Free FICO Score:
The largest credit scoring service is previously known as the Fair Isaac Co. and now is called FICO has announced that it will begin to offer free credit scores to millions who are already customers of Barclaycard US and First Bankcard. This will be known as the FICO Score Open Access and will expand to more credit card agencies in the future. FICO Scores are used by 90 of the 100 largest financial institutions. There are other credit scores out there such as VantageScore and CreditKarma, but these are not always the scores that are used by lenders. MyFico.com offers a one-time score check of $19.95, but if you have an account with one of the two companies mentioned above, you can now get this score for free.
It is essential that you know and understand your credit score since good credit is required for almost everything these days. Everyone from cell phone companies to landlords will check your credit score to determine if they can trust you in a long term financial agreement. The FICO score ranges from 300-850. It is calculated from several factors, and the basic breakdown is as follows:
- 35% of the score is based on your history of making payments on time.
- 30% is based on how much you currently owe compared to the total amount of credit you have been granted. (For example, you have been given a $3000 credit limit on a card and have a balance of $1000 on it currently. You are using 1/3 of your credit. )
- 15% of your score is the age of credit history. No one will start with an 850 score because of this factor. If you never missed a payment or use credit cards, then it doesn’t mean your bad with credit, but lenders don’t have any evidence that you are good with credit either.
- 10% is based on new credit inquiries. If you recently applied for many loans and credit cards, then it may be a sign that you have some financial difficulties or lenders may want to avoid in giving you many different types of credit all at once. If you apply for 10 $2000 credit cards at once and receive all of them, then you can easily be in debt $20,000 on the first day. New applications for credit usually only affect your credit score for a short period.
- 10% is based on your mix of types of credit, such as credit cards, mortgage, personal loans, etc. Lenders want to see that you can handle many different types of credit.
So knowing your score and how it is determined can help you figure out how to build your score. If you don’t have any credit, then you should open up a credit card. If you have multiple cards and are good with paying them off but do not see your score improving, then try applying for a car loan or a personal loan. If you use your credit all the time and max out your cards, then try to limit the amount you use before paying it off. A good rule of thumb is to use 1/3 or less of your available credit to keep your score from going down and only use about 1/10 of your credit to help raise your score. A missed payment in under 30 days may not always get reported, but over 30 days will get reported. These usually take 5-7 years before they come off your record.
To keep good credit history, you should never close out your oldest card even if you don’t use it. You should never close out any credit card because when you close it out, then your total available credit limit decreases, and now your used credit ratio will be affected. Example: you have 3 $1000 cards for a total of $3000 available credit. You usually use two of the cards for $500 each every month. Your total used credit is $1000 or 1/3 of your available credit. You decide to close the third card because you never use it, and now your full available credit is $2000. You still spend $1000 a month, but now that is 1/2 of your available credit. So your score may take a dive due to you closing a credit card. The only time you should close your card is if it has an annual fee, and you don’t have any need for it, but you should apply for a no-fee card before closing your account.
To access Barclaycard US’s FICO Open Access for free FICO score, click HERE.
For FAQ click HERE.