How to Check Your Credit Score and Why It Matters

Your credit score often helps determine how much you can borrow and at what cost, and you should be able to check it to ensure there are no mistakes or misunderstandings. To calculate credit scores, scoring models analyze your credit history every time there’s new activity—whether you make a monthly payment, open a new credit card, or a lender requests to see your credit report. If there are credit history errors or suspicious credit activity, you can be financially impacted.

In addition to the fact that there’s no penalty for checking your own scores as often as you’d like (looking at them only triggers a soft check that doesn’t appear to lenders), here are three more reasons why checking your credit scores is an excellent habit:

1. Checking helps you understand your financial status

Credit scores generally range from 300-850, and, typically, people with scores of 740 or higher have better approval odds.1 When you see your scores, you can think like a lender and better match credit cards and loans to your credit profile. Some lenders may even tell you their minimum score requirements, and knowing your score can help you avoid unnecessary denials.

2. Checking can provide data to create a stronger-score strategy

Checking your scores allows you to see if they’re lower than you’d like. If they are, and you can pinpoint which of the five key scoring areas you’re struggling in, you may be able to create a more effective borrowing strategy:²

• On-time payment history (35%)
  If missed or late payments are causing your scores to dip, making on-time payments can help significantly—plus the negative impact lessens as time goes on.
• Amounts owed (30%)
  Borrowing up to your limit means you have a high credit utilization rate, and that negatively impacts your scores. If you’re stretched too thin, you can think about pausing credit card spending or making larger payments to free up your credit line.
• Length of credit history (15%)
  The longer your credit accounts stay open and in good standing, the better. So even if you’re not using older credit lines, you may want to consider keeping them open (as long as they’re properly managed, of course) to help lengthen your history.
• Credit diversity (10%)
  Having multiple forms of well-managed debt—like a mortgage, a car payment, and a personal loan—can strengthen your scores. If you’re in a good spot for a new credit line approval that diversifies your mix, you may want to consider applying.
• New credit applications (10%)
  Since adding new debt to your plate increases your risk of falling behind, potential lenders conduct a hard inquiry into your credit report to really study your capacity for more payments, and that generally lowers your score temporarily. Spacing out your applications can help you reduce that impact.

3. Reviewing your scores can help you catch errors and suspicious activity

If your scores usually sit within a certain range, a big drop without any change in your borrowing behavior may indicate errors or suspicious activity. If you notice an unexplained dip, you can check your full credit report, verify all information, see how certain credit actions (like late payments or debt settlement) may be affecting your score, and report any errors that could be dragging it down. Plus, any credit lines a fraudster tries to open in your name will likely appear on your report.