Your credit score plays an important role in your financial life. Good credit helps you qualify for loans and credit cards with low rates and favorable terms, while bad credit makes borrowing money hard and expensive. With excellent credit, you can secure the lowest interest rates and qualify for lucrative rewards credit cards.
It’s clearly important to know where you stand, credit-wise. Knowing whether your credit is great, bad, or in-between helps set your expectations for the types of cards and loans you might qualify for. It also shows you how much work is needed to boost your score.
However, you might have heard that checking your credit score can lower your score. This has a kernel of truth to it, but for the most part, checking your own credit won’t hurt your score.
Does Checking Your Credit Score Lower It?
Checking your credit score can sometimes cause your score to drop by a few points. However, this is typically only true when a lender checks your credit score with one of the credit bureaus for the explicit purpose of approving a loan application, known as a hard pull or hard inquiry. Preapprovals by lenders and personal credit checks by consumers (such as pulling your own credit report) don’t impact your score.
Usually, a hard pull decreases your score by five to ten points.
There are plenty of ways to check your credit without impacting your score. The important thing you need to know is the difference between hard inquiries and soft inquiries.
|Hard Inquiry||Soft Inquiry|
|Lowers Credit Score?||Yes||No|
|By How Much?||5 to 10 points||N/A|
|Example||Applying for a credit card||Getting preapproved for a loan|
Hard Inquiries vs. Soft Inquiries
There are three major credit bureaus in the United States: Experian, Equifax, and TransUnion. These companies keep track of how you interact with credit and debt and compile credit reports on you. When a lender wants to check your credit score, they contact one or more of these bureaus for a copy of your report.
Lenders then run the information on your score through one or more scoring models — like FICO 10 or VantageScore 4.0 — to generate your credit score for you.
Lenders can make this request in two ways: as a hard inquiry or as a soft inquiry.
A hard inquiry or hard pull is the one that impacts your credit score, temporarily decreasing your score by a few points. They show up on your report for two years before dropping off, though they only affect your score for one year. Lenders typically use these inquiries when you actually submit an application for a loan.
By contrast, a soft inquiry, or soft pull, on your credit, won’t show up on your credit history or lower your score. Lenders might use these when you ask for preapproval on a loan. Free credit score services also use these when you want to check your own credit score.
What Can Lower Your Credit Score
Your credit score is composed of five factors, in order of importance:
- Payment history
- Amount owed
- Length of credit history
- New credit
- Credit mix
You want to ensure that you’re doing well on each of these factors to build a good credit score. You can hurt your credit if you’re doing poorly in any of these areas.
Some of the most common ways to hurt your credit are:
- Late or Missed Payments (Inconsistent Payment History). Your payment history makes up more than a third of your credit score. A single missed or late payment can cause a huge drop in your score and take months or even years to recover from.
- A High Credit Utilization Ratio (Balance to Cumulative Credit Limit Ratio). Your credit utilization measures your credit card debt divided by your total credit limits across all cards. Most experts recommend keeping this below 30%.
- Closing Credit Cards for No Reason (Shortening Your Length of Credit History). Closing credit cards can actually lower your score by reducing the average age of your credit accounts. The longer you’ve had credit and the older your accounts, the better.
- Having Too Many Cards or Other Types of Credit Accounts (Poor Credit Mix). Credit mix looks at the different types of loans you’ve had. For example, a borrower with student loans, a car loan, and a personal loan will score better here than someone who only has an auto loan.
- Applying for Too Many Credit Accounts in a Short Period of Time. Hard credit inquiries drop your credit score by a few points, so applying for lots of new loans in a short span of time can tank your score.
- Opening Credit Accounts You Don’t Actually Need. Opening a new credit card or loan reduces your average age of credit accounts and adds a hard inquiry to your credit report, dropping your score.
- Carrying High Credit Balances. Carrying a balance on your credit card adds to your total debt, lowering your score. It also makes your credit utilization higher, further hurting your score.
- Not Checking Your Credit Report Regularly. You can check your credit report for free many ways, such as through a credit monitoring service or annualcreditreport.com. Checking your report regularly can help you come up with a plan to improve your score.
- Failing to Fix Credit Report Errors. When you get a copy of your credit report, you might notice errors or incorrect information. You can report errors to the bureaus to get them removed. Getting incorrect, negative information removed from your credit report can help your score.
How to Reduce the Impact of Credit Inquiries
Maintaining good credit is important, so you should try to reduce the impact that hard credit inquiries have on your score. There are a few ways to do this.
- Only Apply for Loans When You Need Them. The most obvious way to avoid hurting your score is to avoid hard inquiries in the first place. If you only apply for loans rarely, you won’t have many inquiries on your report to damage your score.
- Plan Ahead When Rate Shopping. Most credit scoring formulas won’t punish you for rate shopping by applying for the same loan type with many lenders. For example, if you apply for a mortgage with five lenders over the course of a few weeks, most formulas will treat that as one inquiry, so make sure you have a plan before submitting the first application.
- Try to Get Pre-Approved. Many lenders will do a soft pull on your credit to see if they can pre-approve you for a loan. This can save you from applying for a loan you won’t qualify for and getting a hard inquiry on your report for no benefit.
- Wait. Hard inquiries hurt your score, but only temporarily. Their impact decreases after a few months and they disappear from your report entirely after two years. If your score is low due to lots of inquiries, waiting a few months can be a big help.
Having good credit can make a lot of financial tasks easier, helping you qualify for loans and secure the best interest rates. Checking your credit score regularly can help you understand the things that are impacting your score and how you can improve your score over time.
Once you’ve built good credit, you can leverage it by signing up for a great rewards credit card or refinancing your mortgage or car loan at a lower interest rate.