Question: Is there any disadvantage in using credit monitoring services in that it might reduce my credit scores? Given the fact that almost all companies are offering credit monitoring, as well as identity theft protection, it is quite reasonable that consumers have this worry. On the bright side, it has been established that the mere act of using credit monitoring services will not adversely affect your score.
People should understand how credit monitoring services work because they offer to monitor an individual’s credit report.
Credit monitoring services obtain your credit report(s) directly from one or all of the three major credit reporting agencies in the United States of America. They do this by making what is referred to as a soft inquiry, meaning they just want to review your credit reports, for instance, on a monthly or quarterly basis.
As earlier noted, the soft inquiries, done to check one’s credit report do not influence the credit scores. This is quite different from a ‘hard pull,’ which is a request for new credit, for instance, a credit card or a loan. As mentioned earlier, hard inquiries only have an impact for a short while, and they can reduce your scores by a few points.
To summarize, they are utilized for the main purpose of tracking credit reports and notifying the user each time there is a change. This enables you to identify any signs of fraud or mistakes in time and rectify them before they snowball out of control. In this regard, the use of monitoring service per se will not lower your credit scores as long as you are not applying for credit accounts.
Things You Can Do that Don’t Affect Your Scores
In addition to credit monitoring, there are a few other types of financial account reviews that will not harm your credit:
- Tracking your credit reports – You are legally allowed to avail of one free credit report once a year from each of the three major credit bureaus in the USA through the website www.annualcreditreport.com and it does not harm to check.
- Getting your credit scores – It is perfectly alright to go online and get your recent scores from a website that offers such scores for free, or better still, subscribe to a score reporting service, and it does not harm your scores in any way.
- being an authorized user on someone else’s credit card – This can even work to your advantage if the primary cardholder has been a subscriber for a long time.
- Recent shopping for loans – Obtaining an auto, mortgage, or a student loan within the previous 45 days is considered as one inquiry.
- The credit check carried out by a dealership before approving an auto loan does not appear as a hard check until you go for the actual loan.
You should just be wary of applying for credit lines too often and getting into more debt. Such behaviors can negatively affect your credit standing as you are gradually deprived of your credit scores.
The following is how credit inquiries may help or harm your scores
Any kind of credit application – from credit card to loan application, cell phone connection, or application for utility services – can slightly affect the scores downward temporarily.
How much effect an inquiry has often depends on your overall credit profile and history:
- However, for people with less credit records, especially those with short credit history, then the inquiries can greatly affect them. The points lost per new application are larger when there are fewer total accounts and less overall experience on the platform.
- Thus, individuals with other open accounts and long credit histories are likely to be less negatively impacted by every inquiry made. Their scores may only decrease marginally, if at all, after sitting through such programs or watching movies.
In general, bigl3742 inquiry can bring down FICO credit score from 3 to 5 percent. The effect is generally a little more profound for the scores that are initially smaller, like 600 or below. As the test scores go higher above 750, there are normally little or no fluctuations.
Since the inquiries can remain on your credit reports for up to two years, any associated drop in scores is reversed. However, multiple inquiries within a certain period may be a warning sign to credit-reporting agencies or other institutions that may be assessing credit risk. Applications should be kept as simple as possible as one of the major guidelines to be followed.
Monitoring With Minimal Impact
It is for this reason that any credit monitoring provider you care to use should be one that only uses soft credit inquiries and not hard ones that require you to fill out an application form. Steer clear from those services that pull one’s credit report to enroll with them. Other things to note include trials that change your plan without your knowledge or consent and those that enroll you into paid services without informing you.
So long as one compares shops effectively, credit monitoring not only serves as a good notice service but also as a security tool without impacting the credit rating. Monitor your reports and scores often, though avoid applying for new credit too often, because this will prompt additional hard inquiries. It is the combination of healthy credit habits and tracking that allows for achieving high scores.
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