Here is some good news for borrowers: The Wall Street Journal reported that the average FICO score is at an all-time high of 700.
A 700 FICO score is considered good, just 20 points shy of being considered excellent.
The Wall Street Journal also reported that the number of consumers with credit scores below 600 has dropped to about 20 percent. (FICO credit scores range from 350-800, with scores below 620 being considered subpar.)
“Where Can I Get My Credit Score?”
If you are interested in finding your credit score, you have several options:
- You can buy your FICO score from myFICO.com. Keep in mind that you actually have three FICO scores because there are three credit-reporting bureaus: Experian, Equifax, and TransUnion. Not all lenders report to all three credit-reporting bureaus, so they each have slightly different information about your payment history. As such, your credit score will differ from bureau to bureau. When determining your interest rate, lenders usually ignore your highest score and your lowest score and base your rate on the score that falls in the middle.
- You can get your credit score for free from a variety of websites. Keep in mind, though, that these credit scores are usually based on a formula other than the FICO formula. Lenders almost always use the FICO formula, so free credit scores usually do not represent the credit score lenders will see when they pull your credit report.
- This brings us to the best way to get your FICO credit score for free: Ask a lender. You can call an auto dealership or mortgage broker and ask to be pre-qualified for a loan. During this process, the lender will pull your credit report and can tell you your credit score, free of charge. Keep in mind that your credit score will drop a couple of points due to the inquiry, but the damage will be minimal, and your score will bounce back within six months.
“What Can I Do to Fix My Credit?”
Here are three of the best ways to increase your credit score:
- Keep a low balance-to-limit ratio on your credit cards. Never carry a balance that is more than 30 percent of your limit on a credit card. Keeping a low balance tells lenders that you are not strapped for cash.
- Build new, good credit around old, bad credit. If you have several accounts that are in poor standing (such as collection accounts, bankruptcies, foreclosures, or the like), you need to build new, good credit around the old accounts. Have at least three new credit cards and a credit rebuilder or installment loan on your account. Consider your old credit like receiving “F” grades in school. You are much better off if you add some “A” grades to your report card than simply hanging on to all those “F” grades. Credit works the same way: If you have a history of poor credit marks, the credit-scoring bureaus need to know you have turned over a new leaf, so open a few new accounts and keep them in great standing. (You can find a list of credit card companies that approve borrowers with low credit scores here: 720CreditScore.com.)
- Of course, the golden rule of credit is this: Pay your bills on time!