How Often Can You Run a Credit Check Without Negatively Affecting Your Credit?

Many things negatively impact your credit, most of which are linked to late payments or overspending, but some are as minor as submitting too many credit applications. Occasional credit checks have little impact on your credit score, but too many inquiries impair your ability to qualify for new accounts. Shopping around for a certain loan type with multiple lenders does not affect your credit in the same way as close-together but unrelated credit checks.

Definition

A credit check is a lender inquiry in response to a credit application for a loan or credit card. Any kind of loan or card application generates an inquiry, including major credit cards, retail accounts, gasoline cars, vehicle loans, personal loans, student loans and mortgages. Banks and finance companies check your credit bureau records, which show your past repayment history, past and current accounts, balances and other relevant information. They use this data to accept or reject your application and to determine your credit line for revolving accounts. You give permission for the credit check when you submit your application.

Effects

The number of credit checks it takes to negatively affect your credit varies, depending on the other information on your credit reports. The impact is minor if your records are otherwise stellar, but you might hurt your credit score badly if it is already borderline. A single credit check normally does not knock more than five points off your score, according to the MyFICO scoring website, with a variable deduction for each additional inquiry. You get the most negative impact from more than five credit checks within a short time period, as that makes you statistically more prone to a bankruptcy filing. Your credit reports show inquiries for up to two years.

Considerations

Lenders understand that many consumers shop around for the best interest rates, especially on expensive accounts like cars, boats, houses, student loans or home equity credit lines. Credit scoring is designed to take this into account and eliminate any penalty for multiple credit checks generated by rate shopping. Limit your related applications to a 30-day period and they will be treated as a single inquiry in your credit score calculations, MyFICO advises.

Disputes

Credit checks may appear on your credit report even though you do not recall giving your authorization. Federal law gives you a right to challenge them with the company that pulled your records and get them removed if that company cannot prove it had a right to make an inquiry. Order credit reports from AnnualCreditReport.com, a site run jointly by the credit bureaus, to comply with the federal law that entitles you to free yearly reports. Write to any unrecognized company demanding either proof of your credit check authorization or removal of the credit report entry, the Illinois Attorney General's office advises.