You’ve been told many times that it isn’t smart to let a salesperson check your credit unless you’re ready to make a purchase. In fact, you may have been told that credit checks are so damaging to your score that you don’t even dare look at your own credit report.
That part isn’t true. You can check your own credit report as often as you like with no damage to your score. And you should – it’s one way that you can be alerted quickly if someone else is using your identity.
In addition, you don’t need to worry the checks that credit card companies make before they send you one of those “pre-approved” offers. Not that you’ll be receiving many of those in the near future – credit card companies are trying not to extend credit right now – not searching for new borrowers.
Those checks, which are really nothing more than unauthorized snooping, are not used in compiling your score. They, along with account reviews and inquiries from potential employers, are known as “soft” inquiries.
The inquiries that affect your FICO score are the “hard inquiries.” These are made when you apply for retail store credit, credit cards, auto loans, and mortgages. They affect your score because they show your positive intent to obtain credit.
The more inquiries, the more they’ll affect your score – except in one instance. The credit bureaus and FICO understand that people shop for the best deals, and they take that into consideration.
So if you’re shopping for a car and you visit 6 different dealerships within a 2 week time frame, all 6 inquires will count as one under the old scoring model. The new model extends that time frame even farther – to 45 days.
The same is true for mortgage loan inquiries.
Even better for shoppers – any inquiries younger than 30 days are completely ignored by the scores. This gives you more leeway to shop for the best mortgage or car loan without fear of lowering your score.
Credit inquiries stay on your credit report for 2 years, but the FICO scoring model only counts them during the first year.
If you’re thinking about a car or a house, check your own credit first and work to get it into the upper 700′s before you let any lender do a hard inquiry. And then, don’t get the inquiry until you feel certain you’re ready to go forward.
It would be a shame to knock yourself down if you’ve been working hard to get to that place in life where lenders offer you the lowest rates!
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