It has been said that when one checks his own credit score he or she is likely to affect it. But are they really true? This is usually a confusing issue especially for those consumers who are keen on their credit status.
The answer is that checking your score could lower it – but only for a short while and by a small margin. In general, it is not very significant and your score will recover rather soon without any intervention.
Thorough vs Lenient Credit Check
The important thing to know is there is a distinction between ‘hard’ credit check and ‘soft’ credit check. The credit checks you ‘pull’ yourself on the Internet to screen your credit are mostly likely to be soft checks. These have negligible influence on your score.
However, credit checks that involve a request of your credit report, for instance when you apply for a new credit card or taking a new loan, are a little damaging to your score.
That is why many credit inquiries in a short period of time can be seen by lenders as increasing the risk level. Hence, this article will look at the effects of soft checks that consumers perform by themselves using online services.
Why do Soft Checks Decrease Scores in Any Case?
Well, you are probably thinking as to why soft checks, which do not affect scores in any way, contribute to a lower credit score?
First of all, sites like Credit Karma are not the direct source of credit reports or scores themselves. Its algorithms rely on the lenders’ data to create estimates of your data using mathematical models.
Their scoring models may deem people who frequently monitor their credit as somewhat more risky. Any person who is worried about or tracking their score might appear more vulnerable to credit problems in the future.
Therefore, frequently monitoring your credit implies that you are being responsible as a borrower. However, credit scoring models are not free from the flaws whereby they may fail to interpret behavioral signals appropriately.
The impact is generally minor – a survey conducted by credit scoring company FICO revealed that soft inquiries can actually result to a score drop of less than 5 points or not at all. Moreover, the effect does not last long and is most probably gone in less than one month from the moment it was used.
General Consequences of Soft Credit Check
Here are a few examples of what could happen if you check your credit often:Here are a few examples of what could happen if you check your credit often:
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No score change occurs when you check your own score, particularly if this is a frequent habit you practice already.
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It means your score will be reduced by a small number of points for instance between 2-4 points. This minor change should not affect your chances of being approved for new credit.
- The latter loses slightly more – by let’s say, 8-10 points for example. However, within the two billing cycles or 60 days or less, there is always a return to the normal figure.
So although soft check can indeed have a very slight short term negative impact in theory – and yet practically, in life, such dramatic swings are a rarity. If your credit history is otherwise good, the effect is frequently negligible or minor.
When Checks Have the Biggest Effect
In instances where you have few or negative factors in your credit profile, you’re likely to observe small fluctuations. For instance:
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If you have less than 3-4 years of credit history – in other words, your oldest credit account is not very old.
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Large credit utilization ratios, which are at or above 30 percent of the total credit limits available to you
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Credit related negative marks like the collections accounts or the number of times one has paid a bill or an outstanding balance after the due date.
- Recent high credit limit – if you have recently increased the credit limit on your existing credit card(s) or have received new cards with high limits
In essence, if you already appear ‘risky’ to scoring models for any reason, then checking your score can worsen that slightly.
Minimising Score Dips from Soft Checks
If you want to eliminate even minor, temporary dips the simple fix is this:If you want to eliminate even minor, temporary dips the simple fix is this:
It is advisable to check your credit about once every three months instead of checking it on a monthly or weekly basis. It means less work done behind the scenes to update your credit data if at least one billing cycle is in between the checks.
A much better way is to sign up for free monitoring rather than doing look-ups manually. When monitoring alerts are based on actual changes to your credit reports, not the scoring models.
