Just the thought of checking yours makes you want to tuck your tail and run for cover, right? Unfortunately, your credit score isn’t something that should be ignored.
As I’ve said before, the credit score is one of the most misunderstood financial metrics there is. Those with a good credit score tend to wave it around like a badge of honor. Others who are struggling sometimes feel like there is no coming back.
Neither is correct.
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Understanding the Credit Score
A credit score isn’t really a measurement of financial health. Instead, your credit score actually measures how well you handle debt.
“Well, isn’t that the same thing?”
Nope. Not exactly.
In almost all instances, I consider people who have zero debt to be in a pretty strong financial position. Since they don’t have any monthly payments to make, they don’t even need a ton of income to survive. However, if they don’t use any type of credit, their credit score could surely suffer.
On the other hand, somebody who is deeply in debt but manages to make their payments every month could easily have a high credit score. However, their debt could put them in a very perilous financial position if anything was to happen to their income.
To be clear, a good credit score does not necessarily equal a strong financial position or solid financial management. A bad credit score does not equal a poor financial position. Credit scores measure how you handle debt, period.
Why Having Good Credit Is Important
With that said, keeping a good credit score is still an important part of most people’s financial lives. While I advocate avoiding debt, the fact is that most people are going to need a loan at some point in their lives. I mean, it’s a pretty rare feat to pay cash for a house, so it’s important to whip your credit score into shape before you buy.
Credit scores are almost always used when determining both your eligibility and your interest rate for mortgages, auto loans, and more. It can also directly affect your insurance rates, particularly when it comes to car insurance.
And while your credit score is not used directly, a credit check will almost certainly be performed if you decide to rent a house. Credit checks may also be performed before you’re hired for certain jobs, particularly in the finance industry. Marks against your credit may rule you out for that apartment or job you desperately want, and monitoring your credit score should help you keep on top of that.
More importantly, keeping a close eye on your credit score can help alert you to any sudden changes in your credit. Unexpected changes can be cause for alarm and might be a sign of identity theft. With major data breaches happening all the time, I consider using a free credit score service to be a bare minimum first line of defense.
Where to Get a Free Credit Score
Now that you know why a credit score is important, you’re probably wondering where in the world you can find yours?
Although you’re entitled to one free credit report from each of the three major credit reporting bureaus each year, until recently, a credit score has been more difficult to come by. These days, there are both free and paid options for monitoring your credit score. Here are a few of our favorites.
Credit Sesame is my favorite place to get a free credit score, and I’ve used them for years. It takes just a few minutes to sign up and is completely free. Every month, they’ll update your score using your TransUnion credit report. You’ll also receive daily monitoring alerts if anything changes on your credit report. They also have a suite full of financial tools that are free and at your disposal. Get started with Credit Sesame here.
Credit Karma is another place you can receive a free credit score, and I’ve also used them. You get weekly updates if anything changes on your TransUnion credit report. (Hint: Remember your credit report and credit score are two different things!) Free credit scores are calculated using both TransUnion and Equifax.
Getting Your FICO Score
While free credit scores are a good tool for benchmarking your progress, the number that most lenders use to determine your creditworthiness is actually your FICO® score. Here are a few ways to access it.
Before signing up for a premium FICO® score program, you may want to check if any of your credit cards offer it for free. If your credit is less than perfect, several of the best secured credit cards offer a free monthly FICO® score. Some balance transfer cards and cash back cards also offer this service. Follow the links below to search for a card that fits your needs.
- Compare the best balance transfer cards here.
- Compare the best cash back cards here.
- Compare the best secured credit cards here.
If you’re looking for a premium identity monitoring and credit score service, myFICO may be it. Owned by the Fair Isaac Corporation (FICO®) itself, this isn’t exactly cheap. Ranging between $19.95 and $39.95 a month, you can choose between 1-bureau reports and 3-bureau reports. With the 3-bureau reports, you must also select whether to receive monthly or quarterly updates. While not in everybody’s budget, this service also provides identity theft insurance. Learn more here.
While monitoring your credit score is definitely important, it doesn’t have to cost you an arm and a leg. Getting a free credit score is both fast and easy.
Although free credit scores don’t always provide a full picture of your credit situation, they do provide a good benchmark for your progress. Even more importantly, while they are in no way guaranteed to prevent or detect identity theft, they can provide important credit alerts that act as a first line of defense, helping you to get out in front of identity theft problems before they get worse.
Thanks so much for reading, and good luck!
Do you use a free credit score service? Which are your favorites? Let us know below!