In today’s uneasy economy, you have probably noticed an abundance of companies touting “Free Credit Reports.” In most cases these ARE free, but you should realize you may pay an indirect price for having your credit checked.
Some of the most popular services offering free credit reports include:
While there is nothing wrong with wanting to take a closer look at your credit history, you must be aware of the potential drawbacks.
Many people are unaware that there are two types of credit history inquiries: hard pull and soft pull.
For example, every time you have a “hard pull” on your credit history you will take (at least) a minor ding to your overall credit score. It’s hard to predict the EXACT affect both of these examinations (hard and soft pull) have on your overall score, however, realizing the difference between the two should give you some insight.
A hard pull should only occur when you give express written consent for it to happen. This type of credit pull will have a (slight) negative effect on your overall score. These usually occur when you are seeking some form of credit (think – insurance, loan app, new credit card, etc). Records of these inquiries will remain with you for 1 or 2 years and should be used primarily when obtaining new lines of credit. Sometimes companies may require these reports be pulled before you purchase a certain product or service (think – satellite television, utility companies, etc).
With this in mind, you don’t want to go crazy with how many times you “give consent.”
It is important to note that several inquiries within a short period of time – such as shopping around for a mortgage rate – may be counted as one inquiry.
A soft credit pull will not effect your credit score. Even if you conduct several of these a year, they will not be visible to other individuals or institutions pulling your credit. These “soft pulls” typically occur when applying for a new job, new apartment, etc. You may also make these soft pulls yourself which should give you an accurate calculation of your current credit standing. One thing to be aware of is that these pulls can be generated by credit card companies whom issue you “pre-approved” credit cards.
It goes without saying that a soft pull is preferred over a hard pull.
Final tip: don’t be shy about asking what type of credit check will be conducted. Even though you may not have any recourse, it is always good to know if it will be a hard pull or soft pull.