How to check your credit card score

March 6, 2020

Your credit score is what determines your creditworthiness. Simply put, creditworthiness defines how deserving you are of credit. A lender considers you as being creditworthy if it is convinced that you will honor your debt obligations in a timely fashion.

To avoid a conflict of interest, lenders don't evaluate their clients' creditworthiness on their own. Reputable and independent credit-scoring bureaus usually perform the evaluation of an individual's creditworthiness. These intermediaries use complex mathematical formulas to assess the risk associated with a particular lender and the probability of payment.

Financial institutions use the ratings from credit bureaus to determine whether you are eligible for credit or not. Your credit bureaus' financial rating also determines the terms under which financial institutions will advance credit to you. If you have a low credit score, you are categorized as a risky borrower. Your loan application will be outright rejected, or the interest rate payable on the loan will be high.

This post will teach you what a credit score is and how you can check your credit card score. Read on till the end.

What is a credit score?

A credit score is a three-digit number that is obtained after an assessment of your credit file. It normally ranges from 300 to 850. 850 being the highest possible score. It estimates how likely you are to honor your debt obligations. Credit- scoring companies extract information from your credit reports and use mathematical formulae to calculate your credit score.

Credit scores were invented to make decision making easier for lenders. They are a summary of your borrowing history. The thinking behind the use of credit scores by potential lenders is that your past behavior predicts your future behavior. For instance, if you had borrowed money before and paid in a timely fashion, then it is assumed that you will pay the money you seek to borrow.

Credit scores are not only used by financial institutions. Insurance companies may also check your credit to determine the premiums you should be charged. A landlord may also use your credit score to decide whether you are a deserving tenant or not.

What is a good credit score?

It is simple, the closer your credit score is to 850, the more deserving you are of credit. A higher credit score increases the chance of your online loan being approved. It also earns you favorable credit terms like a lower interest rate. If you are applying for an insurance cover, you'll enjoy reduced premiums.

Using the FICO scale, a good credit rating starts from 670 and goes up to 739. A score above 800 is considered exceptional. FICO is the leading credit-scoring bureau in the United States.

It is important to note that the definitions provided by credit-scoring bureaus are only indicative. They are only used for educational purposes. In reality, it is the lending institutions that have the ultimate decision on what a good credit score is. However, it is still advisable to check your credit card score regularly.

In the wake of the COVID-19 pandemic, we are curious to see how lenders will evaluate credit scores.

How to check credit score

Before you apply for a new credit card, you should first check your credit score. Banks and other lending institutions use your credit score to determine if you are eligible for credit or the credit loan you are applying for. It doesn't hurt to be prepared in advance, does it?

But exactly how do you check your credit scores? There several ways, as you'll soon find out.

  • Use of credit cards with credit scores

There are credit card providers who provide free credit scores. Look around for one. These services are usually provided through online platforms or mobile applications. However, the credit score provided by two different financial institutions will not necessarily be the same.

  • Purchase credit scores from a credit bureau.

Credit-scoring bureaus such as TransUnion provide credit scores at a fee. You can purchase the credit report online or through the mail. A lending institution is not bound to use the credit score provided by the bureau. Whether a credit score is good or not is at the sole discretion of the financial institutions.

How to improve your credit card score

Now that you have an understanding of what a good credit card score is, it is only fair that we discuss the best way to build a good credit score. If you turn the tips listed below into habits, even before you realize it, your credit score will start nearing the 850 mark.

  • Pay on time, every time.

Of all the parameters taken into account when calculating your credit score, timely and regular payments receive the most attention.

  • Use multiple types of credit

Having various types of accounts tells lenders that you can comfortably and responsibly handle different types of credit. In financial terms, this is referred to as a credit mix. The three main types of credit are open, revolving, and installment credit. It is advisable to have a mix of the three types of credit provided you are using them responsibly.

  • Always ask for favorable terms

There's an unwritten rule in business that you are worth your bargain. If you have been a good and loyal customer, then it is very much for you to ask for better terms from your bank. Ask for lower interest rates or a higher limit on your credit card. A higher limit on your credit card will lower your credit utilization ratio.

  • Regularly review your credit report

There are higher chances that there is an error on your credit report. If you don't review your credit report at regular intervals, this error may go unnoticed and hurt your finances. The faster you identify and report and an error on your credit report, the easier it is easier to prevent your credit score from moving away from the 850 mark.