Understanding Credit Scores and Credit Checks
Checking your credit score can be a crucial step in managing your financial health, but it's natural to wonder if doing so will lower your score. Fortunately, checking your own credit score is considered a soft inquiry and does not affect your credit score.
Credit scores are calculated based on information in your credit reports, including payment history, credit utilization, and length of credit history. Soft inquiries, such as checking your own credit score, are not factored into credit score calculations.
The Difference Between Soft and Hard Pulls
A hard pull, on the other hand, occurs when a lender or creditor checks your credit report as part of the loan or credit application process. Hard pulls can temporarily lower your credit score, as they indicate to creditors that you're seeking new credit.
Soft pulls, by contrast, are typically used for informational purposes, such as when you check your own credit score or a lender pre-approves you for a credit offer. Soft pulls do not affect your credit score and are not visible to creditors.
How Soft Inquiries Work
Soft inquiries are used by lenders and creditors to pre-approve you for credit offers or to verify your identity. They can also be used by employers or landlords as part of the hiring or rental application process.
Soft inquiries are not visible to creditors and do not affect your credit score. They are typically only visible to you, the consumer, when you request a copy of your credit report.
The Impact of Hard Inquiries on Credit Scores
Hard inquiries can have a negative impact on your credit score, particularly if you have multiple hard pulls in a short period. This is because hard pulls indicate to creditors that you're seeking new credit, which can be a sign of increased credit risk.
However, the impact of hard inquiries on your credit score is typically temporary, lasting only a few months. Additionally, credit scoring models such as FICO and VantageScore are designed to distinguish between rate shopping and actual new credit applications.
Managing Your Credit Score and Credit Report
To manage your credit score and credit report effectively, it's essential to monitor your credit report regularly and dispute any errors or inaccuracies. You can request a free copy of your credit report from each of the three major credit reporting agencies once a year.
Additionally, making on-time payments, keeping credit utilization low, and avoiding unnecessary credit inquiries can help maintain a healthy credit score and credit report.
Frequently Asked Questions
Will checking my credit score every month lower it?
No, checking your own credit score is considered a soft inquiry and does not affect your credit score.
What is the difference between a soft and hard credit pull?
A soft pull is for informational purposes, while a hard pull is for loan or credit applications and can temporarily lower your credit score.
Can I dispute a hard inquiry on my credit report?
Yes, if you believe a hard inquiry was made in error, you can dispute it with the credit reporting agency and the creditor who made the inquiry.
How long do hard inquiries stay on my credit report?
Hard inquiries typically stay on your credit report for two years, but their impact on your credit score usually fades after a few months.
Will multiple hard inquiries for the same type of credit affect my score more?
Credit scoring models are designed to distinguish between rate shopping and actual new credit applications, so multiple hard inquiries for the same type of credit may not significantly affect your score.
Can I avoid hard inquiries when applying for credit?
In some cases, yes, you can avoid hard inquiries by pre-qualifying for credit or using a soft pull to pre-approve you for a credit offer.