

If you have a low credit score or your credit score is inaccurate, it will take some time to build it up or fix it. Check out our handy resources on how to fix and build your credit before you start looking for a home to buy or rent.

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by Jonathan Trout ConsumerAffairs Research Team

As a member of the ConsumerAffairs Research Team, Jonathan Trout believes having access to free, comprehensive information on products and businesses is vital to making smart purchasing decisions. He focuses his efforts on researching and reviewing multiple brands across a variety of industries, with the goal of writing unbiased buyers guides to help inform consumers on impending purchases.