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March 22, 2018

The lowdown on those “free” credit scores

By Kevin Theissen

The Fair and Accurate Credit Transaction Act of 2003 provided individuals with valuable rights to the credit information that companies keep on them, but did you know the credit score provided to you may be different from the one provided to lenders?

The first thing you should know is that you have a right to see your credit report once annually without cost. Visit annualcreditreport.com.

While your credit report can be obtained for free, your credit score will cost you money, except if you have been denied a loan on the basis of your credit score, in which case you may obtain your credit score for free.

Your credit score is a numerical representation of your creditworthiness, which takes into account past and current credit activities, including any late payments, judgments, liens, bankruptcies and foreclosures.

When you see an offer for getting your free credit score, it may be a marketing-driven incentive to get you to sign up for a fee-based credit monitoring service. The score may be only available at no cost if you agree to sign up for a trial subscription and don’t cancel prior to the end of that trial period.

The dirty little secret of credit scores
Before you purchase your credit score, understand that the methodology used to calculate the score you buy is different from that used to determine the credit score lenders receive. There are hundreds of methods for calculating an individual’s credit score, and many lenders use private models with proprietary outcomes. Still, the correlation between the various possible scores is high, around 90 percent according to the Consumer Financial Protection Bureau. In other words, a “good” credit score by one standard will likely also be “good” by another.

While knowing your credit score may be important, it may be more vital to review your credit report to correct any errors that may be hurting your score and take the necessary steps to improve your credit profile.

Kevin Theissen is Principal of Skygate Financial Group: kevin@skygatefinancial.com

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