The average FICO score in the United States stands at 711. Many Americans use their credit to take out loans and achieve financial breathing room in their daily lives.
If you are in the process of checking your credit, you may be wondering if an inquiry will have any impact on your score. While checking your own credit won’t have any impact on your score, there are other important factors to consider.
Your score can be impacted if a lender makes a hard inquiry to learn more about your credit. In this article, you’ll learn more about how a credit check can influence your score and how to minimize the damage.
Will Checking Your Credit Hurt Your Score?
Many people are afraid to check their credit scores. This is because they are concerned that their inquiry will decrease their credit score. The truth is that this is a major misconception.
In reality, if you check your own credit score, you will not impact the outcome negatively. In fact, by regularly checking your own score you can:
Check if there are any disputes against your credit
Obtain progress on how your credit is improving
See if there are any ways to improve your credit score
There are a lot of benefits to checking your own credit score. This is known as a soft credit inquiry. These inquiries are not visible to lenders who are considering your credit to make a decision.
On the other hand, major lenders will conduct more extensive reviews of your credit. This is called a hard credit inquiry. These inquiries may impact your credit score.
Knowing the difference between soft and hard credit inquiries will help you avoid the surprise of looking at a drastically different report. In the following sections, you’ll learn the difference between soft and hard credit inquiries and how they can impact your credit score.
What Is a Hard Credit Inquiry?
Hard credit inquiries, also known as hard credit checks or hard pulls, happen when a lender checks your credit before making a decision to give you a credit card, a home loan, etc.
Hard credit inquiries are serious. Lenders will only perform these inquiries when dealing with significant loans, such as when you apply for a credit card or a home mortgage.
The bottom line is that hard credit inquiries may lower your credit score by a few points. It may also have a very small effect on your score. The end result depends on a lot of different factors.
One hard credit inquiry is likely to not do any major damage to your credit score. It may even disappear for good before the inquiry expires. Remember that a hard credit inquiry can stay on your report for at least two years.
Hard credit inquiries usually precede:
Apartment rental applications
Again, one hard pull won’t have a drastic impact on your credit score. Depending on your overall credit health, several hard credit inquiries in a short duration can start to drag down your score several points.
What Is a Soft Credit Inquiry?
Soft credit inquiries, also known as soft pulls and soft credit checks, usually happen when a person or a company reviews your credit during a background check.
For example, a credit card issuer will check your credit without your permission to see if you qualify for specific cards and offers. In some cases, a potential employer will even check your credit before hiring you.
Soft credit inquiries will never affect your score. Depending on the credit bureau, they may not even appear on your credit report. Soft pulls are only visible to you since they aren’t connected to new credit applications.
Examples of soft credit checks include:
Checking your credit score using an online tool
Prequalified credit score offers
Prequalified quotes for insurance
Background checks, employment verifications, etc
Don’t be afraid to perform soft credit inquiries. They are the only way you can regularly keep tabs on your credit and borrowing history. Besides, lenders, credit card issuers, and employers may check your credit without your knowledge anyway.
This should give you peace of mind knowing that your score won’t be affected without your knowledge.
How to Respond to Negative Credit Discrepancies
It’s highly recommended to regularly check your credit score. You are entitled to a free credit report every year for that purpose. If you see any errors that took place without your permission, consider reporting them to a credit bureau.
You are also encouraged to contact the Consumer Financial Protection Bureau (CFPB) if you need more assistance in filing a credit dispute. An unexplainable error could be a sign of identity theft.
You should at least look into the error and understand what’s going on. If you are worried about a potential negative impact after a hard inquiry, be encouraged. FICO will give you a 30-day grace period hard pulls are reflected on your credit report.
If you’re shopping for the best interest rates and lenders, your credit score will be fine if you conduct your search within 14 days. This way, FICO will consolidate all of these hard credit pulls into one inquiry.
Therefore, multiple hard credit inquiries won’t negatively impact your credit. Granted, lenders rely on different scoring models to make their decision. Nonetheless, you don’t know which scoring model they’ll choose.
Hence, stick to the 14-day rule when comparison shopping.
Build Your Credit Score Today!
Checking your credit won’t have a significant impact on your score. In fact, it’s a great way to see if there are any disputes against your credit. It’ll also help you to build progress in growing your credit score over time.
If several hard credit inquiries have lowered your credit score or if you want to grow your score, then you’ve come to the right place. We offer several credit-building promotions and tools to help you on your journey.
To learn more about how you can take your credit score to the next level, take a look at our pricing models.