A:

Free credit reports do not impact your credit score. Credit inquiries are divided into two categories: soft inquiries and hard inquiries. Free credit reports use soft inquiries to determine your credit, and soft inquiries have no impact on your credit rating or credit score. Hard inquiries, however, do impact your score.

Soft Inquiries

Soft inquiries are typically initiated by an individual or company looking at your credit for background purposes. When you personally initiate a credit check, including for a free credit report, it is considered to be a soft inquiry. Soft inquiries usually appear on your credit report, but they don't impact your credit score.

Hard Inquiries

Hard inquiries are generally conducted by lenders to decide if they should lend you money. These inquiries have a tangible impact on your score. Common examples of hard inquiries are those conducted when you go the bank and apply for a mortgage or to an auto dealership and apply for a car loan, but other credit inquiries such as those conducted when you rent a house or obtain a new mobile phone contract can come across as hard inquiries.

A hard inquiry impacts your score by a few points and remains on your credit report for two years. One hard inquiry may not be a problem, but lenders may look upon multiple high inquiries in close succession unfavorably. Multiple inquiries in a row can add up to a significant decrease to your credit score. From a lender's point of view, these inquiries could signal that you are having difficulty obtaining credit.

If you find a hard inquiry on your credit report that you are certain occurred without your permission, you can dispute it through the appropriate credit bureaus. You have the right to obtain one free credit report every 12 months from each of the national credit reporting companies: Equifax, Experian and TransUnion.

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