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Free Credit Score for All?

Kimberly Lankford

The financial-services reform bill would entitle you to a free score if you're denied a loan. Here's how to check your score before you apply.



I heard that the financial-services reform bill passed by the Senate calls for free credit scores for everyone. Is that true?

Not exactly. The Senate’s version of the financial-reform bill would entitle you to a free credit score if you are denied a loan or prevented from making a purchase, receive an increase in your interest rate on a loan or unfavorable terms on a credit card, or are rejected for a job because of your credit score. If this provision ends up in the final version of the law, it will give people an idea of where they stand so they may take steps to improve their score.

In the meantime, if you are planning to take out a loan, know your score before you apply. One way to get your credit score is to go to www.myfico.com and order your credit reports from TransUnion and Equifax, two of the three credit bureaus (the third is Experian), along with your FICO credit scores; each report and score is $15.95. The FICO score is the most widely used credit measure. Your credit score is based on information in your credit report, so it’s a good idea to check your score with each of your credit reports.

Although the FICO score is still the most popular credit score, a growing number of lenders are using the VantageScore, which was devised by the credit bureaus. You are entitled to a free copy of your credit report (go to www.annualcreditreport.com) every 12 months from each of the three credit bureaus and, at the same time, you can get your VantageScore for $7.95 with your Experian credit report or for $9.95 with your TransUnion credit report. You can get your Equifax score, another type of credit score with slightly different criteria, for $7.95 when you get your Equifax credit report from www.annualcreditreport.com (you can also get your VantageScore for $7.95 at www.experian.com). Beware of credit-score deals that automatically enroll you in credit-monitoring services that charge a monthly fee.

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The best way to improve your credit score is to pay your bills on time; on-time bill paying accounts for more than one-third of your FICO score. It’s also important to keep your balances low; a good target is 20% or less of your available credit if you’re planning to take out a loan in a few months. Keep in mind that your so-called credit-utilization ratio is the total of your credit-card balances divided by the credit limits on all of your cards, regardless of whether you pay your balance in full each month. Also, don’t make any big changes in your credit -- such as opening or closing cards -- within a few months of applying for a loan because your score could take a hit.

For more information, see Boost Your Credit Score in 2 Easy Steps.

Got a question? Ask Kim at askkim@kiplinger.com.



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