Keeping up with your credit reports is essential for anyone who is serious about their financial well-being. They may be the only way for you to detect if your identity has been stolen. This post will show you how to get three free credit reports a year (through a government run program) at annualcreditreport.com, with no strings attached.

What is a Credit Report?

Let’s start with the basics on this one. You can get a free credit report from each of the three major credit reporting agencies: Experian, Transunion, and Equifax. Credit reports will show you all of the credit accounts (including loans of any kind) that you have open at any time or have had open and your payment record by month for each.

To fully understand what a credit report is, it is important to differentiate it from a credit score.

What is a Credit Score?

As stated by annualcreditreport.com, “A credit score is a complex mathematical model that evaluates many types of information in a credit file. A credit score is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service and determining specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents.” The method that I highlight below will be for free credit reports, not credit scores.

You can get your TransUnion credit score for free using Credit Karma. They also give you a free VantageScore, which is increasingly being used by creditors instead of a FICO score.

When Should I Use a Credit Report and when Should I Use a Credit Score?

Credit reports serve two main purposes:

1. To highlight any long-lost open accounts or accounts you didn’t even know you had open (that maybe even were not opened by you). You can then remedy by disputing the information or closing the accounts.
2. To clean up your credit history prior to an event where you will need to apply for credit.

It is best to check your credit reports often – at least a few times per year, just to stay on top of things.

Credit scores should be used in advance of applying for credit. If your score is relatively low, you may not be able to get the best rates when getting credit, and a score may indicate that you need to do some things to remedy that.

Annualcreditreport.com Versus Freecreditreport.com

Remember all those catchy jingles on the commercials for ‘freecreditreport.com’. Just sign up for your “free trial membership” where you submit your credit card. Getting your “free” Experian credit report automatically enrolls you into their credit monitoring service for $16.95 per month, and you hopefully forget about cancelling prior to the end of the membership. Ironically, Credit Karma is now offering free credit monitoring as well, so paying for credit monitoring just got a whole lot less appealing.

The FTC tried to cut down on free credit report scams by offering counter-advertising and the folks at freecreditreport.com have since focused their ads on more profitable territory by promoting freecreditscore.com.

As the FTC’s free credit report disclaimer site says, annualcreditreport.com is the ONLY authorized source to get your free annual credit report under law. It is a website created by Experian, Equifax, and Transunion that allows you to access free credit reports (no strings attached).

Rotate to Get Three Free Credit Reports Per Year

If you plan accordingly, you can get three free reports on annualcreditreport.com via each of the three agencies per year. Here is an example on how I do this:

1. Jan. 1: I get my free Experian Report
2. Tax deadline: I get my free Transunion report.
3. Start of Football season: I get my free report from Equifax.

I suppose adding to a calendar would be easier, but this works for me.

Next, mark one day post those dates on next years calendar with the same agencies, and you’re set.

Free Credit Report Discussion:

• Where do you get your free credit reports?
• Have you caught any discrepancies in your report that you’ve had to dispute?
• Have you been sucked in by the catchy jingles in the past?

Related Posts:

Denied Credit? Now you will Get a Free Credit Score

How to Get 3 Free Credit Reports Per Year (with no Strings Attached) is copyrighted by 20somethingfinance.com without consent to republish.

What is credit monitoring?

Credit monitoring is a service that automatically updates you when a significant change has been identified in your credit report. This could include a hard or soft credit inquiry, a new credit account being started, late payment updates, or updates to your personal information.

You will automatically get an email when one of these things happens. In the long run, this can help you protect your credit and protect yourself from identity theft. If you have a big credit event such as a loan application coming up, it can also protect you from any unforeseen roadblocks.

Just like Credit Karma’s credit score service, which offers up your Transrisk (TransUnion) and VantageScore, it is also free. You do not need to enter your credit card or any payment information like you do with other free credit score services. For more on this and a look at the security features the service provides, check out my full Credit Karma review.

How Much Does Credit Monitoring Cost?

What’s surprising about this move, is that credit monitoring is a service that is not cheap. Equifax charges $16.95 per month for the service, and even TransUnion, who is offering the service to Credit Karma, charges $14.95 per month. Free is quite the bargain!

How do I Get Free Credit Monitoring with Credit Karma?

To get the free credit monitoring service, all you need to do is sign up for a free Credit Karma account and then opt-in to the free credit monitoring. If you are already a member, go to your profile section and select “Notify me about important changes on my credit report” to sign up.

Related Posts:

• How to Improve your Credit Score
• Why Pay for Lifelock when you can Prevent & Monitor Identity Theft for Free?
• Denied Credit? Now you will Get a Free Credit Score
• How to Protect Yourself Against Mail Identity Theft & Fraud

Credit Karma has Started Offering Free Credit Monitoring is copyrighted by 20somethingfinance.com without consent to republish.

Under final rules issued by the Federal Trade Commission and Federal Reserve Board to reflect the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act, there are a number of scenarios in which you will automatically get a free credit score.

The new rules kicked in July 21st.

Here are the scenarios:

1. You apply for credit and are denied credit based on your credit score.  You’ll get a letter, the score that was used, and information on how to get a free credit report too.
2. You apply for credit and get approved with less than the best credit terms that have been given to other approved applicants (i.e. a higher APR).  This is also known as Risk-Based Pricing.
3. Your existing credit terms are changed. This can happen if you have an existing account with a credit card issuer and the APR is increased based on a poor credit score.

Also, keep in mind that you are also supposed to get your credit score when you apply for a mortgage loan (not new, but still good to know).

Here’s a couple of key things to keep in mind in light of this news:

• I’ve been reading that many creditors are deciding just to send out credit reports to everyone who applies for credit as an easy way to navigate the new rules. Definitely not a bad thing for consumers.
• You will be given the credit score that was actually used to make the final call – whether it’s your FICO score, VantageScore, Experian, TransUnion, or Equifax.
• Credit scores are ultimately just a score. It can help highlight why you might have been denied, but your actual credit report might have better insights as to what you might need to fix. Remember that you can get 3 free credit reports annually from annualcreditreport.com (the official government mandated site) to figure out what you need to do to improve your credit score.
• You can always get your free VantageScore from Credit Karma if you’d like – and it might be wise to do this BEFORE you are denied the next time you apply for credit (check out my Credit Karma review for more info.).

Denied Credit? Now you will Get a Free Credit Score is copyrighted by 20somethingfinance.com without consent to republish.

A reader writes in with a good question on closing a checking account and I thought I’d share the answer, to provide some insight:

“G.E., I have an older checking account that I want to close. Will closing a checking account hurt my credit score or credit history in any way? Are there any other possible negatives to doing this?”

The short answer is NO (so is the long… but let me explain why…).

Credit reports and credit scores are out there as a means for lenders to determine if you are credit worthy based on your past and current borrowing and payment history.

Savings and checking accounts, on the other hand, are both assets that you own. As such, they have no impact on your credit (what you borrow). So they won’t show up on your credit reports and your credit score will not be negatively impacted by shutting them down.

The only time your checking account may come in to play in a lending situation is if a lender asks you to prove your assets. I have had this happen when taking out a mortgage. Sometimes lenders like to see that you actually have liquid cash somewhere that you can tap, if needed, to pay them back. But closing a savings or checking an account would still have no impact on your credit score, whatsoever.

I have heard of banks flagging customers for abuse of closing and opening checking accounts to score free promotions. So that might be your only downside. Who would do such a thing?

Related Posts:

• How to Improve your Credit Score
• How to Get Free Credit Reports
• What is a VantageScore?
• CreditKarma Review

Does Closing a Savings or Checking Account Hurt your Credit Score? is copyrighted by 20somethingfinance.com without consent to republish.

Why?

Most of them suck! The thing is this: secured credit cards are typically designed to prey on the weak. If you have no credit or poor credit, you are usually in a tough spot.

Unfortunately, many companies take advantage of this. They usually charge an obscene APR %, have a high setup charge, or a high annual fee. And people still sign up with them because they are desperate.

What is a Secured Credit Card?

A secured credit card is where you deposit an amount into a bank account to cover your credit line. That amount is not pulled from your account like with a debit card.

The benefit is that it is an actual credit card.

They are the only viable options at times for those with poor credit.

The Applied Bank Secured Visa Gold Card

The Applied Bank Secured Visa Gold card is the easiest-to-use and best secured credit card I have seen. This is because:

• It has no annual fee.
• It has no setup charge.
• It has just a 9.99% fixed APR that doesn’t change (this is unheard of for secured credit cards and even regular credit cards these days).
• You pick your own credit limit – from $200 up to $5,000.
• It has monthly credit bureau reporting.

And that’s it. It’s simple, effective, fair, and it does what it’s suppose to do – offer those who can’t otherwise get a credit card access to a credit card. Secured cards shouldn’t have fancy rewards systems.

Just make sure you pay your balance in full each month. If you can do that, the Applied Bank Secured Visa Gold card is the best secured credit card I’ve seen and the only one I’ve mentioned on 20somethingfinance.

A Secured Credit Card that Doesn’t Rip you Off? is copyrighted by 20somethingfinance.com without consent to republish.

Indeed, Credit Karma is pretty awesome, but a few people had questions around the ‘VantageScore’ component that is an added bonus within your account. I had wondered what a VantageScore is myself, so I did a little research and thought I’d share what I found out.

Let’s first go to the source. According to the official VantageScore website, “Created by America’s three major credit reporting companies, VantageScore’s highly predictive model uses an innovative, patent-pending scoring methodology to provide lenders with a consistent interpretation of consumer credit files across all three major credit reporting companies and the ability to score a broad population. This means lenders can help more creditworthy borrowers, and millions of Americans who use credit infrequently can be accurately scored.”

OK, that was a lot of business speak, but here’s the reality: VantageScore was put together by the three credit bureaus – Experian, TransUnion, and Equifax in 2006 in order to compete with the Fair Isaac Corp. Fair Isaac models the FICO score, which had come to dominate the market as the preferred score used by lenders when issuing credit. VantageScore is FICO’s competition. The VantageScore consortium wants a piece of that pie.

Regardless of motives, more lenders are increasingly using VantageScore to rate your credit. It’s to your benefit to know what a good score is and how you are rated so that you can shop around and improve your VantageScore.

What is a Good VantageScore?

Whereas the FICO scale runs from 300 to 850, VantageScore starts at 501 and runs to 990. And how good your VantageScore is falls into the following categories:

• 901-990 = “A” credit = Super Prime
• 801-900 = “B” credit = Prime Plus
• 701-800 = “C” credit = Prime
• 601-700 = “D” credit = Non-Prime
• 501-600 = “F” credit = High Risk

Remind you of grade school a bit?

You can see your score in Credit Karma and how it ranks nationwide. You can see a VantageScore range and national distribution. Here’s a screen shot.

What Factors Into your VantageScore?

VantageScore is a predictive modeling tool and recently “upgraded” to VantageScore 2.0 (mmm…. software analogy).

VantageScore factors the following into your score.

• Payment History: Have you consistently paid your accounts in a timely manner?
• Utilization: How much of the total credit available to you are currently using?
• Balances: What is the total of your current and delinquent account balances?
• Depth of Credit: How long is your credit history and is there a varied mix of credit types?
• Recent Credit: How many recently opened credit accounts and credit inquiries do you have?
• Available Credit: What is the total amount of credit that you currently have access to?

Specifically, they are factored via the following breakdown:

Why Does VantageScore Matter?

When you go to apply for credit your lender is going to look at your credit score. Your FICO score was the primary method that most lenders used for a long time.

Exact VantageScore market share versus FICO is not known, but according to VantageScore in May of last year, “four of the top five lending institutions and eight of the top 25 financial institutions are using VantageScore.” If that’s true, they’ve come a long way since 2006.

VantageScore currently claims to service:

• 4 of the top 5 financial institutions
• 5 of the top 5 credit card issuers
• 2 of the top 5 auto lenders

The bottom line is the only score that matters is the one your lender is using. If it’s FICO, then you should worry about your FICO score. If it’s VantageScore, then worry about that. If it’s one of the individual credit bureaus – then worry about that one. Ask every company you apply for credit from which score they use.

It’s also why it pays to shop around for the best rate. If one lender is using FICO and another VantageScore and you have a better FICO rating, for example, you might get a better rate offer from the lender that uses FICO.

Credit Karma offers you a TransUnion and VantageScore for free. The others, you’ll have to pay for. Don’t do it unless you have to and go only through the official websites if you do.

VantageScore Discussion:

• Have you borrowed from a lender that uses VantageScore?
• Did you find a difference in how you were rated between FICO and VantageScore?
• Did you shop around based on whether your lender used FICO or VantageScore?

Related Posts:

• How to Get 3 Free Annual Credit Reports
• How to Improve your Credit Score
• How to Use a Secured Credit Card to Build Credit
• Hard Credit Inquiry Vs. Soft Credit Inquiry
• Free Credit Report Scams

What is a VantageScore? is copyrighted by 20somethingfinance.com without consent to republish.

- Have you used their service?

- Is it REALLY free to get your credit score?

- Is Credit Karma safe?

- Is Credit Karma a scam?

I had all of those questions myself. So what follows is a Credit Karma review that hopefully answers these questions about the service and whether or not I’d recommend you use it.

Is Credit Karma Free?

Yes. This was a big question that I had going in. Most, if not all, other credit score services offer you a “free” credit score. You’ll notice that when you sign up for their service, they ask for your credit card. And then, a month later, you’ll unsuspectingly get charged. After going back to read the fine print, you’ll notice that free was really only free for the first month, and if you didn’t cancel your subscription, you’ll get a monthly charge. That’s why they asked for your credit card.

Not at Credit Karma. They don’t even ask for your credit card. There’s really no way to get screwed on unsuspecting charges with them.

How Does Credit Karma Make Money?

You’re probably wondering how Credit Karma makes money if they don’t charge you for their service. It’s a legit question to ask. From everything I’ve seen, they have almost an identical business model to Mint.com. If you’ve signed up for Mint’s service, you’ll periodically get Mint partner offers that could potentially save you money. It’s a form of advertising. Credit Karma has the exact same model – ad-based offers from partners.

You can elect whether or not you actually want to receive these offers right on the sign-up page under communication preferences. I appreciate the transparency and that I didn’t have to find some secret unsubscribe link hidden deep in the site somewhere.

Is Credit Karma a Scam?

I was wondering whether Credit Karma was a scam and whether or whether your privacy is truly protected. After researching and using them myself, I can tell you Credit Karma is definitely not a scam. I did a little research before signing up. Credit Karma is a TRUSTe Certified company, endorsed by 627 users as safe. They are also a BBB (Better Business Bureau) Accredited company.

I looked into Credit Karma’s BBB accreditation, and they have an ‘A’ rating, on a scale of A+ to F. Only 8 complaints have been filed in the companies 4-year history, and they were all resolved. If people have been screwed by the service or their information was stolen, you’d think there would be a red flag somewhere.

One of the big downfalls with Credit Karma is that you have to give them your social security number. It is a credit score, after all. You have to do this with all the credit bureaus, all other credit score sites out there, and any time you apply for credit. Credit Karma addresses this concern in their FAQ’s by stating:

In order to retrieve your first credit score, we must use your social security number. We only use your SSN for this first score retrieval, and we do not store it in our database. After this one-time use, we will not need your SSN again and it will not be stored on any of our systems.

That’s what I wanted to hear, but I don’t know how they continually update your credit score if they don’t have your SS#. I’d invite them to elaborate on that point.

What do you Get from Credit Karma?

Here’s a rundown of all the free stuff you get in your Credit Karma account:

Your TransUnion credit score: It is continuously updated so you can see how it changes as you make a change that will impact your credit score. And it charts out over time, as seen in my screen shot above. You can also see how that score compares nationally, and you get an overall grade.

Your TransUnion auto insurance score: Many insurers are now factoring in an auto insurance score, which is based on your credit history. This lets you know how you stack up against others.

Your VantageScore: This is a cumulative, consistent score across all three credit bureaus.

Credit Report Card: This is definitely a nice feature. You get to see a grade on each of the factors that go into making up your credit report: utilization rate, payment history, age of accounts, total accounts, etc. Good stuff to know if you are looking to improve your credit score.

Credit Score Simulator: This is probably the most useful feature on Credit Karma. You get to simulate how taking certain actions (i.e. closing a credit card, opening a new one, increasing your credit line, etc.) would likely impact your score. I was surprised to see how little of an impact opening or closing a credit card account would have. Definitely good to know.

Final Thoughts on Credit Karma

The only downside that I’ve found with Credit Karma is that there are a lot of offers in the interface when you log in to your account. It’s a minor annoyance, but this is how Credit Karma makes money, so I’ll take that trade-off vs. having to pay for the service.

All-in-all, it is a super useful service that I feel really good about. You’re basically getting for free what many other services are charging $10 or more per month for. And having used TransUnion’s credit score reporting service in the past, the nice graphical interfaces, report card, and Simulator tool make Credit Karma much more useful. I highly recommended their service.

Update: Credit Karma has now even started offering free credit monitoring in addition to their other free services.

In addition to your free credit score from Credit Karma, make sure you head over to annualcreditreport.com to get your 3 free credit reports annually. This is the official government-mandated site. The two combined should be all you ever need to monitor your credit – and they are both free.

You can sign up for a free Credit Karma account here.

Have you used Credit Karma? What’s your take?

Credit Karma Review is copyrighted by 20somethingfinance.com without consent to republish.

Slowly, 0% APR balance transfer cards have made a comeback. However, if you read the fine print, even the most generous of these cards charged a balance transfer fee of between 3-5% (which can defeat the whole purpose of transferring in the first place, in my opinion). But for the next week, you can nab one that doesn’t.

Discover More Card – No Balance Transfer Fee & 0% APR on Balance Transfers

The Discover More Card – no balance transfer fee version is the first I’ve seen to break that trend and actually offer a 0% balance transfer fee on top of a 12 month 0% APR on balance transfers and even new purchases.

I’ve written a Discover More Card review in the past, and it should be noted that this is a different card that has different introductory terms. Here is a full run-down on the terms on the no-transfer fee version:

• No balance transfer fee.
• 0% intro APR on balance transfers for a  12 months, then the regular APR.
• 0% intro APR on purchases for a 12 months, then the regular APR.
• 5% cash back bonus in categories that change like travel, gas, groceries, restaurants, home improvement stores and more.
• Up to 1% unlimited cash back on all other purchases.
• No annual fee.

Who is this Discover Card Good for?

Essentially, you’re getting an interest-free loan on your credit card debt for a year. This could be a great opportunity for someone who is digging out of credit card debt and needs a break on the interest piling up. The key is to actually pay off the debt within that 12-month intro period instead of letting new debt pile up.

Note that this is a limited-time offer! You can apply for the Discover More Card – no balance transfer fee card here.

Related Posts:

• Chase Freedom Review
• Costco American Express Review
• Chase Sapphire Review

Discover is Offering a Rare 0% Balance Transfer Fee Card is copyrighted by 20somethingfinance.com without consent to republish.

This is a very common problem. In fact, I get the “how do I build credit when I don’t have any?” question almost as much as any other here at 20somethingfinance. Fortunately, there are a few ways to build your credit report and credit score – and one of them is through a secured credit card.

What is a Secured Credit Card?

Secured credit cards are commonly used as a way to build your credit and prove to creditors that you are a safe bet in the future. To understand what a secured credit card is, you first need to understand what ‘secured debt’ and ‘unsecured debt’ are.

Secured Debt

Secured debt is debt that you back up with collateral – a possession that can be taken from you. If you do not make your payments, you may lose the possessions that you purchased via this debt and be subject to other legal action. Auto loans or mortgages are two examples of secured debt. If you do not pay off your debt, each could be taken from you to pay off your debt.

Unsecured Debt

Unsecured debt is debt that has no collateral behind it. This includes all credit cards excluding secured credit cards. If you don’t pay off your debts here, you may be harassed by creditors and bill collectors the rest of your life, but they have little power other than ruining your ability to receive secured debt at good rates in the future. It is hard to get approved for unsecured debt if you have no credit history or have a bad credit score because of this reason. And it’s for that very same reason why those with poor credit scores are usually charged higher rates – because they are higher risk.

Back to secured credit cards.

How do Secured Credit Cards Work?

In the case of secured credit cards, your collateral is your cash. Much like a debit card or checking account, you must deposit funds into a secured credit card account. If you do not pay your bills, those funds can be taken from you to pay off the balance. The amount that you deposit becomes your credit line for the secured card. Other than that, there is no big difference between an unsecured credit card and a secured one. They can be used in the same way, and they have the same Visa or MasterCard logos.

Because you have backed up your purchases with collateral, secured credit cards are extremely easy to obtain and get approved for so that you can build your credit. Most secured credit cards will report your activity to the three credit bureaus on a monthly basis.

Another interesting thing to note about secured credit cards is that most offer interest on your collateral. It’s usually a nominal amount, similar to what you might get for a savings account, but better than nothing!

What is the Difference Between a Secured Credit Card and a Debit Card?

The difference between a secured credit card and a debit card is that funds are not deducted from your cash deposits with secured credit cards like they are with debit cards. Just like with unsecured credit cards, you must pay off a monthly balance and interest could be charged if you do not. This is not the case with debit cards. Also, you cannot build a credit history with a debit card – a key differentiator.

You will not be debited simply for missing one or two payments. Usually the deposit is only used as an offset when the account is closed, either at the request of the customer or due to severe delinquency (150 to 180 days).

How to Use a Secured Credit Card

Secured credit cards are still credit cards. And because of that, they are inherently dangerous to use because of the high interest rates involved. Remember, the point of a secured credit card is to build your credit – not encourage irresponsible purchasing behavior.

As with all credit cards, you should pay your balance in full every month so as to not incur any interest charges. And use your credit card as you would your cash. Don’t let the ease of the swipe negatively influence your spending habits.

Comparing Secure Credit Cards

When shopping for a secured credit card, here are a few guidelines to follow:

• Shop around. There is a wide variety of cards, and you should only get one from a reputable issuer. There are a number of shady secure credit card issuers out there that pray on those with poor or no credit, so be careful.
• Many secured cards charge an annual fee, but increasingly more do not.
• You should never be charged interest if you are using your card appropriately, but you should still shop around for a reasonable APR that compares to unsecured credit cards.
• You should not have to sign up for any additional services or fees.

Secured Card Discussion:

• Have you used one to build your credit?
• What other tips do you have for building credit when you don’t have any credit or have poor credit?

Related Posts:

• Hard Credit Inquiry vs. a Soft Credit Inquiry
• FTC Cracks Down on Free Credit Report Scams
• Chase Freedom Review
• 0% APR Balance Transfer Card

How to Use a Secured Credit Card to Build your Credit is copyrighted by 20somethingfinance.com without consent to republish.

A credit inquiry, also known as a credit pull, happens whenever you or someone else (namely companies) accesses your credit report for one reason or another. Whether the credit inquiry actually impacts your credit score depends on who initiated the credit inquiry and why they did it.

There are two kinds of credit inquiries – a soft credit inquiry and a hard credit inquiry – and one of them impacts your credit score while the other does not. Knowing the difference between the two and what types of inquiries fall into each category is important for those trying to keep their credit score up. But do they really have a big impact on your FICO score? We’ll take a look.

What is a Soft Credit Inquiry?

A soft credit inquiry, or soft credit pull, is when someone accesses your credit reports without you initiating that action, or when you access them yourself. Because you did not take an action permitting the company to check your credit reports, you are not punished for it. Soft credit inquiries do not impact your credit score. At the same time, accessing your own credit reports has no impact on your credit score. An employer background checks, new utility accounts, and new insurance policies, are considered a soft credit inquiry because they generally don’t lead to debt obligation.

Examples of Soft Credit Inquiries

The following examples of credit inquiries are considered ‘soft credit inquiries’ and do not hurt your credit score:

• Accessing your own credit report.
• When a company checks your credit report to pre-approve you for a loan or some other type of service.
• When a company that you are already a customer of checks in on your credit.
• Potential employer credit check (employee background check).
• Initiating an insurance policy or a new account with a utility.

If you’re like me, I don’t want lenders doing soft inquiries on my credit files and sending me pre-approved offers. If you want to prevent them from doing so altogether, I highlighted how you can do this in my mail fraud identity theft post, through the site optoutprescreen.com.

What is a Hard Credit Inquiry?

Hard credit inquiries, or hard credit pulls, mostly happen when a credit inquiry is initiated due to an action that you have taken that would prompt a company to need to check your credit report. Usually this means you are applying for a financial product or some other service. Hard credit inquiries can potentially impact your credit score negatively.

Examples of Hard Credit Inquiries

The following examples of credit inquiries are considered ‘hard credit inquiries’ and do have the potential to affect your credit score:

• Applying for an auto loan.
• Applying for a mortgage or home equity loan.
• Applying for any other type of loan.
• Applying for a credit card.
• Opening a bank account.
• Initiating a new subscription service where your Social Security number is required (i.e. a new cell phone contract).

How Does a Credit Inquiry impact your Credit Score?

Do you really need to worry about hard credit inquiries significantly damaging your credit score? According to FICO credit score hub, MyFICO, credit inquiries would fall into the ‘new credit’ portion of your FICO score.

The ‘new credit’ category only impacts 10% of your FICO score and hard credit inquiries are only a portion of that category. Also included are:

• the number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
• Time since recent account opening(s), by type of account
• Time since credit inquiry(s)
• Re-establishment of positive credit history following past payment problems

As such, there is no definitive number of points your credit score will go down with each new hard inquiry.

How Long are Credit Inquiries in your Credit Report?

Also part of the ‘new credit’ category is the amount of time that has passed since the credit inquiry. After one year, a hard credit inquiry no longer impacts your FICO score (however, it will stay on your report for two years). There is also another rule in place to help ensure your FICO score is not hurt too much from hard credit inquries:

45 day rate-shopping allowance:

This rule counts multiple similar ‘rate shopping’ inquiries within a 45 day period as just one inquiry. Examples would be when you are applying for multiple mortgages or auto loans to see which offered you the best rate. Credit card applications do not apply.

So, as you can see, credit inquiries can negatively affect your credit score, but only temporarily, and probably not to the extent you were thinking they might.

Related Posts:

• Chase Freedom Review
• American Express Costco Card Review
• Chase Sapphire Card Review
• 0% APR Balance Transfer Credit Cards
• Credit Karma Review
• Credit Karma Free Credit Monitoring

Hard Credit Inquiry Vs. a Soft Credit Inquiry & their Impact on your Credit Score is copyrighted by 20somethingfinance.com without consent to republish.