Mythbusting Four Credit Score Beliefs

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With the economy improving and consumer spending on the rise, I’ve been getting a lot of credit report and credit score related emails. With more people buying things, some of which will inevitably be on credit, folks are looking to make sure they don’t make any mistakes that could jeopardize their good credit scores. and increase their borrowing costs. I like the fact that people are becoming more conscious of their behavior and how it affects their financial lives, it’s one of the more positive side effects of the crisis.

Unfortunately, there are still a few ideas out there about credit that are flat out wrong. While I’m no credit expert, I’ve been reading enough experts and am able to separate the fact from the fiction.

Myth: It hurts your score to check your credit report.

False. Very very false. It doesn’t hurt your score to check your own credit report and it never will. Remember that the purpose of a credit score is to determine how likely you are to default on a loan. Whereas a request by a bank could be a sign that you’re looking to borrow money, often seen as a warning sign (people who need to borrow money are often viewed as in a more tenuous financial situation than people who don’t, a classic catch-22), the same can’t be said for people who are just making sure their information is accurate!

So check your credit report annually for errors via, it won’t affect your score.

Myth: It hurts your score to check your credit score.

False. Normally, when you check your credit report for free, you don’t get your score. You usually have to pay for it, unless you use a service like Credit Karma (they provide a TransUnion credit score based on TransUnion credit data, this is not a FICO credit score). Regardless of how you check your score, it won’t affect it. This follows the same logic as checking your credit report.

Myth: It hurts your score to shop around for the best loan.

False. It’s not surprising to hear that many people believe this because we all understand that hard inquiries hurt your score. If you request a quote from a dozen banks, that’s a dozen hard inquiries right? Yes, but the creators of the credit score understand that this is common practice and they take that info account. All hard inquiries made within a 30 day period by a lender impacts your score as much as just one single hard inquiry.

Myth: It won’t hurt my score if I ask my banker friend to do me a favor and check my score for free.

False. Unfortunately, this will hurt your score as much as any other hard inquiry, even if your friend doesn’t charge you a penny for it. To the credit bureaus, it looks like any other hard inquiry because they just see a bank requesting your score. When you pay for the service, the bureau is made aware that this is your request and treats it accordingly. When your banker friend pulls your score, they simply see a bank.

For many of you, these aren’t myths because I’ve written about it in the past. Unfortunately, I think we’re in the minority when it comes to financial education because I get emails weekly about these very topics. That said, are there any other myths that you once believed or that your friends and family believe that you want to see rebuked? I won’t be able to shatter any myths Mythbusters-style with Buster (my personal favorite is when they hit him with a truck to see if they could knock his socks off) but I can try. 🙂

{ 11 comments, please add your thoughts now! }

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11 Responses to “Mythbusting Four Credit Score Beliefs”

  1. SoonerNATX says:

    thanks for the information. i did not know (although it seems logical) that hard inquiries within a 30-day period have the effect of one hard inquiry alone.

    i liked the “coulvert cannon” personally. I did find the “hammer drop” interesting but as action-filled as one might like.

  2. Strebkr says:

    Good note about using Credit Karma. It does exactly as advertised. I will say that their version of my score has been 50 points lower everytime. I have purchased a house and refinanced another property over the past 2 years so I get all the credit score disclosures the bank used when they pulled my “real” credit score from all 3 of the major firms. 802,790,797 and my Credit Karma score is about 740. Not sure what to think. As long as its constant I know there isn’t a problem. If I see a huge swing I know to check my credit report.

  3. zapeta says:

    I actually didn’t know that multiple requests within 30 days are treated as one. I dunno how I missed that detail before…

  4. skylog says:

    count me in as never knowing about multiple requests within 30 days being treated as a single request. i have NEVER read this before in all my research about credit/credit repair/credit monitoring.

    • Strebkr says:

      From experience – When purchasing our last house we had a little issue pop up. It took a little bit of time to get it cleared up, but the bank pulled our credit no less then 10 times waiting for the correction to come through. I can attest that our “hard inquiry” line on our report only showed one.

  5. elloo says:

    I have a question…I read somewhere that if you close a credit card account, it hurts your credit score. But, if the credit card company closes your account due to inactivity, it doesn’t. It this correct?

    • Strebkr says:

      I’ve never heard that either, but I would be more upset with them closing my card because it would reduce my available credit. That alone will crush your credit score way more then an account closing.

  6. eric says:

    All good info. It’s been beaten into my head but a lot of ppl have misconceptions about credit scores.

  7. Shirley says:

    “All hard inquiries made within a 30 day period by a lender impacts your score as much as just one single hard inquiry.”

    When you request a raise in credit limit for two different CCs within 30 days, does it count as only one hard inquiry?

    • Strebkr says:

      If thats the case I might call all my credit card companies in the same month to ask for increases. I call from time to time just to ask and they always give me something more. Its not like I am using it, but it lowers my credit utilization % which increases my score.

  8. govenar says:

    According to the myfico website below, the 30 day thing applies only to “mortgage, auto and student loans”, not credit cards. (And it doesn’t matter if it’s the same or different lender.)

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