Does checking your score lower it?
You may not have known, but every time your credit history is checked, it is reflected in your credit report. This can be either a soft or a hard credit check, depending on who checked it. However, while a soft credit check does not affect a credit rating, a hard credit check can worsen it and remains on the credit report for 2 years. If you check your credit rating yourself, this is also considered a soft check and does not affect your credit. Learn what soft and hard credit checks are and how they affect your credit score.
What is a soft and hard credit check?
A soft credit check can happen for several reasons: if you are checking your credit, if an employer or renter is doing a credit check (your permission is required), if the lender is doing a check to pre-approve your application. As already mentioned, a soft credit check does not affect your credit rating since you are not applying for a new loan. Some loans, such as Payday Loans, do not require a credit check at all. Sometimes lenders may request a soft credit check, however this is not reflected in the credit report.
A hard credit check is required if you want to get mortgages, Installment Loan and other types of loans. Once you are prequalified and applied, lenders will review your credit to understand your previous payments and make sure you paid off your debts on time. Thus, a hard credit check can lower your credit score for some time.
What can lower your credit score?
You probably know that your FICO rating is based on several factors. Thus, a credit check is not the only thing that can affect your credit and worsen it. Pay attention to other factors that affect your credit:
- Payment history. Please note that payment history is the most important factor in your FICO score. If you pay your debts on time, then this factor will not be affected. However, if at least one of your payments is delayed for more than 30 days, then your credit score deteriorates. Also note that the longer the payment is late, the more it will damage your account. Often times, creditors report late payments to the credit bureaus, so the credit score deteriorates.
- Amounts owed. In calculating this factor, both total debt and loan utilization play an important role. Your credit utilization ratio shows how you are using your credit card limits. For example, if your credit card limit is $ 5000 and your balance is $ 2500, then the utilization rate is 50%. Please note that if your limit exceeds 30%, it may worsen your credit. Thus, the lower your credit utilization rate, the better.
- Length of credit history. The longer your credit history, the better for your credit rating. It is also important to consider such a factor as the average age of accounts. Thus, if you have been using credit for many years but have now opened several new accounts, then the overall age will decrease and your credit score will also suffer.
- Credit mix. The more types of credit you use, the better for your credit history. It can be a credit card, car loan, mortgage, personal loan, and more - variety is only welcome.
- New credit. When you apply for a new loan, it can also negatively affect your credit score (depending on the type of loan you are taking). Most lenders ask for a hard credit check, which can lower your credit by up to 5 points. What's more, if you've had a few hard credit checks lately, it will be even worse for your account.
Thus, as you can see, there are a huge number of factors affecting your credit, so it is impossible to say for sure what exactly worsened it. Moreover, it is worth considering each factor separately, since credit check is far from the only point to which you need to pay attention to.
How often can you check your credit?
You should know that you can check your credit score as often as needed. When you check your credit yourself, it is considered a soft credit check and is not reflected in your credit report. It is recommended that you regularly check your credit before applying for any loan.
By checking it before applying for a loan, you can be sure that there will be no difficulties with the approval of your application. Moreover, it is important to check your credit report at least once a year, as this information is used to calculate your credit rating. It is also important to check your credit report for errors. If you notice inaccurate information in the report, it is worth reporting this to the credit bureaus.
You can get a free copy of your credit report from each credit bureau every 12 months.
Why does checking your credit score lower it?
As already mentioned, if you check your credit score yourself, it does not worsen it, as it is considered a soft credit check. Therefore, if you need to, you can check your credit without fear that it will worsen your credit score.
However, your credit score may deteriorate if it is checked by another person. For example, if you applied for a credit card or loan, the lender will most likely ask for a credit check to see if you can repay the loan on time. The more hard credit checks are done in a short time, the worse for your credit.