You have decided to apply for credit. Whether you’re looking for a new credit card, personal loan or mortgage, you’re probably wondering what to do before a credit check.
Fortunately, there are a few simple steps you can take to put your credit report in the best possible light. But first, let’s make sure you know the difference between reviewing your credit report and checking your credit score.
Difference Between Checking a Credit Score and a Credit Report
Many people mistakenly think that checking your report and your score are the same thing. Unfortunately, there are also articles online that are wrong. This is often based on the belief that your credit score is listed on your credit report.
Your score doesn’t appear anywhere on your report, but you don’t have to look too far to find it. Your score can be viewed in a number of ways, such as your credit card issuer, your bank, or websites offering free educational scores.
Your credit file contains personally identifying information, your credit accounts, and related data such as your credit card balances, credit limits, and anything negative, such as a collection account or late payment.
By the way, checking your score and checking your credit report has no bearing on your score. These actions are considered informal requests, so feel free to check your score and report whenever you feel necessary.
Get your free credit report
You can get your free annual credit reports at AnnualCreditReport.com. Normally, you can get a free report from each of the three credit bureaus once every 12 months, but until December 2022, you can view your reports weekly.
Unless there’s something going on in your life, like a contentious divorce, you don’t need to review the reports every week. But consider them as part of your preparation for a credit check. Make sure there are no mistakes that could lower your score.
How to check your credit score
After reviewing your reports, it’s time to check your credit score. Most likely, you can get a free credit score from your credit card issuer. This can be a FICO score or a VantageScore. Most lenders use a FICO score, but even a VantageScore gives you valuable information about your credit rating.
There are also websites and apps that offer free sheet music. Once you’ve determined your credit score, you can decide if you need to spend time improving your score before applying for credit.
For example, if you have a FICO score of at least 760, you are in a good position to get the lowest interest rates. If your score is close to that number and getting credit isn’t urgent, it may be worth spending a few months raising your score.
What does your credit score tell lenders about you?
The reason for optimizing your score before a credit check is twofold: a good score helps you get the lowest interest rates and also tells the lender that you are worth the risk. When you appear creditworthy, lenders are more likely to approve your mortgage, car loan or credit card application.
According to myFICO, a consumer with a FICO score of 760, which is in the very good credit range, is considered low risk. Only 2% of consumers with a score of 760 are likely to become delinquents.
But someone with a credit score of 650, which is in the fair credit range, is considered to have medium-high risk. About 28% of consumers with a score of 650 are likely to become delinquents.
The bottom line? Getting your highest possible score before you apply for credit can save you a lot of money and improve your chances of getting approved for credit.
How to quickly raise your credit score
There is no magic potion that can boost your score by 100 points by tomorrow. But if you follow this advice, you’ll push your score in the right direction:
- Do not apply for new credit. Each time you apply for new credit, you can lose up to five points on your score.
- Pay off your credit card debt. You have a credit utilization ratio, which is the amount of credit you have used compared to the amount you have. Keep your usage rate below 10% to improve your score.
- Increase your credit limit. If you’ve been a great cardholder, increasing your credit limit can improve your score. When you increase the amount of credit you have, you reduce your utilization rate. This, in turn, can increase your score.
- Pay all bills on time. Payment history accounts for 35% of your FICO score. Now is not the time to rush. Make sure you make timely payments, which you should anyway.
How to Shop for Mortgage Rates
A firm credit application can potentially lower your score by up to five points. If you ask for a credit card, it’s hard to avoid it.
But if you apply for a mortgage or another type of loan, you can limit the damage to your score. This will count as one serious request if you complete your rate purchases within 14 days.
The new FICO scores give you a 45-day window, but the old versions of FICO score and VantageScore only give you two weeks to complete your rate purchases.
Since you know that every survey has the potential to drop a few points, don’t take that risk. Be organized and do your comparison shopping within 14 days.