High credit score is this aspect of our personal finances which all of us should really care about. It is for your own good – if your score is low and you receive a loan, you just have to pay more interest rates than people with high scores.
Therefore, if you are extremely wary when you have to make a financial decision, it is a good sign.
Not all mistakes are equally bad for our credit score, though. Of course, knowing the topic helps making profitable decisions, so we provide you with some useful information.
Opening an online stock-trading account.
You have been thinking about opening an online stock-trading account, but you keep hesitating and worrying that it could damage your credit report. The facts are that online stock-trading companies check credit reports before they approve clients, and such checks will be seen on their reports. But the next fact is that this kind of check will not damage your credit report heavily. There are things which have much more damaging power.
Why do they check my credit?
The online stock-trading companies need to ensure that you really are the person that you declare and they are also interested in your payment history: whether you have been paying bills on time, what kind of payer you have been so far. It is justifiable and necessary.
Your credit score provides them (as it is in the case of various types of lenders) with information about the chances of your future defaults. Thanks to it, they can assess the risk of cooperating with you.
In general, the higher your score, the better. If you have a low credit score, it is obvious that your payment history is marked with late or missed payments and lenders will not see you as a creditworthy and reliable client.
And what does high credit score mean exactly? For example, on the well-known FICO scoring system high score means 740 and more. Many online services will give you access to your free credit score – Credit Karma, Credit Sesame and Quizzle are great examples.
What can hurt your score?
You actually have 3 credit scores – one from each credit bureau. Here are the most damaging aspects of your credit history: late or missed payments and negative judgments (bankruptcy, housing foreclosures).
Also too much credit-card debt will lower your score. And credit inquires, not all, only certain types of them, will negatively influence your score too.
Inquires made by online stock-trading companies.
MyFICO.com says that credit inquiries have a very low damaging effect actually. Hence, the inquiries of online stock-trading companies will not hurt your score to a large extent.
When it comes to inquires made by credit card companies, these are much more damaging. Opening too much credit cards at once will lead to many inquires made by credit card providers. And this situation is not seen positively by credit bureaus. For them, customers with the access to too much credit have more chances to get overwhelmed and then, miss payments.