You may have been told that you should not check your credit score frequently since it may harm your credit score. This creates a lot of controversy for many consumers who would like to keep an eye on their scores but do not want to risk damaging their credit by checking their credit reports. But what is the truth, then? Here is everything you should know about how you affect your credit score by performing a check.
Credit Score: What is it?
Now, let’s discuss whether checking your score brings it down or not, it’s crucial to know what a credit score actually is. Credit score is a three-figure figure determined by the data in the credit report that reveals your credit history. Credit scores usually go from 300 to 850.
Credit scoring models work on the data contained in the credit report at a certain time in arriving at a score. The most popular model is FICO that was developed by the Fair Isaac Corporation. FICO scores show the credit standing of an individual to the lenders and other parties offering credit facilities. All in all the higher the score the better is the general rule of thumb.
Why Credit Score Is Important
Credit scores are valuable when one is applying for credit such as credit cards, auto loans, and mortgages among others. Credit scores are used by lenders to make some of the decisions about whether to grant credit applications and the interest rate to charge where the application is granted. Higher credit scores are associated with lower lending risk, which ultimately leads to favorable interest rates and repayment terms.
Good credits scores are beneficial in the long-run since they result to less interest rates being charged. Higher scores also mean more available funding when one needs credit. It is therefore advisable to ensure that one gets to score high, preferably above 700. This way, one is able to notice any irregularities that may exist and correct them ahead of time.
What Affects Your Credit scores?
That being said about why solid credit scores are important, what is it that defines credit scores? The FICO scoring formula emphasizes these main factors:The FICO scoring formula emphasizes these main factors:
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Payment history – the ability to pay credit accounts in a timely manner. This category has the most points attached to it.
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Payment history – the track record of making payments on credit lines, mortgages, and loans. Possessing a lot damages grades.
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Credit history length – credit scores are higher for those with long-term credit products as opposed to short-term credit products.
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Credit utilization – the amount of credit being used – having different credit account types, such as credit card and an installment loan.
- New credit cards and loans – applying for credit, or opening several accounts within a short time decreases scores for some time.
Your personal credit information provides inputs into scoring models for determining your numbers. This means that the way you manage credit over time determines your credit scores.
Is Checking Your Credit Score Harmful to It?
With this in mind, the general query arises – can even observing your credit score affect it negatively? The good news however is that self checking does not in any way harm your score, it actually helps. Here are some key points on why monitoring your score is score-neutral:Here are some key points on why monitoring your score is score-neutral:
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Credit reports do not consider inquiries you make about your score your own credit reports. So it means that scoring models cannot penalize you for the number of times you have seen or viewed something.
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Credit check performed by potential lenders pulls credit scores and results in minor hard inquiries that last for a short period. But self-checks only make soft inquiries that do not affect the credit score.
- By using your own credit score, your actual credit data is not altered in any way and you are not disadvantaged in any form. It is worth knowing that scoring models consider all the details that are passed to credit bureaus and not the score viewing trends.
The kind of credit monitoring services that allow you to check your credit scores also do not influence the numbers in any way. Regardless if you are ordering free annual credit reports or use a site which offers complimentary scores, just looking at the scores does no harm.
Why the Misconception Exists
If it does not hurt to check one’s score, then why does this misbelief remain that checking credit scores decreases them? If consumer confusion exists, it probably arises from some myths concerning credit scoring built upon misconceptions.
For example, some may think that having a high quantity of inquiries is always bad for credit. Although multiple hard inquiries from lenders within a short period may lower scores, personal soft inquiries of your score do not affect it.
Furthermore, since some of the consumers who have checked the scores in the past also receive lower scores, they would think that checking the scores is what led to the low scores. Other credit activities such as payment delinquency or high credit card utilization ratios probably affected the numbers instead. However, since score changes occurred in the context of self-monitoring, consumers made this connection.
The credit scoring models are not simple, and this makes people misunderstand what leads to changes in the scores. Looking only at the raw score does not influence any of the inputs for scoring formulas, thus cannot shift numbers.
Should You Check Your Credit Score?
Because inspecting credit score does not harm you in anyway, monitoring numbers is advantageous to you regularly. Checking is beneficial in identifying the deterioration of the problem prior to its worsening besides in monitoring progress while seeking to enhance the scores. Ideally, one should check your credit score every three months or so as frequently is not necessary.
You can obtain free credit scores from sources like:You can obtain free credit scores from sources like:
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AnnualCreditReport. com – a government-mandated website for obtaining free credit reports and scores on an annual basis.
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Credit bureau and credit card website – many entities offer free monthly scores to their clients.
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Credit reporting companies – These include Credit. com, Credit Karma, WalletHub among others where users receive free scores.
Understanding your own credit score empowers you so that you can be in control of your own credit. Check your ranking to know how well you are performing, then continue improving on scores using the right practices in credit. It is prudent to continuously check them to avoid nasty shocks in the future when one needs strong credit.
