Which Action Is Least Important to Maintaining a Healthy Credit Score? Everfi Answer
Having a healthy credit score is crucial for financial stability and obtaining loans or credit cards with favorable terms. Many people are aware that there are certain actions they should take to maintain a good credit score, such as paying bills on time and keeping credit card balances low. However, it is also essential to understand which actions are least important to maintaining a healthy credit score. In this article, we will explore Everfi’s answer to this question and provide a comprehensive understanding of credit scores.
Everfi is a leading educational technology company that offers interactive financial education programs, including modules on credit scores. According to Everfi, the least important action to maintain a healthy credit score is the frequency of credit inquiries.
Credit inquiries occur when a lender or creditor checks your credit report to assess your creditworthiness. There are two types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries are generated when you apply for credit, such as a loan or credit card, and they can have a temporary negative impact on your credit score. On the other hand, soft inquiries are generated when you check your own credit report or when lenders or credit card companies make pre-approved offers. Soft inquiries do not affect your credit score.
Everfi emphasizes that while credit inquiries can impact your credit score, they have a relatively minor influence compared to other factors. Payment history, which includes making timely payments, holds the most significant weight in determining your credit score. Other vital factors include credit utilization ratio (how much credit you are using compared to your available credit limit), length of credit history, types of credit accounts, and new credit accounts.
Q: How often should I check my credit report?
A: It is recommended to check your credit report at least once a year to ensure accuracy and detect any potential errors or fraudulent activity. You can obtain a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) annually.
Q: Can checking my own credit score negatively impact my credit?
A: No, checking your own credit score or report is considered a soft inquiry and does not affect your credit score. In fact, monitoring your credit regularly is a responsible financial habit.
Q: How long do hard inquiries stay on my credit report?
A: Hard inquiries typically remain on your credit report for two years. However, their impact on your credit score diminishes over time, and after six months, they no longer affect your score.
Q: How can I minimize the impact of hard inquiries on my credit score?
A: While hard inquiries may have a temporary negative impact on your credit score, their effect is usually minimal. Applying for credit only when necessary and not making multiple credit inquiries within a short period can help minimize their impact.
Q: Are there any actions that can harm my credit score significantly?
A: Yes, certain actions can have a severe negative impact on your credit score. These include consistently missing payments, defaulting on loans, having high credit card balances, and filing for bankruptcy. It is crucial to maintain responsible financial habits to preserve a healthy credit score.
In conclusion, Everfi suggests that the frequency of credit inquiries is the least important action to maintaining a healthy credit score. While credit inquiries can impact your score, factors like payment history, credit utilization, length of credit history, and types of credit accounts hold more weight. It is essential to prioritize these factors and practice responsible financial habits to maintain a good credit score. Regularly checking your credit report and addressing any errors or fraudulent activity promptly is also crucial for financial well-being.