I am sure you have come across the notion that you should not check your own credit score because it has a bearing on the score. But is that actually true? Since credit is highly relevant to obtaining loans, credit cards, and even employment or housing credit, individuals wish to supervise their scores. However, they may not consider running a credit check for fear that more inquiries will negatively impact the credit scores. Well, what is the truth?
What the Experts Say
The good news is that getting your own credit score does not harm it in any way or even cause it to readjust. Both the three main credit reporting agencies including Experian, Equifax, and TransUnion as well as the Consumer Financial Protection Bureau supports this by stating that checking your own credit report or score does not affect it in any way.
Douglas Boneparth, the president of Bone Fide Wealth, and a member of the CNBC Financial Advisor Council also shares the same sentiment saying that checking one’s score does not have any impact at all.
Why then does this misperception endure? Specialists argue that it stems from the failure to differentiate between a soft credit check and a hard credit check.
The Difference between Soft and Hard Checks
When you check your own credit, it also considered as a soft inquiry. Soft inquiries result from activities like:Soft inquiries result from activities like:
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Monitoring your own credit report or score
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Using your credit report in an employment screening process by the employer, during the leasing or renting process by the landlord, or during the insurance process by the insurer
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Credit checks that are conducted on you by lenders when you are out looking for a loan or credit card.
Soft inquiries on the other hand do not affect your credit score in any way. While, on the other hand, the hard inquiries occur when you apply for new credit like credit cards or an auto loan. All these inquiries can slightly reduce your score. Some key differences:
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Soft inquiries are only seen by you while hard inquiries can be seen by other lenders.
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Inquiries that can reduce your score are only the hard inquiries and the impact is usually very small.
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Hard inquiries are reported for a period of one year on the credit report.
The Confusion Explained
Knowing the difference helps one see where the misunderstanding stems from. Consumers are aware that the process of applying for a new line of credit causes hard inquiries that lower the scores. Well when they hear ‘checking your score’ they also hear ‘check credit’ so they think this has to affect scores as well.
In fact, soft inquiries only occur from the checks and their pull cannot even be viewed by creditors in the first place. Unfortunately, it is still possible to assume that any kind of ‘check’ is equally detrimental to scores.
Frequent Check-In’s with No Impact
The good news is that whenever you check your own credit score, it does not impact your score in any way whether you do it daily, weekly, or rarely. You could check your credit reports from Experian, Equifax and TransUnion as often as you wanted to without any negative effects whatsoever! , of course, you wouldn’t get any valuable information performing daily check.
It is noteworthy that many financial specialists do encourage checking your credit approximately three times per year. When checks are spaced out, it is easier to detect mistakes after every three months while keeping a generalized record of the overall trends in the business. Such checks are more frequent than what is necessary in order to maintain good credit standing.
Indirect Impacts to Consider
But we must recall that score issues are not direct and therefore some indirect troubles might appear because of credit monitoring. For example:
Too Many Hard Inquiries: If constant credit checks compel you to apply for credit more than you require “for checking,” new hard inquiries may be produced. They can then reduce scores and open new accounts you do not require.
If constant checks make you apply for credit than is required “just to check,” new hard inquiries could occur. Expansion of such accounts then leads to the reduction of scores that may be useful in keeping tabs on financial activities. Credit Anxiety: It is never fun to be anxious about scores though checking them over and over again can be obsessive. Scores, however, vary normally, and small changes are not necessarily bad signs. If credit checks are a source of stress, less frequent credit checks may be helpful.
In most cases, it is quite enough to glance at the credit score a couple of times per year. However, you need not fear that just by looking at your credit report or score, it will be affected in any way. It is also worth mentioning that the soft inquiries that occur in connection with credit self-checks that are carried out on a daily basis do not affect the score in any way!
