Even if you know relatively little about how FICO scores work, you've most likely heard that when your credit is pulled it hurts your scores. I've actually found this to be the primary reason people avoid applying for new credit. In fact, friends often ask me how I manage to apply for so many of the rewards credit cards I rate and review on Creditnet.com. Shouldn't all those credit inquiries be killing my FICO scores? Well, they haven't, and I frankly don't worry about credit inquiries that much. While there's no doubt in my mind too many inquiries can hurt FICO scores, I think most of us overestimate just how big of an impact credit inquiries have on our scores.

If you didn't already get the memo, piggybacking still works! I know I've written about this topic before, but this is just one of those posts that needs to be resurrected every now and then. In fact, for those that have no credit at all, piggybacking remains one of the fastest ways to add positive credit history to credit reports and give your FICO scores an immediate boost.  I recommend it quite often to parents and spouses who are interested in helping a child or significant other build credit from scratch, even though the practice continues to receive a lot of bad press. But while I consider piggybacking to be a rather safe credit-building technique, it's also important to understand that it's not risk free.  Especially if you're the one seeking to build credit, there's one big risk to consider before you're added as an authorized user on anyone's account. What if the account holder responsible for the card eventually racks up a bunch of credit card debt and stops paying?  How would that affect you?

It's true that too many credit inquiries can have a negative effect on FICO scores, but my experience has been that most people focus WAY too much on this small factor in the FICO credit-scoring model. In fact, I receive emails quite often from both readers and personal friends who are concerned about something as simple as applying for a new airline miles credit card because they're planning on financing a new home or a car in the next 12 months. Their reasoning is they don't want to risk taking any sort of unnecessary hit to their credit scores before applying for a major loan, and I completely understand that. I wouldn't apply for new credit within a month or two of closing on a home loan either.

I'm sad to say I was immediately rejected when I applied for a student loan through FAFSA a few months ago. The reason: I had a credit card bill that was beyond 180 days late. And just what was my unpaid balance? A skimpy $9...ugh! Unfortunately, I had completely forgotten about a small purchase I made on eBay several months prior. I had racked up interest in the amount of $4 and some change, a bunch of negative marks on my credit reports, and then I was forced to deal with the whole hassle of getting denied for a graduate school loan I really needed. All of that pain for 9 bucks.