Does Checking Your Credit Score Lower It?

Understanding how your credit score works may sound complicated, but it doesn’t have to be. One question many people ask when it comes to finances: Does checking your credit score lower it?

The good news is that you can check your credit score as many times as you want without any repercussions. Your score will not lower at any point if you’re the one initiating the process.

Many people recovering from a low credit score habitually check their score every month to see if it has risen or fallen since the previous time they looked. Though excessive worrying is never good, checking your credit score on a routine basis is actually good common sense these days.

Even if you’re not concerned about repairing your credit, ongoing monitoring tips you off to potential identity theft if you see a sudden dip in your score that wasn’t caused by any of your own late payments or financing applications.

There are, however, several scenarios in which a credit check pulled by someone else can impact your score. Here’s everything you need to know about how credit checks work.

What’s the difference between a credit score and a credit report?

Your credit report is a record of your financial history. It includes things like how many revolving credit accounts you have open, a history of your on-time and late payments, and how much debt you have in your name. Nowhere on the credit report is there any numeric score associated with your file. It is simply a compilation of data and factoids. As with your credit score, you can check it often without it hurting your credit score, this also helps you with understanding how your credit score works.

You have credit reports with three credit bureaus:

  • Experian
  • Equifax
  • TransUnion

Your credit score differs from your credit report because it’s given to you by the Fair Isaac Corporation (also known as FICO) or Vantage. FICO and Vantage develop scores off each one of your credit reports — meaning each person has three credit scores (as opposed to one) from each bureau — but FICO seems to be the most popular choice among lenders.

Can other people check my credit score without it lowering?

Here’s where things get a little complicated. When other people access your credit report, it is known as a credit check. There are two types of credit checks:

  • Soft Inquiry
  • Hard Inquiry

A soft credit check will not lower your credit score. Sometimes lenders offer soft credit checks to see if you pre-qualify for financing. It is not a formal process by any means, but it gives lenders a rough idea of your financial history. If they like what they see, they’ll recommend that you formally apply with them.

You often won’t even know a soft inquiry has taken place. Have you ever gotten a credit card offer in the mail? The reason you did is because the credit card company did a soft credit pull.

A hard credit inquiry, on the other hand, does lower your credit score. When you ask, “Does checking your credit score lower it,” this is when the answer to that question is yes.

Also known as a “hard pull,” a hard credit inquiry occurs whenever you apply for credit. You should have an inquiry on your report every time you apply for a:

How much does a hard inquiry lower your credit score?

Hard inquiries lower credit scores by about 5 to 10 points. However, if you’re shopping around for the best rate, FICO typically lumps all the inquiries from the same type of lender within a 45-day window into a single inquiry; so your account only gets hit with a single 5 to 10 point drop. While you may think that a lender checking your credit score lowers it substantially, it’s only a small amount when you apply for financing in moderation.

How do you know if it’s a soft or hard inquiry?

Any credit application should clearly note whether the creditor plans to use a hard or soft inquiry. If you’re unsure, just ask. It’s helpful to know which type it is if your score is on the brink of rising or falling into a new score category. Lowering your score at the last minute can hurt your chances of qualifying for a better rate.

Where can I check my credit score?

You can check your credit score through a variety of means; in fact, your bank may even give you free updates throughout the year. You can also pay for your credit score through FICO, Vantage, or even each credit bureau individually.

No Need to Wonder, “Does Checking Your Credit Score Lower It?”

Have we answered, “Does checking your credit score lower it?” We like to think we have, and we hope we’ve given you some insight into understanding how your credit score works.

Simply put, you can check your own credit scores and reports on a regular basis without causing any damage. Your credit score only drops once you accept hard pull on your account. 

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What is a Good Credit Score?

A good credit score opens doors to lower interest rates and more favorable financing arrangements. It may also qualify you for top-tier credit card offers and allow you to obtain large loans such as mortgages. As you’re pondering what is a good score, you may wonder whether yours falls in that category—and if not, you’re probably asking, how can I improve my credit score? Let’s take a look at what a good score is—and how you can achieve this financial milestone.

What is a good credit score?

A good score is the result of years of on-time payments while maintaining a low balance of credit usage across your available accounts. Most lenders and credit card companies use one of two scoring models, either FICO or VantageScore, which are used by the three major credit bureaus: Experian, Equifax, and TransUnion. FICO defines a good credit score as 670 or above, while VantageScore sets the bar a bit higher at 700. Some lenders, such as auto lenders, might opt to use their own models–but generally, most lenders and credit card companies stand by the FICO or VantageScore brand.

How are credit scores measured?

Your credit score measures your track record of paying lenders and credit card companies while providing potential lenders insight into your level of risk as a borrower. Your credit score is a three-digit number ranging from 300 to 850. Basically, if you are approved for a loan with a score below 600, you would likely pay a higher interest rate than someone with what is a good score, such as 720. While the scoring companies do not disclose the exact formulas they use to determine a score, they generally weigh the following factors:

Payment history

Lenders will evaluate your history of making on-time payments as well as whether you have any late or missed payments on your credit report.

Credit utilization

This describes the amount of credit you’re using in proportion to the total amount of credit you’re using. For a good score, you’ll need to maintain a low credit utilization, typically 30% or less at any given time.

Length of credit history

The “age” of your credit accounts is another key ingredient in the score calculation. The longer you can manage to keep accounts open, the more your score will rise.

New activity

When a potential lender pulls your credit report to decide whether to extend credit to you, that may register as a “hard inquiry” on your credit report. Your score may drop a few points as a result, particularly if multiple hard inquiries show up on your report.

Credit mix

Lenders like to see that you have managed a variety of types of credit, including credit cards, installment loans, auto loans, and more. Although this factor is less important than the others, it nonetheless plays a role.

Negative history

Late or missed payments can have a serious lasting impact on your score, generally for up to two years. Bankruptcies and collection activity can damage your credit score even further.

How can I improve my credit score?

Learning what is a good score is the first step to achieving that goal. The single most important ingredient in a good credit score is a record of on-time regular payments. That means you must pay your credit card and loan payments on time every month. 

You can also improve your score by maintaining a low credit utilization across all of your accounts. Aim to charge 30% or less of the total credit limit at any given time. Paying down debt on your credit cards—and then keeping those accounts open—will free up some of the available credit and will gradually lift your score. As you maintain certain accounts over time, your score will also benefit from the longer, positive credit history.

What Credit Score is Needed to Buy a House?

There’s a lot to think about when you’re buying a house. You’ll want to consider what neighborhood you want to live in, what schools or businesses are nearby, what style home you want—and that’s not even touching on finances.

Buying a home is probably the biggest purchase you’ll make in your lifetime, so it’s no wonder that there’s a lot to consider. Going into the house-hunting process informed about what you want, what you have, and what you can expect is the most important thing you can do as a buyer—and that means getting educated about your credit score. If you have questions about what credit score is needed to buy a house, there are a few important facts to recognize.

Why does your credit score matter?  

In short, credit scores are three-digit numbers from 300 to 850 that tell lenders if you’re a responsible borrower. The higher your number, the less risk you present to a lender.

Creditors send credit bureaus information about whether you pay on time, how much credit you’ve been given by different lenders, and if you have any accounts outstanding. Each credit bureau chooses an algorithm to consolidate all of this information into a three-digit credit score.

If a lender uses the FICO® Score 8, which is the most common model in use today, 35 percent of your score relates to your payment history and 30 percent comes from the percentage of your credit limit that you use. The remaining 35 percent is a blend of factors like how long you’ve been using credit, what types of credit you’ve had, and how many lenders have made hard inquiries into your credit.

By translating all of this information into a three-digit number, credit bureaus give lenders a quick snapshot of whether you’re likely to repay a loan. They also allow lenders to easily compare your creditworthiness to that of other borrowers.

What credit score is needed to buy a house?  

There are no “official” quality levels for credit scores, but scores between 700 and 749 are generally considered to be good. Scores above 750 are considered excellent and can get you some of the best rates. Scores from 650 to 700, on the other hand, are only fair and often cause lenders to charge higher rates.

According to FICO®, the national average credit score has hit an all-time high of 706 this year. Scores have been on a generally upward trend for a while, so mortgage lenders have higher standards than they may have had 10 years ago.

That said, there’s no single answer as to what credit score is needed to buy a house. It all depends on what kind of mortgage you want.

The government-secured Federal Housing Administration (FHA) loan, for instance, is designed to make homeownership affordable. For these loans, you can get away with a score of 580 or higher and 3.5 percent down. You may still get an FHA loan if your score is lower, but you’ll need to put at least 10 percent down.

If you’re planning to apply for a conventional mortgage from a bank or lending company, your lender gets to decide what credit score they need you to have, and the expectations are higher. According to the Federal Reserve, 90 percent of new mortgage borrowers in 2019 had credit scores of 650 or higher, and three-quarters had scores above 700. So when you apply for a mortgage, your credit score will likely be a strong indicator of what kind of offer you receive.

How to improve your credit score

Now that you know what credit score is needed to buy a house, it’s time to review your financial situation and see what tactics you can use to raise your credit score if need be. Your credit score is always changing as you use your credit. If it’s not where you want it to be as a potential home buyer, you can bring it up by paying loans on time and being careful about how much credit you use.

These tips can help you bump up your credit score over time:

  • Use your credit card less. Credit bureaus calculate your utilization score based on your closing balance each month, so the less you charge, the better your score.
  • Request higher limits on your credit cards, but don’t use more. That improves your credit utilization ration because there’s more of your credit that you’re not using.
  • Pay down your credit cards but keep the accounts open. The effect is similar to increasing your limits.

The more ways you learn to bring up your credit score, the better you’ll look to mortgage lenders—assuming you stay disciplined and borrow responsibly. Knowing what credit score is needed to buy a house and making positive changes to improve your score is a good step before making any home offers. It’s a long road, but the prize at the end is a new home to call your own.

Read more: 6 Easy Ways to Improve Your Credit Score

FICO and FICO Score 8 are trademarks and/or registered trademarks of Fair Isaac Corporation in the United States and other countries.

What Is A Credit Score? All Your Credit Questions Answered

If you’re early on your financial journey or trying to learn how to better manage your finances, you may be asking yourself: What is a credit score? Your credit score is one of the most important–if not the most important–aspect of your financial life. It affects your ability to purchase a home, take out a loan, buy a car, and more. To understand what it means to build credit and manage your finances, you must first understand what a credit score really is. 

What is a credit score?

A credit score is a 3-digit number that summarizes your credit history, represents your financial track record, and lets financial institutions see the risk of lending to you. Think of it as a report card for how you’ve handled money during your lifetime.

What is considered a good score?

Credit scores fall on a scale from 300 to 850. A credit score above 720 is excellent and will help you earn more favorable terms when it comes to establishing future payments and interest rates. A credit score below 620 is considered a bad score and will negatively impact your financial abilities in the future if it stays that way. A score that falls somewhere around 670 or greater is still considered a generally good credit score.

How are scores calculated?

There are 3 main credit bureaus–Equifax, Experian, and TransUnion–that manage credit reports. By law, you are entitled to one free credit report every 12 months from each major agency by visiting AnnualCreditReport.com. It’s a good practice to regularly check your reports for errors and inaccuracies, such as the same debt being listed multiple times. If you find an error, follow the formal dispute procedures.

Your score is determined through a credit report. Your credit report and score are two different things–one is used to determine the other. A credit report evaluates your payment history, types of credit used, length of credit history, account standings, level of debt, and more to determine your score.

Each credit bureau has different scoring models to determine credit scores. All 3 bureaus collaborated to form the VantageScore model in an effort to score more consistently across each. This scoring model is becoming more popular, although a FICO score is the most common score determined by credit bureaus. 

Is it normal to have many different scores?

Don’t be alarmed to see slightly different scores based on where your report was run. This is normal. Each of the 3 credit bureaus has slightly different data, which are factored into your reports. Plus, the timing of your report may affect your score since scores are not calculated on a fixed schedule. And finally, each company has slightly different scoring models that are updated frequently and used for different purposes. 

For example, if you’re applying for an auto loan, the lender may use the FICO Auto Score 8 model and your score could be 700. If you’re applying for a personal loan, a different lender may use the TransUnion model and your score could be 750. Your scores should generally fall within a similar range–but if you don’t get identical scores from different reporting companies, don’t stress it.

What is the average score?

The average credit score in America varies greatly based on the credit holder’s age, geographic location, and economic opportunity. However, as of 2019, the average score in the U.S. is at an all-time high at 695. Generally, the average score falls between 660 and 720. 

What influences your score?

While each credit scoring model is unique and prioritizes different parts of your credit history, there are several factors that typically play a key role in influencing your score.

  • Your payment history

    This is one of the most important factors and can account for about 35% of a FICO score. Scoring models look to your past behavior to predict what you’ll do in the future—and they want to see that you have an established history of making on-time payments. The degree to which a late payment may impact your score depends on multiple factors, such as how recent it is, how frequently you’ve paid late, and how late the payment was.

  • Percentage of credit limit used

    This factor can be highly influential and applies primarily to revolving debt (credit cards). Experts typically recommend that you keep your balances below 30% of your credit limit to prevent your score from dropping. The ratio of balances to credit limit is also known as your credit utilization ratio. For example, if you have three credit cards, each with a $2,000 balance and a limit of $3,000, your credit utilization ratio is 67% ($6,000 total balance divided by $9,000 total limit), which may hurt your score.

  • Age and type of credit

    Another factor that can be influential is the age of your credit accounts. Generally, your score will improve the longer your accounts have been open. Many scoring models also consider the variety of types of credit that you’re using. The models typically want to see that you have an established history of responsible payments across multiple types of credit, from installment loans to credit cards and beyond.

  • New credit inquiries

    When you request credit, the lender will pull your credit report, which typically results in a hard inquiry on your credit report. Hard inquiries usually impact your credit score. If you have a high number of hard inquiries, many scoring models take that as a sign of risk, as you could potentially be loading up on new debt that’s difficult to pay off. It’s important to note that most scoring models understand that you may be comparison shopping for the best terms on one loan, which could result in multiple hard inquiries. As such, most models treat multiple inquiries for the same kind of debt as a single inquiry, as long as they happen within a short time frame. Overall, hard inquiries are less influential than other factors when it comes to your scores. It’s also important to note the difference between hard and soft inquiries. A soft inquiry is made when you check your own credit or when your credit is checked outside of a lender’s decision-making process. For example, if you request offers from a peer-to-peer lending platform such as Prosper, or if a potential employer checks your credit, a soft inquiry would be recorded. Soft inquiries do not impact your scores.

  • Negative information

    Negative public records on your credit report, such as accounts in collection and bankruptcy filings, can seriously hurt your credit scores as they are related to your payment history—the factor typically given the most weight when calculating your scores.

It’s worth clarifying that several things do not influence your score, including race, religion, gender, age, salary, occupation, employer, and marital status. If you’re interested in improving your score, there are several things you can do, including consolidating your debt and paying down your credit card balances.

What if you don’t have a score?

If you’ve never used credit before, it’s entirely possible that your credit report contains little or no information and you don’t have a score. To start responsibly building a credit history, you can consider several options, including opening a joint account with someone who has solid credit or becoming an authorized signer on their account. You could also open a secured credit card and pay the balance in full each month to start establishing a healthy credit history.

We can all strive to establish excellent credit and an important first step is understanding how scores work. Now that you’re familiar with the basics, you have the ability to build a better score and improve your financial well-being.

Read more to find out 6 things you can do to improve your credit score.

Personal Loans and Your Credit Score

If you’re considering personal loans, you may want to understand how companies determine loan offers that are customized just for you. What’s the important factor when it comes to personal loans and your credit score?

The short answer is your credit history. Three credit agencies (TransUnion, Equifax and Experian) track a large amount of data tied to your credit history, and the credit story this data tells factors into your credit score. This credit score plays a critical role in whether or not you’re approved for credit and has a significant impact on the loan offers that you receive.

Lenders and creditors that you do business with may report to one or all of the credit agencies. No creditor is required to report to all three credit agencies, and this is why the formula each agency uses can be different, and credit scores can differ slightly between credit agencies.

6 factors that could affect your credit score

The actual credit score algorithm is a closely guarded secret, however, some factors are understood to have impacts on the score.

Your credit score takes into account your complete credit history. One component in determining your credit-worthiness is the length in months of your open credit accounts, and your payment history on those accounts. Someone who has never had a credit card is not accumulating a long-standing history of either good payments or bad payments on their accounts.

2. Debt-to-credit ratio

If your debt-to-credit ratio is high, that could affect your credit score. Your debt-to-credit ratio is the amount of debt you have against your current credit ceiling across your credit accounts. So, if you have $44,000 in available credit across all of your credit accounts, and you have $22,000 in debt, your debt-to-credit ratio is 50%.

3. Mortgage, rent, car loans

Your credit score can be affected by the amount of installment loans you have, and your ability to make payments on time for those loans. By paying these loans off consistently, you can build a good credit history. Missed payments can stay on your credit report for up to 2 years.

4. Late payments

Your credit score can be negatively affected by late or missed payments, or accounts where you have a serious derogatory (delinquent) payment. So, that bill you refused to pay for lost cable equipment (but that you did not dispute), can affect your ability to obtain credit in the future.

5. Bankruptcies

If you have filed for bankruptcy, the bankruptcy will appear on your credit report for 7-10 years, depending on the type of bankruptcy you filed under (i.e chapter 7 or chapter 13).

6. Too many credit requests (AKA too many hard inquiries or hard pulls)

Hard inquiries are credit inquiries where a potential lender is reviewing your credit because you’ve applied for credit with them. These include credit checks when you’ve applied for a mortgage, credit card or a personal loan for debt consolidation. Each of these types of credit checks count as a single credit inquiry.

A soft pull is a credit inquiry that does not affect your credit score. For example, checking your rate for a personal loan through Prosper results in a soft inquiry that will not affect your credit score.  A hard inquiry will only occur once you accept an offer and formally request a loan through Prosper. Similarly, if you have received a pre-approved offer through the mail, a soft pull has likely been made that should not impact your credit score.

Checking your credit score/credit report

Your credit score is an important part of your financial health.

Luckily, checking and monitoring your credit score is easy. Many of the major credit card companies allow you to check your credit score on a regular basis, so you can see if it’s rising or falling from month to month.

If you’d like to get your credit report from credit agencies for free, you can do this once each year by going to annualcreditreport.com. The credit reports are basic, and include a list of your accounts and payment history, and any actions or decisions on your report, such as delinquencies or bankruptcies, but likely will not contain your score.

The good news is that the longer you maintain a satisfactory credit history with accounts that are paid on-time, the better your credit report looks to potential lenders.

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