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Why Does Having My Credit Score Checked Affect My Credit?
In today’s society, credit scores play a crucial role in financial decisions. Whether you’re applying for a loan, a credit card, or even renting an apartment, your credit score is often checked to assess your creditworthiness. However, many people wonder why the act of having their credit score checked can actually affect their credit. In this article, we will delve into the reasons behind this phenomenon and answer some frequently asked questions about credit checks.
When a lender or financial institution checks your credit score, it is known as a “hard inquiry” or a “hard pull.” This type of inquiry occurs when you actively apply for credit, such as a mortgage or a car loan. Hard inquiries are typically visible on your credit report for up to two years and can have a temporary negative impact on your credit score.
One of the main reasons why hard inquiries affect your credit is due to the potential risks associated with seeking new credit. Frequent credit applications may indicate that an individual is experiencing financial difficulties, which can raise concerns for lenders. Additionally, each hard inquiry generates a new entry on your credit report, which can be perceived as a sign of increased credit risk.
Hard inquiries typically have a minimal impact on credit scores, usually resulting in a decrease of a few points. However, the effect can vary depending on your overall credit history and the number of recent inquiries. It is important to note that the impact of a hard inquiry is usually short-lived and diminishes over time.
On the other hand, there is another type of credit check known as a “soft inquiry” or a “soft pull.” Soft inquiries occur when a person or entity checks your credit report for non-lending purposes, such as a background check or a pre-approved credit offer. Unlike hard inquiries, soft inquiries do not affect your credit score. They are only visible to you and do not impact your creditworthiness.
Now, let’s address some frequently asked questions about credit checks:
Q: How many points can a hard inquiry affect my credit score?
A: The impact of a hard inquiry on your credit score is usually minimal, resulting in a decrease of a few points. However, the exact impact may vary depending on factors such as your overall credit history and the number of recent inquiries.
Q: How long do hard inquiries stay on my credit report?
A: Hard inquiries can remain on your credit report for up to two years. However, their impact on your credit score diminishes over time, and after about a year, their influence becomes negligible.
Q: Can I avoid having my credit score checked?
A: In most cases, credit checks are inevitable when applying for credit or certain financial services. However, it is important to be mindful of the number of credit applications you submit, as multiple inquiries within a short period can have a more significant impact on your credit score.
Q: Will checking my own credit score affect my credit?
A: No, checking your own credit score is considered a soft inquiry and does not affect your credit score. It is encouraged to regularly monitor your credit report to ensure accuracy and identify any potential issues.
Q: How can I minimize the impact of hard inquiries on my credit?
A: While it may not be possible to completely avoid hard inquiries, you can minimize their impact by spacing out your credit applications over time. Consolidating your credit applications within a short period can signal higher credit risk, potentially affecting your credit score.
In conclusion, having your credit score checked, specifically through hard inquiries, can temporarily affect your credit. Lenders and financial institutions use credit checks as a means to assess your creditworthiness and determine the potential risks associated with granting you credit. While the impact of hard inquiries is usually minimal, it is important to be mindful of your credit application frequency and regularly monitor your credit report for accuracy.
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