Does Checking Your Credit Score Lower It?
Does checking your credit score lower it? How many times can you check your rating within a month? How to track your credit score without hurting it?
We have all the answers you need to track and improve your FICO score – that three-digit number that represents your financial reputation and can significantly expand or limit your options.
Join 57% of US adults who obtained their FICO score within the past 12 months and stay informed.
Does Checking Your Credit Score Lower It?
Not necessarily. Whether an inquiry impacts your FICO rating depends on who made it. Soft inquiries – performed regularly and without permission – have no effect. Hard inquiries are the ones to watch out for. These are done for a specific reason and need your consent.
This means that checking FICO scores for informational purposes isn’t harmful to your rating. If financial institutions perform checks to establish your creditworthiness, however, you can expect your grade to drop. The effect of hard inquiries lasts for about 12 months and remains on your report for 24 months.
Why Does Checking Your Credit Score Lower It?
It’s not the credit check that lowers your score but the intention behind it. That’s why personal and background checks run by employers, as well as checks for marketing purposes have no effect. By contrast, any FICO rating check prompted by a loan or credit application hurts the score.
So, why does checking credit score lower it exactly in that specific case? Because it sends a signal that the person plans to acquire debt. To explain in more detail, FICO scores are comprised of several factors. These include payment history, length of credit history, credit mix, new credit, and personal debt. The last factor is the reason why hard inquiries can damage your FICO rating.
Whenever a bank or a lender performs the check, FICO is alerted that the debt of that person will grow. This is also a sign that you are short on cash. The scoring system reacts accordingly by lowering your rating.
Why Would Checking Credit Score Lower It If Done by a Financial Institution?
Financial institutions check the score of customers applying for credit cards, loans, etc., all of which scream debt. So, if you’re looking to take an auto loan or a credit card, the amount you owe will increase. With debt negatively affecting the FICO rating, these inquiries lower your score.
On the flip side, checking your rating yourself won’t have any effect on your score. In fact, it’s highly recommended for American adults to perform FICO score checks at least once a year. Not only this doesn’t hurt the score, but it also helps people keep track of any unauthorized changes.
How Many Times Can You Check Your Credit Score Without Hurting Your Credit?
This depends on the “who” and “when” factors of the credit score check. Soft inquiries performed by yourself, future employers, or salespersons won’t damage your rating. So, it doesn’t matter how many such checks took place. Hard inquiries result in you losing several points from your score.
Please note that FICO recognizes multiple checks for the same purpose done within 14-45 days. If you’re applying for a mortgage at several financial institutions, FICO will count those inquires as a single check.
How Many Points Does Your Credit Score Go Down for An Inquiry?
FICO data shows that a single credit score check can lower your rating by 5-10 points. The effect meanwhile will last for about a year. A soft credit check won’t harm your good credit score.
Other factors play a role in the exact decrease in your scores. Americans with a robust credit history and no financial issues may lose under five points per check, while people with debt, late payments, and no income may see a steeper drop.
Can I Check My Credit Score Without Affecting It?
Yes, you can check your FICO score without hurting it. Performing checks for personal reasons doesn’t lower financial grades. Future employers can also run background checks that include your credit score without damaging it. Even salespersons promoting loans and credit cards can see consumers’ financial scores without permission.
There are three basic ways to check and monitor your credit score. These are getting it for free from your bank, buying it from a credit bureau, or paying for a monitoring tool. Major banks and credit card issuers provide their consumers with a free FICO rating tracker on monthly statements or mobile apps.
How Many Inquiries Is Too Much?
Six hard inquiries are considered too many. Statistics show that Americans with at least six inquiries are more likely to default on loans or file for bankruptcy. The exact limit, however, also depends on the financial institution policy, the reason for the inquiry, credit history, and personal debt.
Remember that each hard check remains on your record for about 24 months. It, however, negatively affects your score for about 12 months. Also, multiple checks performed for the same reason, for example, mortgage or a personal loan, count as a single inquiry.
What’s the Difference Between a Hard and a Soft Inquiry?
To understand if checking credit score will lower it, you need to know the difference between the two types of inquiries first. There is a soft inquiry and a hard inquiry.
The first is usually done for the following reasons:
- Tracking your FICO score
- Getting a quote for auto insurance
- Employee background check
- Sending pre-approved promotional materials
Soft checks don’t require your permission and have no effect on your FICO score. These are done for informative reasons only.
The second type can cost you between 5-10 points. So why will checking credit score lower it if done through a financial institution? Well, let’s look at the main reasons why such inquiries take place:
- Loan application
- Mortgage application
- Credit application
- Credit card application
- New utility service account
- New cell phone account
- House rental application
As you can see, all these equal generating personal debt or future spending. FICO recognizes them as such and reacts appropriately by lowering your score. Having a hard inquiry on your credit record is like saying you need money. If you need funds, you’re probably short on cash.
Understanding Credit Score
Your FICO score is a three-digit number that represents your financial reputation and ability to pay a loan. This rating, ranging between 300-850, is crucial for determining whether a person qualifies for loans, mortgages, and various services.
There are five possible ratings – poor, fair, good, very good, and exceptional. The average American has a credit score around the 700-mark, i.e., a good rating.
Many credit score factors affect a person’s financial rating. The most important are credit history, debt, payments, credit mix, and credit checks. While the first three are simple to understand, the last factor is a bit more complicated. Some checks can hurt a financial score, while others don’t. That’s why the question “does checking credit score affect it?” remains an ever-popular topic among American adults.
Why Do People Perform Credit Score Checks?
There are many reasons for a person to need their credit score checked.
First, this is a crucial step towards tracking any changes and spotting possible identity theft. That’s right. Unauthorized hard inquiries are a clear sign of identity theft and must be reported asap. If you notice such an inquiry, you should contact the institution that submitted it and notify the credit bureaus of possible fraud.
Second, a credit score check is necessary for monitoring your financial reputation. In the case of any drops, you should learn why they happened and how to fix them. Responsible adults should check their rating at least once a year.
Finally, not all checks are performed by individuals who want to know their score. Financial institutions that need your creditworthiness also check this grade before approving you for loans and/or credit cards.
How to Handle An Unauthorized Credit Score Check?
Imagine that you are checking your own credit score, and notice a drop in your FICO rating and an unauthorized hard inquiry. This may be a sign of fraud or identity theft and you must deal with such situations as quickly as possible.
The first step is to make sure that you haven’t initiated such a check by applying for a loan or a credit card. If you’re confident that the inquiry isn’t on your behalf, contact the institution or company that submitted it. Next, make sure to dispute the inquiry with all major credit bureaus so they can remove it from your financial records. Credit repair statistics show that inquiries are a commonly disputed category during any credit repair process.
Finally, don’t forget to place a 90-day fraud alert to prevent future unauthorized inquiries from happening. If the situation escalates, you may even need to freeze your credit.
Best Practices for Credit Checks
When, how, and who are the three factors of having a smart credit monitoring strategy. Knowing how many inquiries is too much and where to get your rating can save you tons of headaches.
Below, our team of financial experts shares their best practices for performing FICO score checks.
- Use a bank that provides free credit score reports each month.
- Monitor all changes and react fast for any unauthorized checks.
- Always ask companies and institutions whether they perform hard inquiries.
- When looking for a loan or mortgage, make all applications within 14-45 days.
- Once a year, get FICO score reports from the three major credit bureaus and compare them.
- Avoid racking six or more hard inquiries within 12 months.
- Keep track of all your hard inquiries for personal reference.
By applying these tips, you won’t have to bother wondering how many times you can check your credit score or if the check would affect it. You’ll be able to get free reports and start working on improving your FICO rating, instead.
Credit Score Checks – Bottom Line
Understanding how credit scores work is critical to maintaining a sound financial reputation. Your best chance of tracking any changes is by performing a credit check at least once per year. Doing this the right way will keep your record clean and won’t cost you any precious points. So, make sure to follow our expert tips and join the 59% of Americans who have a FICO score of at least 700.