While it’s tempting to checking your credit score once in a while, doing so too often can hurt your credit score in the long run. Some consumers check their credit score daily or multiple times per day; however, the practice of checking your score too often can show lenders that you are desperate to learn your score and may also reflect that you are over-extending yourself financially. It’s best to check your credit score once per month or after making significant financial changes, such as opening a new line of credit or applying for a loan.
Credit Score Basics
The vast majority of consumer credit in America is supplied by big banks and other huge financial institutions. These companies have massive databases called credit bureaus with information on over 300 million Americans. By examining these massive datasets, they determine an individual’s likelihood to repay a loan, which is how they gauge their customer’s creditworthiness. FICO and VantageScore are two major competing credit scoring models widely used by lenders today. Generally speaking, a higher score means you’re considered a more reliable borrower—all else being equal. The average American has a FICO score somewhere between 600 and 700, though scores can range from 300 to 850 or more! In general, higher scores are better for individuals looking to take out loans because it makes them eligible for lower interest rates.
What Happens When You Check Your Credit?
After you check your credit, it gets recorded on your report as a hard inquiry. Like any other information that appears on a credit report, hard inquiries affect a consumer’s FICO score. Each hard inquiry lowers a consumer’s FICO score by one point; however, multiple auto loan and mortgage inquiries will not lower FICO scores beyond five points per year. Additionally, some issuers will exclude inquiries within 45 days of each other from their calculations of FICO scores because such inquiries may not be accurate predictors of risk.
Even without such exclusions, multiple inquiries negatively impact consumers’ scores more than just one inquiry. Checking your credit should only be done once every four months at most. The rest of the time should be spent monitoring accounts through online banking or other financial technology solutions. Monitoring accounts is far less damaging to credit scores than checking them frequently—every three months is recommended if possible.
Consumers who want to improve their FICO score also need to pay attention to what kinds of accounts they have checked when calculating their score. They should avoid opening new lines of credit during times when they are planning on applying for loans to prevent lenders from assuming they are trying to inflate their creditworthiness artificially. All in all, checking your credit too often or at too many different places hurts your chances of getting future lines of credit approved, which means you could end up spending more money on interest payments over time.
Protecting Credit While Checking Your Credit Score
Checking your credit score will not directly affect it. However, if you check it often, you could indirectly hurt your chances of getting a loan or line of credit in the future. The three major U.S. credit bureaus (Equifax, Experian, and TransUnion) track how often consumers check their scores on their websites. This metric is used to determine whether an individual should be charged for viewing their information, so it’s important to keep an eye on when you go online to see how lenders view you as a potential borrower. Not only does frequent checking indicate low-interest rates—which may hinder your ability to obtain financing—but also lenders might interpret such behavior as indicative of an individual’s debt problems or other financial issues that they believe could ultimately negatively impact their business.
Additionally, multiple checks per month by individuals with bad credit histories may result in additional inquiries being placed on those accounts and thus potentially lower scores. It’s best practice to avoid obsessively looking at any part of your credit history, including your score. Instead, review all three from time to time to ensure they’re accurate and consistent with what you know about yourself from other sources.