Why Having Someone Check Your Credit Scores too Often Is Bad

Companies check credit reports and credit scores in response to loan and credit card applications. Your scores and credit records indicate whether you are reliable or likely to default on the debt. Many things affect your score, including these inquiries. The MyFICO credit scoring company warns that "hard inquiries," which occur because of applications rather than credit self-checks or marketing pre-screenings, hurt your credit rating because they make you look like a risky borrower.

Effects

Companies check your credit rating by pulling your score or reviewing you Experian, TransUnion and Equifax files whenever you apply for new accounts. Their inquiries get added to your credit reports and figure into credit score calculation, the MyFICO site explains. A single inquiry drops your credit score between zero and five points, but more credit checks pull it down farther. Six or more checks in close proximity peg you as a high risk for default because it makes you statistically eight times more likely to file for bankruptcy.

Considerations

You can get your credit reports and check your credit score as often as you wish without any negative results because self-checks fall into the "soft inquiry" category, the Lendingtree finance website advises. They are invisible to creditors and ignored by the FICO credit scoring formula. Also, banks and finance companies buy pre-screened information from Experian, TransUnion and Equifax. Their inquiries are visible to you but do not affect your score.

Loan Shopping

Loan shopping racks up a high number of inquiries when you fill out numerous applications for big loans like mortgages, student loans or new or used car financing. Normally this would harm your credit score, but MyFICO explains that its formula takes shopping into account. You only get penalized the equivalent of a single query as long as all the shopping-related inquiries happen within a 45-day period.

Reporting Time

Damage caused by too many inquiries and credit score requests eventually repairs itself. Equifax explains that this data only stays on your credit reports for 24 months, then gets purged. It no longer figures into your credit score or influences creditors once it is erased. You are allowed to dispute inquiries older than two years that still show up or data you do not recognize. The Federal Trade Commission (FTC) advises writing letters to the credit bureaus asking for removal of wrong or outdated information. You are allowed to check for mistakes yearly by getting free credit reports from annualcreditreport.com.