Don’t Fall for these Credit Score Myths

February 21st, 2011 Ronald Unruh Leave a comment Go to comments

If you’re rebuilding your finances after a personal bankruptcy filing, you’re probably aware of the important role your credit score plays in your overall financial health. But there is plenty of unreliable information out there about what a credit score is and how it works – to make sure you’re taking the right steps toward post-bankruptcy credit health, make sure you have the right info!

Here is a refresher course on the truth behind some common myths about how your credit score works (adapted from Bargaineering.com).

Myth Vs. Reality: Your Credit Score

Myth: Your credit score is damaged when you check your credit report. Reality: Checking your credit report (which you can do for free at annualcreditreport.com) has no impact on your credit score. In fact, checking your credit report is one of the most important things you can do if you’re recovering from bankruptcy or some other financial setback, if you’re interested in preventing identity theft of if you’re just plain interested in maintaining healthy personal finances. Checking your credit report regularly allows you to make sure your information is being reported accurately so that you’re getting the most benefit from your positive credit actions.
Myth: Your credit score is damaged when you check your credit score. Reality: Even though credit scores are not currently offered for free (though legislation proposed a while back sought to change that), when you pay to view your credit score, it does not cause any damage. In fact, if you’re getting ready to apply for a loan (whether for a mortgage, a car or something else), it’s probably a good idea to figure out what your credit score is so you can determine whether to wait a while or pull the trigger. As with checking your credit report, checking your credit score can be part of maintaining healthy finances.
Myth: Shopping around for loans damages your credit score. Reality: This myth probably grew from the knowledge that hard inquiries (that is, when lenders check your credit score) have a slight negative impact on your credit score. But shopping around for loans is a savvy financial move and the credit scoring bodies understand that, so that hard inquiries made within a 30-day period count only as one inquiry. This means that, to do the least damage to your credit score, plan well and shop smart: get your loan shopping done within the 30-day window and your credit score should be minimally affected.
Myth: My banker friend can check my score as a favor to me without damaging my score. Reality: Even if your buddy at the bank doesn’t charge you for this service, the credit scoring body still sees the inquiry as a hard inquiry from a bank, which means it will do as much (or little) damage to your score as any other hard inquiry would.

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