It used to be that you had to pay to see your credit score, and keeping track of it every month required purchasing a subscription to a credit monitoring service. Thankfully, many credit card issuers are now offering their customers some sort of free monthly credit score. This happened after the Consumer Financial Protection Bureau called on credit card issuers to do so back in February of 2014.
In the two years that followed, several major banks have worked with the major consumer credit bureaus to offer cardholders a free credit score each month on their statements, online, and though their mobile apps. This service has been complimentary, much like the travel insurance and shopping protection benefits offered by most cards.
Nevertheless, this benefit has varied from cards that offer just a simple credit score to others that offer features such as explanations of your score and graphs that help you track how it's changed over time. Capital One has been at the forefront of this trend by offering it's Credit Tracker app which featured a grade overview, credit alerts, and even a credit simulator to see how your possible future actions would affect your credit score. Now, Capital One has announced it will be re-branding this benefit as CreditWise and making one surprising new feature.
The New CreditWise App
Capital One announced that it will make the new CreditWise app available to everyone, not just existing customers. In addition, it will be offering scores using the TransUnion VantageScore 3.0 model, which is used by some lenders. Previously, it had been offering the TransUnion New Account model, which is considered to be an educational score. It's also revising its app with a new design that it hopes will be more intuitive and easier to navigate.
How Credit Scores Work
There are two components to your credit score, the data used and the scoring formula applied. The data used is from your credit history, which is kept in a credit file by one of the three major consumer credit bureaus, Experian, TransUnion, and Equifax. Since each credit bureau could have different data in your credit file, your credit score will vary depending on which bureau is used to create a credit score. Yet in practice, the differences in the data kept by the different bureaus tend to be minor, and most people find that their credit score only varies slightly based on the company that supplies the credit history.
The other factor is the scoring model or formula used. One of the more popular scores is called FICO, after the Fair Isaac Corporation that creates it. But in addition, credit bureaus can market their own credit scoring formulas, such as the TransUnion VantageScore 3.0 that Capital One uses.
What Goes Into Your Credit Score
The formulas used to create a credit score are secret, but there is a basic outline of how it's weighted:
- 35% Payment History
- 30% Amount Owed
- 15% Length of Credit History
- 10% New Credit
- 10% Types of Credit in Use
Much has been written about how to improve your credit score, but in this case, the big picture generally matters more than the details. By making all of your payments on-time and keeping a low amount of debt, you can excel in both the "Payment History" and "Amounts Owed" factors, which make up a combined total of 65 percent of your credit score. You can also help the remaining factors by not opening and closing numerous credit accounts frequently. This is the simplest way to improve your credit score or to maintain an excellent one.
By understanding how the different types of credit scores work and how you may be able to obtain your credit score from your card issuer, you can keep track of your credit and make sure that it's as strong as it can be.