Few credit myths are as frustrating as the idea that checking your own credit can hurt your score. Don’t let this myth scares you away from doing the very thing you need to be doing regularly: keeping a close eye on your credit reports.
The truth is that you will never, ever harm your credit in any way by monitoring, just as long as you do it the right way. Pulling your own credit from any of the many reputable websites that provide credit reports to consumers does not have any impact on your credit. Asking a friend who works at a car dealership to pull your credit report for you…now that’s a different story.
Inquiries
When you or anyone else accesses a copy of any of your credit reports, it is recorded. The record, which will show up on future credit reports, is known as an “inquiry.” The Fair Credit Reporting Act (FCRA) determines both who is allowed to pull your credit and how long that credit pull remains on your credit reports. Typically the credit bureaus will keep all inquiries on file for 2 years.
They do this because inquiries are, in fact, predictive of credit risk. Statistics show without question that consumers who apply for new credit are riskier than those who do not. However, not all inquiries are created equal and credit scoring models acknowledge this fact.
Hard Inquiries
Most (though not all) hard inquiries occur whenever you overtly apply for some form of credit. If you apply for a mortgage loan, an auto loan, a personal loan, or a credit card a hard inquiry is going to find its way onto your credit report or credit reports. Due to the fact that hard inquiries have the potential to damage your credit scores it is best to only have your credit reports pulled by lenders when absolutely necessary. For example, it’s probably best to pass the next time a store clerk offers to take 15% off your purchase if you apply for a new retail credit card account.
Soft Inquiries
If your credit reports are pulled for a purpose other than the underwriting of a credit application, the inquiry will most likely be considered a soft inquiry. The most common way that soft inquiries occur is when a consumer requests a copy of his own credit reports or credit scores. Additional examples of soft inquiries include promotional inquiries posted when lenders want to send you preapproved credit card offers and when your current lenders pull your credit reports to assess whether or not they wish to continue having a relationship with you.
So the next time you hear someone suggest that pulling your own credit reports will hurt your credit, you can correct them. Just be careful NOT to have a friend in the credit industry pull it for you because it will look like you’re applying for some form of credit from their company. That can have an adverse impact on your credit scores.
