Does Checking Your Credit Report Lower Your Score?

The Fair Credit Reporting Act allows consumers to check their credit reports once every year for free, according to the Federal Trade Commission. Those copies must be obtained from annualcreditreport.com. People can purchase additional copies as frequently as they wish from TransUnion, Experian and Equifax, which are the three nationwide credit bureaus, or third-party vendors. Certain credit report inquiries are reflected in the credit score, but personal credit checks are viewed differently.

Purpose

The Federal Trade Commission recommends checking credit reports regularly for mistakes and signs of identity theft or other fraudulent activity. The credit reporting agencies do not do their own accuracy checks or audits, so consumers must catch errors on their own. Reports are constantly updated with new and changing information, so new problems can happen at any time. The Fair Credit Reporting Act lets people dispute mistakes to get them fixed or completely erased. This is especially important when preparing to fill out a mortgage application or applying for other major loans.

Type

A self-check of credit reports is classified as a "soft inquiry," the Lending Tree financial website explains. Other examples of soft inquiries include check-ups by your current creditors and pre-screening by companies that want to send promotions like pre-approved credit card offers. None of the inquiries in this category has an effect on the person's credit score.

Alternatives

There is another type of credit check, known as a "hard inquiry," according to Lending Tree. This happens when a consumer applies for a loan or credit card and the lender requests credit records to evaluate the application. Banks sometimes make a hard inquiry on a person's credit files when opening a new checking or savings account.

Effects

Although a self credit check has no effect on a person's credit score, too many hard inquires will lower it. Lending Tree warns that such inquiries can reduce it by up to five points. This may not influence the ability to open new accounts, but if the score was borderline it could cause rejections or cause a person to be offered inflated interest rates.

Considerations

Credit reports are different than credit scores. A credit score is a three-digit number calculated by a company called FICO or the credit bureaus, based on information contained in the reports. Leslie McFadden of the Bankrate.com financial site explains that the credit score gives lenders a quick idea of whether a person is likely to default on loans within the next 24 months. Consumers are not entitled to see their credit scores for free by law, although they can buy their numbers from FICO and the bureaus.