Friday, October 21, 2011

Will the Free Credit Report Lower My Credit Score?

You may have heard that if you ask for your free credit report it could lower your credit score.
Asking for a credit report creates an inquiry on the report. While it is true that inquiries can lower your credit score, it is only for certain types of inquiries. There are two types of inquiries: soft inquiries and hard inquiries.

When you ask for your credit report, you’ve not actually applied for credit. You’ve only asked to see the report. This is called a soft inquiry. When the credit card company sends you an application, they have looked at your credit report to determine what kind of offer they may want to make. This, too, is a soft inquiry, and it will appear on your report so you can see who has asked to see it.

But once you send in that credit card application, it becomes a hard inquiry, and, at that point, it can lower your credit score.

Other types of hard inquiries include applying for a car loan or a student loan, pre-qualifying for a mortgage, and opening an account at the department store when they offer you that 10% discount on the merchandise you are about to purchase.

When shopping for a major purchase, such as a car, we encourage people to use the Rule of Three and shop around to compare at least three sources. But if applying for credit will bring down my credit score, how can I shop for credit? Good question. Multiple inquiries will lower your score. So do your shopping within a limited period. That way, it will count as only one inquiry on your credit report. Lenders expect you to shop around.
The scoring models take into account that the inquiries occurring within a 14 day window that are all from auto dealers or are mortgage applications are the result of shopping for the best terms and count them as one inquiry. Newer scoring models give you a 45-day window.
But, even though there have been three or more inquiries from lenders, because it was done in a limited amount of time, it counts as one on your credit report.

So getting back to your free report, you should be requesting it every 12 months from each of the three credit bureaus—Equifax, Experian, and Trans Union. Better yet, if you stagger them, you can get a free report every four months. Mark the dates on your calendar so you know when you requested the report and when you can request the next one.

To get your report, go to You can request the report online, by phone, or by mail. The easiest method is by mail. Online requests can be tricky for some people because of the security questions that are asked. If not answered correctly, the system kicks you out and it emails you a message that someone has attempted to access your report and you will have to wait two weeks to try again. Be careful where you go online to get the free report. Some websites offer a “free” report, but only if you sign up for their services at a monthly fee.

Nevertheless, I still find a lot of people who have never accessed their report. The importance of doing so is to find out if there is any inaccurate negative information there. Are there accounts indicated that you do not recognize? If so, someone may be using your identity to go shopping. In addition, the inquiry section within the credit report lets you know who has requested the report. If you’ve received an offer from a credit card company, it will appear as an inquiry on the report.

You can find out more about how inquiries affect your credit score at

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