Thursday, April 19

Credit monitoring service impacting credit scores

Have you ever heard that multiple inquiries into your credit can harm your credit score? Well, it could, but it depends on who is looking and for what purpose.

I was recently asked if a subscription to a credit monitoring service would adversely impact a credit score.

Banks, Credit Unions and Consumer credit reporting agencies offer to "monitor" your credit for a fee. Credit monitoring services can be costly. These services cost anywhere between $43.80 per year to nearly $150.00 per year depending upon the provider. Typically, these services say they will notify you if anything unusual or suspicious appears on your consumer credit report. To monitor your credit, they look at your information to determine if there is are any new trade lines reporting.

As explained in truecredit by TransUnion, there are differences between soft and hard inquiries on your credit. Soft inquiries will not impact your credit rating, hard inquires will. Generally, if you are checking your own credit (at for example) or using a service to monitor your credit file, it will not cause a hard inquiry, and will not harm your credit.

A hard inquiry occurs when a creditor or lender reviews your credit data for the purpose of a loan or other credit related transaction. A hard inquiry is listed on your credit report. Too many of these can harm your credit rating.

What if you're car shopping and each dealership that you visit takes a loan application and pulls a credit report? If this happens, try to make sure that the inquiries all happen on or around the same day. Better yet, go to your credit union and get pre-approved for the loan! That way, you can focus on negotiating the price of the car. Oftentimes, the dealership will attempt to divert your attention by redirecting your focus on the financing of the car. If you already have your financing in place, you don't have to worry about it. Once you've landed on the car and have the deal that you want, then you can ask how competitive the dealers financing is compared to your offer from the credit union (or bank). The key here is to not have everyone and their brother pulling credit on you.

Information from says this about inquiries:

Fallacy: My score will drop if I apply for new credit.
Fact: If it does, it probably won't drop much. If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called "inquiries") will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

No, credit monitoring will not impact your score, but multiple hard inquiries over time may.