What is a credit score simulator?

Are you curious about what affects your credit score? Have you been considering ways to improve it but don’t know where to start? A credit score simulator is a great tool to help you better understand how your credit score is determined and how changes in your financial behavior can affect your score.

In this article, we’ll discuss what a credit score simulator is, how it works and where to find one to use. For cardholders who are still learning about credit or those planning their next big money move, like applying for a mortgage loan or financing a new car, credit score simulators are useful for test running potential financial decisions and comparing the relative impacts of multiple actions on your credit score.

How do credit score simulators work?

Credit score simulators are interactive online tools that can help you figure out what your credit score might look like.

Simulations use the data from your credit report and predictive modeling to estimate how various transactions might affect your FICO score or VantageScore (depending on which company is working with the simulator). In doing so, these simulators factor in your credit history, the types of credit accounts you have, your payment history, your credit limits and more.

To begin, you’ll enter some information about your debt and your payment history. This can include the number of loans and credit card accounts you have, how long they’ve been open (or paid off) and your history of repaying them.

Some score simulators, such as those offered by Experian, begin with your actual credit score and demonstrate how different actions might influence the score. And don’t worry, running a simulation won’t actually impact your credit score.

Remember: The results from a score simulator are estimates, not predictions. While the results of credit score simulators cannot be guaranteed, these tools are still valuable in helping you know what to anticipate when pursuing a particular financial action — like opening a new credit card or increasing your monthly card payments. That way you can make informed decisions to work toward your financial goals.

Where to find a credit score simulator

Many online resources that provide free credit scores also offer credit score simulators. Credit card issuers such as Capital One and American Express, which supply free credit score services like CreditWise and MyCredit Guide, respectively, also have credit score simulators. The best part: You don’t need to hold a card from these issuers to sign up for free.

Two of the credit bureaus, TransUnion and Experian, also offer simulators of their own, but these seem to be baked into monthly subscriptions.

What factors affect your credit score?

Credit scores are created using a complex algorithm and vary according to both the credit scoring model and your credit report. Your credit score can land between 300 and 850, with the higher your score, the better. There are two major credit scoring models, FICO and VantageScore, though the FICO score remains the preferred model for major lenders such as credit card issuers and loan providers.

The following are the five factors that make up your credit score:

• Payment history: This is the most significant category, and it includes information on whether you paid your bills on all your credit products, not just credit cards, on time and in full. Related to this are late payments, bankruptcies, foreclosures and accounts reported to collection agencies.
• Credit utilization: This evaluates loan amounts and your credit utilization ratio, which is the percentage of available credit you’re using.
• Length of credit history: This takes into account the age of your oldest and newest accounts, as well as the average age of all your accounts. How long you’ve had your oldest credit card, for example, can change how much a single action impacts your score.
• Credit mix: This factor considers how you manage both revolving and installment credit, such as credit cards and student loans.
• New credit: Opening new credit accounts can be good for your credit score, but you must also account for the hard inquiries that accompany each credit application.

Where to check your credit score

Since your credit score acts as an important snapshot of your financial behavior and risk, numerous institutions provide them to you free of charge. Some banks and credit card issuers offer their customers access to their scores through their flagship apps and sites. However, many issuers provide free credit scores to all consumers online, even those who don’t have a card from the respective issuer.

Many credit card issuers, including Citi and Discover, now offer free FICO scores to their customers, as well as to non-customers. Other issuers, like Chase and Capital One, will provide a free VantageScore 3.0 through Experian. Some financial institutions, like Experian and myFICO, also provide a free credit score; however, these free scores are based on data from a single credit bureau. To view your credit score according to all three bureaus, you would have to pay a monthly fee.

Overall, checking your credit score is easy and can be done online without any cost.

Bottom line

A credit score simulator is a helpful tool to gain a better understanding of how your credit score is determined, how it can change and how it can be improved. Especially useful for consumers plotting for their next financial move, a credit score simulator can show you what to expect so you can plan ahead in case your score decreases. For anyone with access to a simulator through your free credit score provider, it’s a smart financial move to take advantage of it.