Credit card companies offer free credit scores
NEW YORK — Want to check your credit score? It might be included on your next credit card statement.
The FICO score, which is widely used by lenders to gauge your financial health, should be checked before applying for a car loan or a mortgage. But it can cost as much as $20 to do so. Now three credit card issuers — Discover, Barclaycard US and First Bankcard — have signed up to allow some 35 million cardholders to check their FICO scores every month at no cost. Besides those three credit card companies, more lenders are expected to sign up.
“I think it's fantastic,” says Ted Sarenski, a certified public accountant and financial planner at Blue Ocean Strategic Capital. “People should be watching that score and asking how they could improve it.”
The move is an initiative by Fair Isaac Corp., the company that developed the FICO score, to enable more people to see their score for free and get its brand in front of consumers. It comes after websites, such as Credit.com, CreditSesame.com and CreditKarma.com, have offered free credit scores for years. Those scores are derived differently from FICO's, but offer a similar three-digit score.
The FICO score ranges from 300 to 850. The higher the score the better. People with higher scores are offered lower interest rates from lenders and credit card companies. Most lenders pay Fair Isaac to see the scores of potential borrowers when determining if they will approve an application. What has changed is that Fair Issac has agreed to let some lenders share the scores with customers. It's not charging the lenders more to do so.
Discover Financial Services, the nation's sixth-largest credit card issuer, is the biggest lender to sign up. Cardholders of its “Discover It” branded credit cards will see their FICO scores on their monthly statements now. Discover will offer scores to all of its credit cards in the next few months. The score will be featured prominently at the top of statements and will be available on paper and online.
Barclaycard and First Bankcard customers will have to log on to the credit card's websites to view their credit scores. Barclaycard, the credit card unit of Barclays PLC, says that 80 percent of its 8 million cardholders will have access to their FICO scores by December. Some already do. The rest will get it earlier next year. The company also provides credit cards for retailers such as Barnes & Noble, and airlines such as US Airways and Frontier. So far 80,000 First Bankcard customers have access to their FICO scores. It will roll out to all its 2.5 million cardholders over the next few months.
With a number of free credit scores available, it can get confusing for customers. “They're all going to be different,” says John Ulzheimer, a contributor at CreditSesame.com. But he says consumers shouldn't get worked up about the scores. Ulzheimer recommends focusing on your credit report, which list the companies that have extended you credit, the types and amounts of the loans you have outstanding and your payment history.
Credit reports are available for free, from each of the three national credit reporting agencies -- Equifax, Experian and TransUnion -- every 12 months from AnnualCreditReport.com. They should be checked every year for mistakes or possible identity fraud.
Those reports don't include a credit score. But credit scores are derived from the reports. So making sure that your credit report is solid means you'll likely have a good credit score, says Ulzheimer.