Beacon Scores Explained

Credit is a pivotal part of how our economy functions, yet so many people are clueless as to how it works. Operating under misconceptions can be incredibly dangerous (particularly when your false beliefs affect your ability to take out a loan), so we've come up with a list of some of the most common credit score myths (and how to avoid them).

Credit is a pivotal part of how our economy functions, yet so many people are clueless as to how it works. Operating under misconceptions can be incredibly dangerous (particularly when your false beliefs affect your ability to take out a loan), so we've come up with a list of some of the most common credit score myths (and how to avoid them).

I have no need to check my score because I've never had any trouble

Many people operate under the assumption that because they always pay their bills on time and have never had any trouble with credit in the past, their record is completely solid. Unfortunately, they forget to take human error into account. Two thirds of credit reports have errors on them, and if yours is one of the affected ones, you could be paying more interest than you really should be.

Even if you've checked your credit score with one credit bureau, you're still not completely safe. There are multiple credit bureaus, and each has a file on you. Just because the one you checked is error free doesn't mean the others are too. Check them all to be safe.

Checking your own credit hurts your score

This is one of the more pervasive myths, and thankfully, extremely false. There are two types of credit inquiries: a soft inquiry and a hard inquiry. Soft inquiries (i.e. you looking into your own credit) do not hurt your score, though the fact that you requested it will be added to your report. You can check your own credit reports as often as you want to without any ill effects on your credit score.

It is important to distinguish between soft and inquiries and hard inquiries (which will hurt your score if checked too often).

Examples of soft inquiries:
  • those done for insurance or employment reasons
  • pre-approved credit card and loan offers
  • those done by creditors with which you already do business
Examples of hard inquiries:
  • applying for an auto, student, business, or personal loan
  • applying for a credit card
  • applying for a mortgage

Hard inquiries are shown to lenders and are shared because they help tell whether or not you are a good candidate for a loan (and whether you possess unknown debt). They are damaging to your credit score because they affect lending decisions (though the impact is not as awful or long lived as some people think).

There are also some things that can fall under both categories depending on the circumstances (like applying to rent an apartment, ID verification at a stock brokerage or credit union, car rental, getting an internet or cable account, opening a checking or savings account with a bank).

You can't Have Hard Inquiries Removed from your Record

You can, actually, but only if they occurred without your permission (in which case you can open a dispute). Any authorized hard inquiries take up to two years to be removed.

You have two weeks (14 days) in which to make as many hard inquiries as you'd like

This one is not a myth. As long as your mortgage, auto, and student loan inquiries fall within a 14 day span, they will all be lumped together and viewed as one inquiry. There are some newer scoring models that extend that to a 45 day span.

Credit scoring bureaus realize that it's important for customers to shop around and find the best interest rates before committing to a car or home purchase, so they account for that in credit reports so long as the inquiries all fall within the 14 day window.

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