Getting a free credit score is easier than ever, and knowing it is key to keeping your finances in order

• A credit score is a number between 350 and 800 that represents your creditworthiness.
• FICO and VantageScore credit scores take into account factors like payment history and credit mix.
• Consumers can get their credit score for free, or it can be included as part of a paid service.
• Read more stories from Personal Finance Insider.

Credit scores play a crucial role in the lives of consumers. They figure prominently in everything from qualifying for a mortgage or credit card to the rate you pay on your auto insurance. Knowing where to find your credit score and understanding what it means are key to effectively managing your finances.

What is a credit score? 

A credit score is a number from 300 to 850 that predicts how likely you are to pay back a debt on time. Consumer credit reporting agencies like Experian, Equifax, and TransUnion look at a range of factors including bill-paying history, current unpaid loans, and the share of available credit that are used to determine credit scores. The two most common credit scores consumers are likely to come across are FICO and VantageScore. 

• The FICO score is a three-digit number that represents your credit worthiness, or how likely you are to pay back a loan and the size and time to repay the loans that are available to you. It was developed by what was then known as the Fair Isaac Corporation 30 years ago. 
• VantageScore is a similar three-digit number used to measure an individual’s credit worthiness. It was started in 2006 by three of the biggest consumer credit rating agencies, Experian, Equifax, and TransUnion.

How to check your credit score for free

Knowing your credit score is important as it will determine the size and terms of any loans you’re able to get. Having good credit will most likely make taking out a loan relatively easy, while having bad credit may make it difficult or even impossible to do so. The number is updated regularly and can move up or down, depending on various factors like payment history and how many loans you have. So it’s useful to have a sense of what that number is.

In the past, it was common for consumers to have to pay a fee to get access to their credit scores from one of the credit agencies. Today, however, there are many free options available. Most credit card companies will provide your score on your monthly statement or anytime you check your account online. There are also a number of websites, like Credit Karma, that offer free credit scores when you sign up for their services.

“You can find free credit scores all over the place today,” says Matt Schulz, chief industry analyst at CompareCards by LendingTree, who notes that knowing your credit score can take a lot of the mystery out of the lending process.

“It has never been easier to find a free credit score than it is today, and that’s a good thing for consumers,” Schulz says. LendingTree, for instance, offers regular access to your TransUnion credit report and your VantageScore, Shulz addss.

Still, companies can and some still do charge a fee, as they are entitled to do so under the Fair Credit Reporting Act (FCRA). FICO offers tiered services that give users their Experian score plus a range of other services like credit monitoring and identity theft insurance for $19.95 a month. A user can get scores from Experian, Equifax, and TransUnion for $29.95 a month. 

How are credit scores calculated?

Now that you know how to get a hold of your credit score for free, what exactly are the factors that go into its calculation? It’s slightly different depending on whether you’re looking at a FICO score or VantageScore. Let’s break it down.

FICO score

1. Payment history (35%): The most important factor in your FICO score is whether you’ve paid previous loans off on time. It helps lenders determine how much risk it will take on when extending credit.
2. Amounts owed (30%): While having a lot of outstanding debts isn’t necessarily a bad thing, it does show how much of your available credit you’re using. Lenders can look at this and determine whether or not you’re overextended.  
3. Length of credit history (15%): A longer credit history is a positive, but not a requirement for a good score. 
4. Credit mix (10%): Your FICO score takes into account your mix of credit cards, retail accounts, installment loans, finance company accounts, and mortgage loans. 
5. New credit (10%): The score looks at recent credit accounts and the time frame in which they’re opened as they can represent a greater risk.

VantageScore

VantageScore uses slightly different factors, which are weighted differently to determine the overall score. The most recent iteration of the scoring model uses “trended data,” which looks at your credit use over time to help determine your score. The breakdown of contributing factors is as follows.

1. Payment history (41%)
2. Utilization (20%)
3. Age/Mix (20%)
4. New credit (11%)
5. Balance (6%)
6. Available credit (2%)

While there are different formulas to determine your credit, Schulz says it all really comes down to three things: “Paying your bills on time every time, keeping your balances low and not applying for too much credit too often. Do those three things over and over again and your credit will likely be just fine.”

What’s a good credit score?

While the range of credit scores runs from 300 to 850 for both FICO and Vantage, there are slight variations in what each represents.

FICO	Score	Percentage of Americans
Exceptional	800 – 850	21%
Very Good	740 – 799	25%
Good	670 – 739	21%
Fair	580 – 669	17%
Poor	300 – 579	16%

Source: Experian

As of April of last year, the average FICO score was 716 and  67% of U.S. consumers had a FICO score of good or better.

VantageScore	Score	Percentage of Americans
Excellent	781 – 850	23%
Good	661 – 780	38%
Fair	601 – 660	13%
Poor	500 – 600	21%
Very Poor	300 – 499	5%

Source: Experian

The average VantageScore in the U.S. is 695, with 61% of Americans having a Fair or better score. 

Does checking my credit score lower it? 

A common misconception is that checking your credit score will lower it. That’s considered a “soft” check and has no impact on the score itself. Other instances that are considered soft checks include when an employer runs a credit check with your permission or when a lender checks to preapprove or prequalify an offer. 

A “hard” check is one conducted by a prospective lender when they look into your credit history. Those checks can have a negative impact. This is part of the “new credit” factor that contributes to your credit score. 

Credit score vs. credit report

If you look at a credit score as the grade lenders use to determine your creditworthiness, think of the credit report as all the “work” that goes into that grade.

Your credit report details your credit activity. It lists current and historical accounts, the credit limits, balances, payment histories, dates accounts were open, as well as public records such as liens, foreclosures, bankruptcies, and civil judgments. It does not include your credit score. Consumers are entitled by law to one free report every 12 months from each of the three major reporting companies. They can be requested at www.annualcreditreport.com.

Keeping a close eye on your credit score and credit reports, whether you get them for free or pay for them, are key to staying on sound financial footing. By monitoring both, you can take steps to correct small issues before they become something that can hamper your ability to take out loans. They can provide valuable insights into what factors might be pulling down your score, according to Kendall Clayborne, a certified financial planner at online bank SoFi.

“From here, you can formulate a plan for what will make the biggest impact for you personally,” Clayborne says.