Applying for a Loan Hurts Your Score

Checking your own credit does not.

Some people shy away from checking their own credit because they think it will hurt their score.  Others just use that as an excuse, but the result is the same -- they are clueless about their credit reputation. 

Here is the truth:   Checking one's own credit will not damage your credit ratings.  What will hurt is applying for credit.

It is a very simple formula.  The logic of the credit bureaus is that a person applying for lots of credit may overextend themselves and is thus less worthy of a high score.  It is hard to argue with that.  The converse of that is also true -- closing accounts is one of the easiest ways to raise your scores.

Remember that applying for credit extends beyond credit cards or loans.  The next time a helpful store clerk offers you 20 percent off for applying for a store card, you might want to think long and hard. Saving those few dollars on that one purchase will hit your credit score.  A lowered credit rating can cost you a lot more than the few dollars you'll save on that particular purchase.

Also be aware of taking advantage of any offers for credit that come in the mail.  In fact, in my opinion (Consult with your own financial advisor before making any decisions!), the only situations in which it makes sense to take a new line of credit are these:

• consolidating debts (closing other accounts)
• starting a new business
• buying a home or car (and in the case of a car, it might make more sense to save your pennies for few years instead of taking a loan)

The old fashioned way -- saving for the things you buy -- is still the best, even if the store is offering you 20 percent off for signing up for a store card.  Isn't it ironic how in the brave new world of credit scores, following grandma's advice still produces the best results!

You need not worry about hurting your credit rating by checking your scores.  What hurts is the application for credit, not the checking of scores.