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When you apply for a credit card or loan, your credit score is probably the single most important factor in determining whether you’ll be approved or denied. A credit score is a three-digit number between 300 and 850 that’s based on your credit history — both good and bad.
Lenders and credit card companies use the score to determine your ability to pay off loans and card balances. A good credit score is typically considered to be 670 or higher, but a lot depends on the credit-scoring model. Poor scores usually range between 300 and 579, which is well below the national average FICO Score of 714.
Unless you have a rich friend or relative willing to loan you money, you’ll likely need a good credit score to get a home or car loan. A good score will also typically get you a better interest rate. This is why it’s important to keep close tabs on your credit score, regardless of whether you’ve had any recent credit activity.
You can check your credit scores in several different ways. In fact, you may be surprised at the level of services you can get at no cost. For example, Chase Bank lets you check your credit score through its Chase Credit Journey service — whether you have an account with the bank or not. The service is free and available on Chase’s website. You can check your score as often as you want, and because the activity is considered a “soft” credit inquiry, it won’t impact your credit score.
Once you’ve signed up for Chase Credit Journey, you’ll also have free access to a suite of tools you can use to help build your credit, such as identity monitoring, credit activity alerts and personal insights.
Because your credit score plays such an important role in determining your creditworthiness, it’s also important to understand the factors that go into determining the score. While the two main credit scoring services, VantageScore and FICO, vary slightly in how they weigh these factors, both generally emphasize the same components. For example, VantageScore calculates your credit score based on six main categories.
Here’s a quick rundown of each, and the individual weight they carry in determining the overall score.
Your payment history lets lenders and other creditors know how likely you are to make your payments on time, which is why it’s the most important factor in determining your score. If you miss payments or make them late, this will negatively impact your score. Conversely, building a record of on-time payments can help your score.
This category tracks how long your credit cards and other lines of credit have been open as well as the different types of credit you have, such as mortgages, car loans and credit cards. Lenders weigh the average age of all your lines of credit when determining your credit score. Opening new credit accounts can reduce your credit history length and also lower your score. Lenders also like to see a mix of different types of credit, so keeping your mix diverse will help your credit score.
Your credit utilization ratio is the percentage of the amount you owe vs. your total credit limit across all cards and loans. For example, if you have a total balance of $1,000 across all of your credit accounts and a total limit of $10,000, your utilization is 10%. It’s best to avoid pushing your credit utilization above 30% to keep from hurting your credit score.
Carrying a large amount of overall debt can have a negative impact on your credit score, especially if your debt-to-credit ratio is high.
Whenever you open a new credit account, a “hard” inquiry will be added to your credit report that can temporarily lower your score. It is better to build your credit limit over time to ensure you don’t hurt your credit score.
While this is not a major factor that impacts your credit score, lenders want to see that you’re not opening more lines of credit than you need.
No matter your credit history, it’s important to check your score regularly. Keep reading to learn why.
Checking your credit score with a service like Chase Credit Journey helps ensure that your information is correct, up-to-date and compete. If you see a sudden change in your score — especially a change that pushes it lower — it’s possible that some kind of error has been made. If you see something that doesn’t belong on your credit report, contact the reporting company. To dispute an error on your score or report, contact the credit bureau that furnishes the report. The three credit reporting agencies are Equifax, Experian and TransUnion.
Checking your credit score regularly can alert you to activity that might impact it, such as pushing your credit utilization too high. In some cases, financial institutions can monitor your accounts for you.
For example, Chase Credit Journey monitors all of your accounts and alerts you to changes in your credit report that could impact your score. You’ll get an alert any time Chase sees new activity — including charges, credit inquiries and new account openings. Chase will also notify you when it sees changes in your credit usage, credit limits, and balances.
Knowing your credit score can give you an idea of your overall financial health. For example, if you see a low score that may be due to a high credit utilization ratio, that can tell you that you need to focus on paying down debt. Or if you’ve been late making some payments, a low score can motivate you to prioritize on-time payments and be aware of due dates. Tools such as a budget tracker and payment calendar can help you gain more control over your finances, and you can find many of these tools for free online.
A credit score that drops sharply in a short period of time might indicate that late or missed payments have shown up on your credit report. Lenders and creditors sometimes make mistakes when reporting your payment history, and you’ll want to correct those mistakes as soon as possible.
If you believe an error was made, you’ll first want to check your credit reports from all three credit bureaus – Equifax, Experian and TransUnion – to confirm the error and determine if the inaccuracy appears in all three. If you notice a mistake, try contacting the lender directly. If the lender made an error, they are responsible for updating the credit bureaus with the correct information. You can also file a dispute with any of the credit bureaus online or by mail.
In addition, it’s important to ensure that any old information that counts against your score — including late payments — is removed from your credit report. Late payments should disappear after seven years.
One big advantage of regularly checking your credit score is that it’s easier to spot fraudulent activity. For example, scammers might open a new account in your name without your knowledge. When this happens, file a dispute immediately. Some free services that allow you to check your credit score also provide identity monitoring and will alert you to suspicious activity. Chase Credit Journey tracks any changes connected to your Social Security number, notifies you if your data is exposed in a breach and monitors whether your information is appearing on any sites on the dark web.ge of regularly checking your credit score is that it’s easier to spot fraudulent activity. For example, scammers might open a new account in your name without your knowledge. When this happens, file a dispute immediately.
Knowing your credit score gives you an indication of whether you’ll qualify for a mortgage or other type of loan or credit. If you see a high score, you can feel more confident about filling out an application. If you see a low score, you’ll need to take steps to improve it before applying for new credit.
There’s a reason that many people don’t watch their credit score and credit activity as closely as they should. It takes a lot of time and effort to properly perform all these steps, one by one, on your own. But there’s a more efficient way to do it. Chase Credit Journey is a free service that bundles the tools you need to complete all these steps into one easy-to-use package. In fact, Chase does the hard work for you by monitoring your identity and alerting you to changes in your credit score. You’re also free to check your credit score as frequently as you want with no impact to your score.
Start keeping closer tabs on your credit score and enjoy the peace of mind (and possibly better interest rates!) that come with it.
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