Credit score is a measure of your credit standing or credit strength. Since it shows lenders how often you meet your financial obligations, it helps them determine whether to lend you money and if so, how much to lend you. This is arrived at by factoring in five main areas, they include, the payment history, amounts owed on credit, the length of credit history, types of credit used and number of new credit applications. Because this number is so pivotal, people often have concerns about what can affect their credit score. Some of the most frequently asked questions include whether one is able to negatively affect their credit score by running ones own credit report.
What does it mean to ‘run your credit’?
When you “run your credit” you pull a credit report from one of the three credit reporting agencies such as experian, transunion or equifax. It enables you to have a view on your credit history, ascertain the correctness of the data, look for traces of fraud, and keep track of your score. There are a few ways you can obtain your credit report:There are a few ways you can obtain your credit report:
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Getting a free annual credit report through www. annualcreditreport. com
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Credit karma is one of the free and effective credit monitoring service.
- Buying your report without going to a credit bureau website
When you check your own credit, this is called a soft inquiry, which occurs when you decipher your score on your own or when lenders pull your credit without your authorization (like for pre-approved offers). These inquiries appear on your reports but are not accessible to creditors and do not harm your scores.
Does Running Your Credit Lower Your Credit Scores?
The short answer is no, doing a credit check on yourself will not harm your credit scores. Soft inquiries that emanate from the act of requesting copies of your report, as noted above, do not in any way harm your credit. What this actually does is to make the consumer to frequently check his or her credit to detect any signs of fraud.
However, when you apply for new lines of credit, those creditors pull “hard inquires” to check your eligibility. Unlike soft inquiries, hard inquiries do appear to other lenders and can slightly affect your scores. However, the impact is usually a fleeting one, and is not as profound as one might expect. Your scores will likely bounce back within 1-6 months. However, if there are too many hard inquiries in a relatively short period, it may indicate higher risk, and therefore, lower scores. However, just running your own credit does not suffice – so go ahead and check as frequently as you desire without any concern!
Why Is Credit Monitoring Important
Monitoring your credit reports and scores is something you should do periodically alongside other regular financial checkups. Here are some great reasons why it pays to monitor your credit often:Here are some great reasons why it pays to monitor your credit often:
Catch Errors Early: These credit reports are not always accurate. If you have errors on your reports such as accounts that are not your own or accounts with the wrong balances, they can pull your scores down. It is always advisable to catch mistakes as early as possible and ensure they are corrected immediately.
Notice Identity Theft: The only way to detect if someone has obtained your personal details and is using it to open accounts or make purchases is by checking the reports. The earlier one acts, the less need for damage control.
Track Improvement: To maintain credit, whether for the first time or after experiencing some hitches in future, running your credit helps in tracking the progress. You can notice the benefits of healthy financial habits.
Prepare to Apply for Credit: It is good to ensure that one checks his or her credit before applying for a big account that needs new credit (such as home loan). Look for errors, trends in scores over months, and determine whether one should establish credit before an application to get better chances of approval and better rates. This can help you avoid disappointment some other time!
Stay Vigilant Against Fraud: Unsurprisingly, the number of personal data breaches has risen over the years. The best defense is to carefully check credit since leaked data results in fake credit accounts creation. Being able to catch issues early allows one to report fraud before large losses occur.
How Frequently Should One Monitor Credit?
Most credit experts suggest that you should review your credit reports from the three major credit bureaus at least once a year. Therefore, if you decide to review materials more often, you will be able to detect flaws in the process. Regarding your scores – it is more than reasonable to track it every 2-3 months to observe the tendencies and improvements.
Forbes also affirms that checking credit report has no prearranged impact on the score and, therefore, one can run credit report as frequently as necessary to get the best picture without considering the effect. Regularly check your credit reports and scores to ensure good credit standing. Be sure to check your credit before any major purchases where new lines of credit may be necessary so you go in informed!
