Does Credit Monitoring Affect My Credit Score?

Does Credit Monitoring Affect My Credit Score?

December 7, 2016         Written By Jason Steele

Are you concerned about your credit? If so, you may want to use a credit monitoring service to keep track of changes to your credit report and credit score. But at the same time, you wouldn’t want to do anything to hurt your credit score. And to many people, it is unclear if credit monitoring will hurt your score in any way.

How your score can be affected when it is checked

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When you apply for a new loan, such as a credit card, the card issuer will check your credit score to see if you qualify. When a lender inquires about your credit for the purpose of approving you for a loan, it creates a record in your credit history. This record is often referred to as a “hard pull,” because it is pulling a copy of your credit history, your credit score, or both.

Having numerous hard pulls on your credit report can hurt your credit score. When you think about why it hurts your credit score, it makes sense. Imagine if you knew someone who was asking all of your friends for money. Once you heard about this, you would probably conclude that he or she was in financial trouble, and you would be less likely to loan money to that person.

How credit monitoring is different

However, when you sign up for credit monitoring, it checks your credit regularly, but in an entirely different way. When a credit monitoring service checks your credit report or credit score, it is only performing what is called a “soft pull.” These are credit checks that are not done for the purpose of applying for a loan, so they have no effect, positive or negative, on your credit history or credit score. This is true whether you use a credit monitoring service, view your own credit report, or check your own score.

If you are into science, then you might have heard of the Heisenberg Uncertainty Principle, which states that the act of observing a subatomic particle changes its state. If monitoring your credit actually hurt it, then it would be something like this principle applied to credit. But thankfully, the Heisenberg Uncertainty Principle only applies to quantum mechanics, not to credit scores or most everyday observable phenomena for that matter.

Why it is important to monitor your credit

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Your credit history and your credit score are among your most valuable assets. With a strong credit history and a high credit score, you can be approved for credit cards with the most valuable benefits and rewards, and the lowest interest rates. You can also qualify for the most competitive interest rates on major loans such as a home mortgage or car loan.

However, your good credit can be ruined very quickly once negative information is placed in your file, even if it is not your fault. For example, you could become the victim of identity theft, or merely miss payments while a bill is being sent to a wrong address. Other times, you could have information in your credit history that is meant for someone else, especially if you have a relatively common name.

By using a credit monitoring service, you can get an immediate alert when there is a change to your credit report or your credit score. And like so many other problems in life, the sooner you take action to correct it, the easier it will be.

Types of credit monitoring services

For many years, people would have to pay a company each month to use a credit monitoring service. These services might be have been worth it for some people who were very focused on their credit, but it was an unnecessary expense for most people.

However, a few years ago the Consumer Financial Protection Bureau (CFPB) started encouraging credit card issuers to offer credit monitoring to their cardholders as a benefit, much like many cards offer extended warranty coverage or auto rental insurance.

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In response, most major card issuers began offering credit tracking and credit scores to customers. For example, Capital One offers its CreditWise service for free to everyone including cardholders and even those who aren’t Capital One customers. This service allows you to quickly view your record of on-time payments, your oldest credit line, and percentage of credit used. It also shows you your recent inquiries, new accounts, and total available credit. Finally, it offers a what-if simulator to give you an idea about how possible future decisions could affect your credit.

And just like other credit monitoring services, using CreditWise from Capital One will have no direct effect on your credit. However, if you can use a service like this to learn more about your credit history, and detect problems early, it can empower you to have a positive effect on your credit score and your credit history.

The information contained within this article was accurate as of December 7, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Jason Steele

Jason Steele is a journalist that covers credit cards, travel and consumer credit. As one of the nation's leading experts in credit cards, Jason has contributed to dozens of travel and personal finance outlets including NerdWallet, Credit Karma and the Points Guy, where he serves as the Senior Points and Miles Contributor. Jason has also been widely quoted in mainstream media in outlets such as the Washington Post, the USA Today and Bloomberg Business Week. Jason is also the founder and producer of CardCon, which is the annual Conference for Credit and Credit Card Media.
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