Is checking your credit score as frightening as you thought? Don’t be too concerned, but does checking a credit score lowers it? In this article, Hanfincal (hanfincal.com) helps you find out more about the truth behind it.
1. How many types of credit checks?
There are two types of credit checks: hard credit pull and soft credit pull. Let’s see what these types are below.
1.1 What is a hard credit inquiry?
A hard credit inquiry, also called a hard credit check or a hard credit pull, is a credit information request that includes your entire credit report and lowers your credit score. Lenders and creditors use these inquiries to determine whether to grant you credit or a loan, and they usually result in a temporary drop in your credit score. It is triggered when applying for credit, such as a mortgage, auto loan, student loan, credit card, or personal loan. It does not occur if you are only looking for pre-qualification to determine whether or not to apply.
Hard credit pulls impact your credit score and can remain on your credit report for two years. However, it does not affect your score after less than a year.
1.2 What is a soft credit inquiry?
A soft credit inquiry, also called a soft credit check or a soft credit pull, is a credit report check initiated by you or a company to pre-approve you for a loan. Soft credit inquiries do not affect your credit score because you are not applying for credit, and these inquiries do not always require your permission.
2. Does checking my credit score lower it?
Checking credit score by yourself, also known as a soft inquiry, has no negative impact on your credit score. However, if a third party does a detailed credit check on yours, it has.
So, how much does a credit score decrease when it is checked by a financial institution? A single hard inquiry can reduce your FICO score by up to 5 points and your VantageScore by 10 points.
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3. Why does checking credit score with hard inquiry lower it?
Checking credit score with hard inquiry will lower it only if you have a short credit history or fewer credit accounts. Basically, a hard inquiry can deduct about five points from your credit score for 12 months, according to FICO. This is because having many hard credit inquiries in a short time on your account may show lenders that you may be low on cash or on the verge of incurring debt. That may lead to you being a higher-risk consumer in their perspective.
In contrast, if you have a good credit history and credit score, any hard inquiry on your credit report will likely do very little damage to your score.
4. What other factors can lower your credit score?
Checking your credit score will not reduce it, but there are a lot of factors that might lower your score in addition to hard credit checks.
- Credit history length: A longer history is better for your credit scores.
- Credit mix: The more credit you have (credit cards, student loans, personal loans, auto loans, and mortgage loans), the better your credit will be.
- Credit utilization: A more than 30% utilization rate will begin to harm your scores, and the lower your rate, the better. Those with the highest credit scores have utilization rates in the low single digits.
- New credit: The lender conducts a hard inquiry on your credit report every time you apply for credit. Given FICO, each new hard inquiry can lower your credit score by five points.
- Available credit: The more this kind of credit you have, the better.
- Total balances: the sum of your recently reported current and delinquent balances. The lower your balance, the better.
- Payment history: If one of your payments is more than 30 days late, your credit score may suffer.
5. How often can you check your credit score?
You can check your credit score at least once every few months. By doing so at least a few months in advance, you will have more time to address any issues affecting your credit score.
Remember to check your credit report at one of three credit bureaus at least once a year. Keep an eye out for anything unfamiliar on your credit report. Contact the lender to ensure it is legitimate if you notice anything unusual.
Does checking a credit score lower it? Soft inquiries do not wreak havoc on your credit score. Whatever method you use, regularly checking your credit score and learning what’s on your credit report will benefit your financial health. Remember that you can check your credit score as often as you want, and it will not be affected.
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