Particularly when you are trying for a credit card or loan, a FICO score is very helpful. Lenders evaluate your creditworthiness and if you should be approved using this three-digit number. A high FICO score also indicates that one has a great possibility of getting authorized for any credit under better conditions. You will therefore have to monitor this score to see whether it fairly reflects your creditworthiness. But if you check your personal FICO score, does it drop? Some individuals avoid tracking their scores out of this worry. Here is what you should be aware of about credit impact and FICO score obtaining.
That is what we are going to find out in the next section where we define what the FICO score means
Fair Isaac Corporation, the company that created the FICO rating system, is mostly known by its initials FICO. This credit score model is the most often used one in credit decisions. A credit score, the FICO score ranges from 300 and up to 850. Stated differently, consumers find that credit risk is regarded as being reduced at higher score levels. When mortgage credit scores equal or exceed 700, they are usually regarded as excellent.
The three credit reporting companies— Experian, Equifax, and TransUnion—have their credit records factored into the score. It thus provides information on credit limitations, credit history duration, credit payment history, forms of credit, and fresh credit applications. This means that should you have a good FICO score, it suggests that you have over time been responsible with your credit.
Why is it important to check the FICO score?
Here are some key reasons to check your FICO score periodically: Here are some key reasons to check your FICO score periodically:
Monitor credit health: Your FICO score informs you about your creditworthiness. Monitoring it allows you to identify a problem when it emerges, for instance, an incorrect entry in credit files or fraud. You can work on the issues as soon as possible before they significantly pull down your rating.
Benchmark for lenders: As most lenders use the FICO score when evaluating credit applications, information on this score helps one understand how lenders view their creditworthiness. Of all the factors considered in the application process, a high score is beneficial to you.
Alert to changes: Every activity you undertake within the credit world; from maintaining credit card balances to applying for new credit can cause your FICO score to drop or rise. Tracking allows you to determine the effect that some activity has on your score so that you get a better understanding of the cause.
Prepare to apply: If you check your FICO score before a large credit event such as a mortgage or an auto loan, you can see where you stand. You can delay the application if your score is low and needs enhancement.
Does checking my FICO score hurt the score?
The short answer is no, the FICO score is not decreased just by accessing it. Here are some common misconceptions explaining why people wrongly believe it does: Here are some common misconceptions explaining why people wrongly believe it does:
Confusion with hard inquiries: When you apply for new credit, the credit company pulls a credit report and score, which is a hard pull. It is also important to note that several hard inquiries made within a short period may cause your score to drop. However, when you get a personal review of your own FICO score it is considered to be a soft inquiry. However, let me tell you that soft inquiries have no impact on your credit score whatsoever.
Misunderstanding the scoring process: Several users mingle up the score with elements that define it, such as late payments or high credit limits. However, the credit actions and credit history determine the score, not checking it.
Myths about the financial system: Some consumers cannot trust financial systems or they think that checking their health status harms it. However, the FICO scoring formula is purely based on your credit management pattern only. Whether you check it daily or after a month does not matter.
So you can check your FICO score as frequently as you wish without having to worry. However, where is it available?
Here are some options to check your score:
Check your credit card statement: Most credit card companies include a FICO score provided by Experian on your monthly statement, whether through email or in the mail.
Use a free site: Certain websites that offer free credit scores include Credit Karma, which offers credit scores that are refreshed monthly. But these are often not FICO scores. They use a different scoring model like VantageScore.
Buy direct from FICO: It is also important to note that you can buy FICO scores from FICO. com or other affiliated websites. This may range from $30 to $40 per report and score it. Equifax also provides the option of regularly monitoring your FICO score across all three credit bureaus for a monthly subscription.
Try a free trial: Many credit monitoring companies provide trial periods during which you can check your FICO score for free. However, you normally pay after the trial and have to subscribe to paid services unless you opt-out first.
The takeaway is that checking your FICO score helps to track the state of your credit and prevent potential problems. Use it as frequently as you desire without stressing that your rating will drop. It is proactive and so when you track it occasionally and know where you stand, you are in a good position to practice good credit habits.
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