There are some myths that state that if one checks his or her credit score, then the score will reduce. But is that really true? Since credit plays a decisive role in obtaining loans, credit cards, and other financial products, it is quite natural to have fears regarding anything that can affect credit scores.
Fortunately, the act of checking your credit score does not adversely impact it under most conditions. This is what you should know about how monitoring your own credit affects your scores and what does affect them.
Soft Credit Checks Have No Impact on Your Credit Score
Credit checks are of two types based on their impact: the soft check and the hard check. Soft credit checks are those that happen when you check your own credit scores or when a lender does a prequalification check. Soft credit checks allow you or someone else to look into your credit report and you do not suffer any consequences on your scores.
Hard inquiries are when a lender pulls your credit report in connection with an application for a loan or credit card. However, if you have too many hard inquiries in a short span of time, then it may pull your scores down a bit. Nevertheless, if you perform any number of soft checks, there will be no impact.
Soft inquiry is not reported in your credit files by the three primary credit bureaus, namely Experian, Equifax, and TransUnion. That way, future employers, lenders, and others who pull your credit reports and scores won’t even know you ran your own credit reports and scores. The only credit inquiries that appear and affect the scores are the tough credit checks.
Frequent Checking Doesn’t Improve or Worsen
Some people argue that even checking the credit score many times in a short period could also affect it. However, credit scoring models are meant to differentiate between productive credit checking and fraudulent or improper utilization of the system.
Given the circumstances, as long as you have a valid reason to monitor your credit, such as your financial status, there is no danger in performing credit checks on a weekly basis. It is still reasonable to space them out every few months if you desire to have an additional measure of confidence that the repeated views are not going to hurt your score. However, as most of the consumer credit professionals argue that checking personal credit scores will not harm them.
The primary danger of checking too frequently is not your scores, but rather the inconvenience that it may entail. If you check through multiple sources often, for example, when checking your credit through all three credit bureaus or sites that offer credit reports from the bureaus, you may get overwhelmed with unwanted telemarketing calls. But those are just attempting to sell you credit monitoring products there is nothing wrong with your credit report. Choosing to stick with one reputable credit monitoring agency means it’s less confusing to compare your reports and scores in the long run.
What Does Lower Your Credit Scores
If checking credit does not adversely affect credit scores, then what does negatively affect credit scores? Some key factors that damage credit scores include:Some key factors that damage credit scores include:
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Late payments – The timeliness of payments is a significant aspect of credit scores. A single one-month delay can reduce the scores considerably, and such a record will remain in your credit file for seven years.
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New credit – Applying for new credit accounts – This often reduces scores, especially if the individual applies for several credit facilities in a short time. Ideally, the figure should be below 10 percent.
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Closing old accounts – This aspect assists in scores since it contributes positively to having good credit mix and history, including the duration of account opening. Pay off or close your oldest accounts or loans and this shortens your credit history.
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Having too many hard inquiries – Getting new accounts and applying for credit significantly decreases the average age of your credit history and therefore, decreases the scores.
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Incorrect data – This means that data such as payments made late when in actual sense they were made on time will reduce your scores. Dispute any adverse items on your credit reports with the credit bureaus.
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Payment history – Bankruptcy, collection accounts, garnishments, or tax liens all are bad for credit. Rebuilding scores requires time and positive behaviors that improve credit health.
Regular tracking of credit scores enables one identify such problems early enough. New accounts and too many hard inquiries do cause the scores to be lower, but checking your own reports and scores does not - this enables people to safeguard their credit scores rather than damaging it.
With advancement in technology more gadgets and easier access makes it possible for individuals to go and look at their credit information themselves online securely. There are of course many good and valid reasons to monitor credit reports and prevent misuse of one’s credit, and the drawbacks of more active monitoring are in fact very limited. The second reason is that remaining knowledgeable means making more effective decisions and being financially stable.
The bottom line? Do not fear that by tracking your credit reports and scores, your numbers will drop. Responsible checking will not harm your credit profiles or ratings. To the extent it just involves voluntary credit checking only, it can only be beneficial.
