Does Checking Your Credit Score Lower It?
When it comes to managing personal finances, maintaining a good credit score is a top priority for many people. A healthy credit score can greatly benefit your financial life, as it’s one of the key factors that lenders consider when evaluating loan and credit applications. One of the common misconceptions about credit scores is that checking them frequently results in a lower score. However, this is not always true. Here, we will explore the two types of credit inquiries and how they affect your credit score.
Soft Inquiries
A soft inquiry, also known as a soft pull, occurs when you or an authorized party checks your credit report without initiating a new credit application. Soft inquiries have no impact on your credit score at all, so you don’t have to worry about them hurting your score when checking it regularly.
Some examples of soft inquiries include:
– Checking your own credit report via a free service or one provided by the credit bureaus
– Background checks by potential employers
– Credit card companies providing pre-approved offers
– Rental applications from landlords
It’s essential to monitor your credit report regularly and be aware of any changes in order to maintain a good score. Regularly checking your report also helps you detect any fraudulent activity or errors that may be negatively affecting your score.
Hard Inquiries
A hard inquiry, also known as a hard pull, occurs when you apply for new credit or request an increase in existing credit lines. Lenders perform hard inquiries to evaluate your creditworthiness before approving any form of loan or new line of credit.
These inquiries can temporarily lower your credit score by a few points, but their impact on your score usually lasts only for 12 months. Multiple hard inquiries within a short period can make potential lenders perceive you as riskier, which might cause them to deny your application or charge higher interest rates.
Examples of hard inquiries include:
– Applying for a mortgage, auto loan, or personal loan
– Credit card applications
– Requesting a credit limit increase
It’s worth noting that some programs, such as credit scoring models like FICO Score or VantageScore, offer a feature called “rate shopping.” This allows consumers shopping for certain types of loans (auto loans, student loans, mortgages) to have multiple hard inquiries within a specific time frame (typically 14 to 45 days) without significantly damaging their score.
In conclusion, regularly checking your credit score through soft inquiries does not hurt your credit score. However, it’s crucial to be mindful of making multiple hard inquiries in a short period. Monitoring your credit report consistently and taking necessary steps to maintain or improve your score can help you enjoy better financial opportunities and save money in the long run.