This widely held belief is actually one of the top misconceptions about credit, said nationally recognized credit expert John Ulzheimer, formerly of FICO and Equifax.
“Companies that give away free credit reports and free credit scores play this myth up to be more of a problem than it really is,” he said.
Here Ulzheimer busts the credit-check myth.
“The reason this myth still lives on is because I believe people don't have an understanding of this soft versus hard inquiry structure,” Ulzheimer said.
A soft inquiry occurs when you check your own credit or when a lender or credit card company sends you a pre-approved offer. Because these “light” credit checks aren't connected to a new credit application, they have no impact on your credit score.
Hard inquiries, on the other hand, are posted to your credit report once you apply for new credit.
“Hard inquiries may have an impact on your scores, but they do not always have an impact,” he continued. “To the extent it does impact your scores, the impact is minimal.”
Furthermore, old inquiries have no impact on your credit score, because “scoring systems are programmed to ignore hard inquiries that are older than 12 months,” he said.
One great option for protecting your credit report is setting up a security freeze, also called a credit freeze. Thanks to a 2018 amendment to the Fair Credit Reporting Act, it is now free for consumers to freeze or unfreeze their credit report.
“Monitoring is reactive and only alerts you when something has already happened,” Ulzheimer explained. “Freezes prevent any unauthorized access into your credit reports.”
When a security freeze is in place, you will be notified any time a hard inquiry is attempted on your credit report. Since soft inquiries already have no impact on your score, these are not blocked by a freeze.
To request a credit freeze, contact the three national credit reporting agencies:
If you’re still concerned about a credit check negatively affecting your score, Ulzheimer advised discretion when applying for credit.
“You can't control the value of an inquiry, to the extent there is any. It's easier to avoid the inquiry altogether. You can do that by applying for credit sparingly.”
Regardless if you have good or bad credit, paying attention to your score is a good idea. Banks, credit card companies, car dealerships, utility providers and even potential employers can run a credit check.
“Credit scores are very important to consumers,” said Ulzheimer. “They are used for risk assessment by lenders and are used to set the terms of your accounts.”
Your credit score is a summary of your credit history and the more detailed information available in your credit report.
“Think of the report as the test and the score as the grade you earned,” he said.
By knowing where your credit stands, you can take steps to improve your credit score quickly.