Posted by: Howard Dvorkin, CPA
Date of post: December 3, 2018

The answer will shock you.

Every day for the past two decades, I’ve spent a good chunk of my time figuring out how to explain complex financial advice in plain English for smart but busy Americans.

Whether it’s trying to explain the subtle differences between income-contingent and income-based student loan repayment plans or the big differences between Chapter 7, Chapter 11, and Chapter 13 bankruptcies, it’s been a struggle.

What’s even worse, however, is trying to convince Americans that a simple answer is actually the correct one. Nowhere is this more obvious when I’m asked, “Why does checking my credit score lower it?”

It seems so silly, right? I’ve received emails from readers like this…

I’m trying to do like you said and pay off my credit cards and save money, but if I check my credit score for free online, why will that score drop? That doesn’t sound fair at all! Do they want me to stay in debt and keep paying them? Is that why?

Here’s the answer: Checking your credit score will never lower your credit.

Sadly, many people won’t believe me. So let me explain why they should.

The difference between soft and hard

When people refuse to believe an answer, it’s because there’s a kernel of truth in the myth they embrace. In this case, it has to do with two terms: hard pulls and soft pulls.

A “soft pull” is the industry term for when you check your own credit score. Your creditors — like your credit card issuer or your mortgage holder — are smart enough to realize this is actually a good thing. You care enough about your finances to do your homework.

Where they get concerned is with “hard pulls.” That’s the term for someone else pulling your credit score. Who does that? Whoever you applied to for new credit. For instance, say you’ve applied for an auto loan with GMAC. The company is checking your score to make sure you’re a good credit risk, and the interest rate they demand you pay will be based on that score.

For obvious reasons, if you’re applying for a lot of new credit — and a lot of creditors are pulling your score — that’s worrisome. It might mean you’re trying to get more credit than you can afford to pay back, which makes lenders skittish.

That’s why your credit score might take a small hit if there are too many hard pulls. But those soft pulls? You can quite literally check your score every day, and it won’t make a dent.

What others say

If you don’t believe me, maybe you’ll believe CNN (“Looking up your own credit report…won’t hurt your score”) or Forbes “Checking your own credit report is considered a soft inquiry, and will not affect you”) or CNBC (“Checking your credit score will not lower it, contrary to a common myth”).

If you don’t believe the media, let’s go straight to the sources. Your credit reports are handled by what’s known as the Big Three credit bureaus: Equifax, Experian, and TransUnion. For instance, TransUnion says, “viewing your own report and score is counted as a soft inquiry and doesn’t change the score one way or another.”

Equifax explains further: “Soft inquiries do not affect credit scores and are not visible to potential lenders that may review your credit reports.”

If you don’t believe me, believe them.

Why this matters

It’s a fair question, which I was asked a few years ago here at “Why does this bug you so much, Howard?” Two reasons.

First and practically speaking, believing this myth can keep Americans from getting an accurate financial picture. That, in turn, could cost them more money when they need to get a line of credit. We’re already staring down a record amount of consumer debt in this country — more than $13 trillion — so every dollar counts.

Second and philosophically speaking, the world is only getting more complicated on every level. If we don’t master the financial rules now, this nation will face only more personal debt in the future, as the terminology grows only denser. While that will keep CPAs like me employed, as we both explain and assist Americans with their money, it’s not good for our future. I have children, and I want them to inherit not only a better planet, but a more prosperous one.

I hope this makes sense.