September 26, 2020

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Does Credit Monitoring Hurt Your FICO Score?

Does Credit Monitoring Hurt Your FICO Score?

Credit monitoring is an important service. Many borrowers don’t know what their FICO scores are when first starting out, and it is easy to be surprised by outdated or erroneous information on your credit file if you don’t look at it frequently enough.

Do you know what your credit reports say about you? Your credit activity including the most recent events can sometimes make or break a credit application.

Too many recent applications for credit is one problem, another may be too much of the wrong kind of credit (junk credit cards, payday loans, etc.) The reason for credit monitoring has a lot to do with protecting your identity from fraudsters and thieves, but many people have never even seen a credit report, let alone understand what is in them. 

One common complaint about checking credit has to do with a misunderstanding of the credit review process; some assume that any credit inquiry potentially hurts your FICO score.

But when you look at a credit monitoring company’s website you will often see plenty of disclaimers urging consumers:

“You can’t hurt your FICO score if you check your own credit’. Is this true? Or is this just marketing hype designed to sell a product or service?

The statement above is indeed NOT marketing hype–consumers don’t hurt their own scores by requesting a copy of your credit report or by credit monitoring. These defined as “soft inquiries” that don’t affect your scores.

A hard inquiry such as a credit card application will slightly reduce your FICO score. A hard inquiry happens whenever you apply for credit such as for a store credit card, auto loan, and yes, mortgage loans.

But you don’t have to worry about the hard inquiry issue when doing credit monitoring– you are making soft inquiries and the result is not the same.

Experian, one of the three major credit reporting agencies informs consumers that a soft inquiry happens not only when you check your own credit score, but also when an employer or landlord runs a credit check. This describes what is considered a soft credit inquiry. But there’s more!

The major credit reporting agency reminds consumers that there no penalty for pulling your own credit report or for monitoring your own credit. And you are also not penalized for getting pre-approved for an FHA mortgage. This also does not count as a hard inquiry.

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