Is Your Credit Impacted by Frequently Checking Your Score?
When you are getting a mortgage, lenders will check your score more than once. When you are making a major effort to improve your credit, you will want to check your progress frequently. So, is your credit impacted by frequently checking your score?
The answer is, it depends. Credit bureaus make a note in your file anytime anyone checks your credit. Inquiries can be "soft" or "hard," depending on who is checking.
What’s the Difference Between Hard & Soft Inquiries to Your Credit Report?
When you check your own credit, the inquiry is recorded as a soft inquiry. Credit checks by an employer or landlord whom you have given your permission to check your credit, also count as soft inquiries. Inquiries made to prequalify you for a student loan, home mortgage, car loan or credit card are also soft. Soft inquiries have no effect on your credit score.
After you take the next step and apply for a loan, mortgage, credit card, financing for a purchase or line of credit, the credit bureaus will record a hard inquiry. Hard inquiries can lower your credit score. And repeated inquiries by the same lender after your application can lower your credit score more.
How Much Do Hard Inquiries Affect Your Score?
A single hard inquiry to your credit will probably lower your credit score by about five points. Multiple inquiries by the same lender — say, by the mortgage company financing your new home — may lower your credit score a little more, but they are not likely to have a drastic effect on your score.
Problems arise when you make multiple applications for credit over just a few months to get multiple credit cards, store accounts or lines of credit - especially if they are out of proportion to your income. Even in these cases, hard inquiries are not as big a factor in computing your credit score as: the percentage of payments you have made on your open accounts on time, the percentage of your credit you are currently using, derogatory remarks from court judgments and collection agencies, and how your other accounts have been open.
Even multiple hard inquiries won't, outside of extreme circumstances, ruin your credit. Soft inquiries don't affect your score at all. They just give you opportunities to nip problems in the bud.
Why You Need to Check Your Credit Regularly
You could check your own credit every day without lowering your scores, although there are really only two times you must check your credit report:
- Before applying for credit, whether it's a credit card, an auto loan, a home loan or something else. If you check your credit several months before applying for important new credit, you have an opportunity to take care of any issues that appear on your report.
- You should check your credit report at least once a year to keep tabs on potential errors, even if you are not applying for new credit. You don't just want to check your credit score once a year. You want to review your credit report once a year to look at the raw information the credit bureaus use to calculate your score.
When you check your credit report, be on the lookout for anything you don't recognize. If you see something odd, contact the lender. Sometimes lenders operate under multiple business names, and sometimes creditors sell accounts.
You should never be afraid to check your own credit score. And you should never hesitate to ask a trusted lender who is on your side, like your credit union, to demystify your credit report. Clark County Credit Union can work with you to build savings for the financial stability you need for your next loan. Contact us today at 702-228-2228 to learn more.