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Jump-start your credit: Begin with a free credit score

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Like many people who set money goals for 2021, you may have your eye on a better credit score. But it can feel like such a big job that it’s hard to know where to start. Try breaking it down into smaller tasks you can check off, one per week:

  • Check your free credit score and set a goal.
  • Find out what has the biggest impact on your scores.
  • Get your credit reports.
  • Dispute errors or information that is too old to be on your credit reports.
  • Monitor your credit — without a lot of effort.

Start by getting a free credit score

The first part of your credit journey is finding the “you are here” spot on the map. From there you can set a realistic, achievable goal and see how fast you’re getting there.

Your starting point is your current credit score, which is a three-digit number, usually on a scale of 300 to 850.

There are plenty of ways to get a free credit score. It’s possible you already have access — many credit cards, financial institutions and personal finance websites offer them.

To add points to your credit score, choose a single score source to track, and don’t worry about small moves up or down — they are normal. You’re looking for overall direction. There are two main credit scoring companies:

  • VantageScore keeps a list of places to get scores that are truly free. Using that list is a safer bet than searching online, where you may encounter “free” scores that ask you to enter a credit card number. Any site that asks you to give credit card info is likely going to charge you a monthly fee after a free or low-cost trial period unless you remember to cancel.
  • FICO, the dominant scoring company, has fewer free sources, but you may have access through your financial institution or credit card issuer.

What to expect when getting a free score

When signing up for a score, you’ll be asked for your first and last name, Social Security number, address and birth date.

After that, you’ll be presented with a series of multiple-choice questions to verify your identity. Because the questions are intended to be ones only you can answer, they can be tough. It will help to know approximate amounts of regular monthly payments you’ve made on credit accounts, previous addresses and roughly when credit accounts were opened and closed. Enter data carefully; in the event that you cannot correctly answer verifying questions, you may have to wait for up to 30 days to try again.

Once the verification questions are answered correctly, you should have access to your credit score.

What your score means

Expect to see some context for your free score — not just the three-digit number. Knowing whether you are close to moving up to the next credit score range or already comfortably where you want to be can help you set a reasonable, achievable goal.

A solid score is not just bragging rights: It can mean being able to borrow money at a reasonable interest rate, for things like a car, house or even cash in the event of an emergency. It may also help you qualify for a better deal on a cell phone, get the apartment you want, save money on car insurance and avoid having to put down deposits for utilities.

If you are new to credit or haven’t used it in a long time, there may not be enough data to produce a score. In that case, you can try a credit-building product, such as a credit-builder loan, to bulk up your credit history.

What should your goal be?

If you want to, you can shoot for a perfect credit score. But beyond a certain point, a higher score won’t get you better terms on credit. Credit expert John Ulzheimer says a score of 760 or higher is likely to qualify you for the lowest mortgage rates, and 720 is the minimum for the best car loan rates. You can still get loans with scores lower than those, but will probably pay higher interest rates.

Ultimately, your credit score is just a tool for achieving financial goals. Think about how you want to use that tool: Do you want a rewards credit card or a balance transfer card? Are you hoping to qualify for a mortgage? Research the score requirements of the credit card issuer or mortgage lender you are considering.

If that seems impossibly far away, set an interim goal such as adding 20 or 30 points. As long as you’re moving in the right direction, you’ll feel encouraged to keep going.

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Bev O’Shea writes for NerdWallet. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.