Well, you have probably heard that checking your own credit score can actually lower it. But is that really true? Since credit plays such a crucial role in one’s financial standing, you might want to pay some attention to a credit score. But, at the same time, you don’t want to reduce it merely because you need to check on it. Okay, so what is the actual answer?
The Short Answer On this front, there is some good news. Just going and checking their credit score does not in any way reduce their credit score. It means that you can check how many points you have at the moment without any harm to your score. It is the hard inquiries that can sometimes bring your score down for some time. However, if you check your own score, it comes to what is known as a soft inquiry and does not harm you in any way.
The Common Myth One myth is that you should rarely check your credit report or score, say every few weeks or months because all those checks will decrease your score. But that simply isn’t true. This is likely why this myth has been around for so long because many people do not understand the difference in credit inquiries.
Now, let’s take a closer look at the two types of inquiries: hard inquiries and soft inquiries. The type of inquiry that can harm your scores is called a hard inquiry. Hard inquiries happen when you apply for any type of credit. Credit card, car loan, mortgage etc This every time you apply for credit the lender will request your complete credit report from one or all the three major credit reporting companies. This leads to a hard inquiry.
It is therefore important not to make too many hard inquiries within a short period of time as this can be interpreted by potential lenders as high risk. Still, if you have applied for several credit cards in the last few months, it gives the impression that you are eager for more credit and might get in too deep. Consequently, every hard inquiry can lower your score by a few points. However, this ding is usually quite small and your score rebounds quickly with responsible credit behaviors.
However, if you want to check your own credit report or credit score, this leads to what is known as a soft pull. Soft inquiries can in no way affect your score in any way, shape, or form. It does not involve applying for more credit and is something that you can do from the comfort of your home. Therefore, soft inquiries are not considered to be raising your risk factor in the eyes of the lenders.
The free credit report can be requested from all the three agencies from annualcreditreport. com. Also, You can find out your credit score and report directly from many banks and credit card companies which offer it free to their customers. Any of these options to check your score only provides soft inquiries that will not affect the number in any way.
When to Check Your Credit Score Not only is checking one’s own score free from negatively affecting the score, it is financially responsible to do so. In fact, you should make it a habit to monitor your credit reports and scores every several months. Here's why it pays to keep tabs on your credit health:Here's why it pays to keep tabs on your credit health:
- Monitoring for Mistakes It is also possible that your reports contain errors that have a negative influence on your scores. Common credit report mistakes include:Common credit report mistakes include:
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This means that there will be accounts that you do not own or have any form of control over.
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Some of the weak signals include;
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Wrong balances or incorrect limits
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Inaccurate papers which contain old information about the client
Indeed, if you do not pay attention to such slight imprecisions, they will surely decrease your points specifically in your scores. Catching and disputing mistakes can help your credit standing become better in time.
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Catching Fraud Early If someone attempts to commit identity theft and use your identity to open new credit accounts, you will be able to identify it earlier if you have a practice of reviewing your reports often. The quicker one is able to detect fraud and fraud related activities, the less damage that one can accumulate.
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Tracking Improvement While working on improving your credit, such as paying off debts or disputing inaccuracies, it helps to track progress and evaluate progress on credit scores. Getting to see your numbers rise thanks to your credit management skills provides an incentive to continue practicing the skills.
The Role of Inquiries as They Contribute to Your Credit Scores There is no good kind of inquiries on reports, however, some of them are useful in real life situations such as purchasing a house. Yet it’s definitely something to look out for especially if you realize that you have to apply for credit again soon while rate shopping. This results in a scoring impact that is short lived if applications are kept within a reasonable range.
Here is a glance at how different types of inquiries generally impact FICO scores:Here is a glance at how different types of inquiries generally impact FICO scores:
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One credit application can reduce your score by less than five points.
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Subsequent application reduces it by less than five points each time.
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This means that after 10 or so inquiries, each additional one diminish in effectiveness.
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The inquiries are no longer having an impact on the scores after 12 months.
Inquiries also affect FICO and VantageScores as well as other types of credit scores differently. I would like however to state that a small temporary dip in such a metric is quite healthy anyway. Responsible ongoing management of new credit tends to pull scores up over time.
What Actually Drives Your Credit Score Down? If doing a credit check does not harm then what leads to the scores being lowered? The biggest red flags for lenders that negatively impact your scores include:The biggest red flags for lenders that negatively impact your scores include:
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High balances: This indicates higher risk particularly if you are more than thirty percent of the limit.
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Missed payments: No factor is as effective in sinking scores as delayed payments.
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Errors: Overlooking errors has an effect of indirectly reducing the rating.
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Short credit history: Less formal credit is more risky.
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Too many applications or hard inquiries: This suggests that you may well end up with debt levels that you are unable to manage.
In almost all typical settings though, the act of checking own score – whether it is daily, weekly, monthly or annually – does not alter the number in any way.
The Takeaway Generally, it is advisable to track credit reports and scores regularly in order to assess credit status over time. It is free of risks and still, it enables constant supervision of the situation, which allows for immediate action in case of any issues. Since it can be accessed from various sources and at no cost, there is no excuse for not at least checking your credit a few times in a year. It is again important to note that more frequent checks only serve to assist in improving your scores. So you review and monitor with no worries knowing that only soft inquiries will not harm your credit points.
