Why Is It Important To Check My Credit Score
Now that you know that you can check your credit score without negatively impacting your score, its time to make it a habit. A lower score may indicate errors or fraud on your credit report. The sooner you catch something, the faster you can address it.
Keeping tabs on your credit score can be motivational, too. People who checked their score 12 or more times a year were almost twice as likely to report an improved score, compared to those who only checked it once, according to a survey conducted by Discover. After all, to improve your credit score, you need to know your current number and track your progress.;
When Does A Credit Check Hurt Your Score
When you check your own credit score, it has no impact because it only counts as a soft inquiry. But when a lender or credit card company pulls your credit score, its a different story.
There are two ways a company can pull your credit information: a soft inquiry and a hard inquiry. A soft inquiry is most often used when a lender wants to preapprove you for a loan or credit card and has no visible impact on your score. Employer credit checks also show up as soft inquiries.
A hard inquiry occurs when youre directly applying for a loan or credit card and will impact your credit score. Landlord credit checks are often considered hard inquiries, too. A hard inquiry will officially stay on your credit report for two years but will only affect your score for one yeartypically between one and five points.
Other Accounts Included In A Credit Report
Your mobile phone and internet provider may report your accounts to your credit bureau. They can appear in your credit report, even though they arent credit accounts.
Your mortgage information and your mortgage payment history may also appear in your credit report. The credit bureaus decides if they use this information when they determine your credit score
A home equity line of credit that is added to your mortgage may be treated as part of your mortgage in your credit report. If your HELOC is a separate account from your mortgage, it is reported separately.
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Why Is Checking Your Credit Score Important
Many of todays consumers believe that checking their credit will have a negative impact on their score. As a result, a large number of consumers tend to avoid regular credit checks, meaning that many people may be missing errors or inaccuracies on their report which can lead to a lower score. As such, its important for you to regularly check your credit to stay on track and make sure your score is where youd like it to be.
Checking Accounts And Credit Scores
While your checking account is an important part of your financial life, it has little effect on your credit score, and only in certain situations. Normal day-to-day use of your checking account, such as making deposits, writing checks, withdrawing funds, or transferring money to other accounts, does not appear on your credit report. Your credit report only deals with money you owe or have owed. However, a few isolated circumstances exist where your checking account can affect your credit score.
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If Youve Applied For Financing Or Other Credit And The Lender Checked Your Credit Scores As Part Of The Process Youve Probably Experienced Whats Called A Hard Credit Inquiry
When lenders check your credit with a hard inquiry , they often make a note of their official review in your . They use that information to assess how youve handled credit in the past, how often youve paid your debts and bills on time, and whether you have any derogatory marks on your credit reports.
They also want to know how much credit youre juggling and how long youve been managing your credit. All of these factors help creditors decide whether to extend new credit to you or give you additional credit.
You can help yourself prepare for a hard credit pull by monitoring your credit reports and making sure there arent any unpleasant surprises. Checking your own credit reports often involves whats known as a soft credit inquiry, or soft pull.
Lets take a deeper look at the differences between hard credit inquiries and soft credit inquiries.
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Hard Credit Inquiries Dont Hurt Much
Heres the good news: For many people, the damage from hard checks is minor, usually less than five points off your credit score. One or two credit checks will not significantly harm your credit.
Dont let concern about credit checks keep you from shopping around for the best deal on auto loans, student loans or mortgages. Hard credit checks that occur for specific items like these, and that happen within a certain time frameFICO calls them shopping periodsare usually treated as a single inquiry. While each lender may use a different formula to calculate a shopping period, its typically 1445 days.
Why Credit Karma Won’t Hurt Your Score
Credit Karma checks your FICO score on your behalf and therefore conducts soft inquiries. Soft inquiries differ from hard inquiries in that they leave your credit scores untouched. Multiple hard inquiries done in a short period of time can knock off as much as five points per inquiry and can stay on the record for upward of two years.
Credit bureaus tend to deduct points, particularly if the person has a short or only a few accounts. Credit bureaus interpret multiple hard inquiries as showing that the person may be a high-risk borrower. The bureaus suspect that the person may be desperate for credit or was unable to get the credit needed from other creditors. MyFICO reports that people with multiple hard inquiries are eight times more likely to declare bankruptcy than other people with no bankruptcies on their reports.
Starting To Improve Your Credit
When you open a new line of credit, a few immediate changes are usually made to your credit report. Most instantly, a new hard inquiry will probably be added to your report, and your average age of credit history could drop. Due to these factors, opening a new account is likely to drop your credit score in the short term. However, as you begin to diligently pay off your bills, the additional on-time payments, the higher number of total accounts and your now-growing age of credit history will likely outweigh the initial downsides, and your score can benefit in the long term.
How To Check Your Credit Scores Safely
Ordering or checking your own credit score will never result in a hard inquiry, only a soft one. You wont have to worry about your credit score dipping when you order it on your own. Here are several ways to view your credit score.
Check with your bank
Banks often provide free credit scores for their customers. This can be a way to view the status of your credit without having to pay for a score. Remember, though, that the score your bank sends might not be the FICO® credit score that mortgage and auto lenders use. The score that banks and other financial institutions send, though, should be similar, and will give you an idea of how strong your credit is.
Check with your credit cards
You can also pay for your FICO® score from any of the three national credit bureaus of Experian, Equifax or TransUnion. Prices vary but should cost about $15.
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Consent And Credit Checks
In general, you need to give permission, or your consent, for a business or individual to use your credit report.
In the following provinces a business or individual only needs to tell you that they are checking your credit report:
- Prince Edward Island
Other provinces require written consent to check your credit report. When you sign an application for credit, you allow the lender to access your credit report. Your consent generally lets the lender use your credit report when you first apply for credit. They can also access your credit at any time afterward while your account is open.
In many cases, your consent also lets the lender share information about you with the credit bureaus. This is only the case if the lender approves your application.
Some provincial laws allow government representatives to see parts of your credit report without your consent. This includes judges and police.
My Credit Report Doesnt Look Right
Its critically important that you check your credit report often for errors and mis-reporting. If youre reviewing your report and notice something amiss, there are ways to dispute the inquiry. All credit bureaus have a dedicated dispute hotline and agents that will help you work through your dispute.
Additionally, if there is an error, the credit bureau will inform the others that the inquiry should be removed.
You could also opt to hire a credit repair agency like Sky Blue .
If youre not getting the service you think you should be from the credit bureaus, you should escalate your complaint to the Consumer Financial Protection Bureau which helps consumers arbitrate disputes with financial institutions.
Most importantly, if you notice a hard credit pull on your report that you didnt make, you may be the victim of identity theft. Contacting your financial institutions and the credit bureau in question is the first step.
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Do Credit Inquiries Affect My Fico Score
FICO’s research shows that opening several credit accounts in a short period of time represents greater credit risk. When the information on your credit report indicates that you have been applying for multiple new credit lines in a short period of time , your FICO Scores can be lower as a result. Although FICO Scores only consider inquiries from the last 12 months, inquiries remain on your credit report for two years.
If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher risk, but most are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on your credit scores.
How Is Credit Score Determined
You can actually think of a credit score like a report card. There is a scoring system that banks refer to when giving loans. In this system, which gives points from 1 to 1900, 1 is the most risky and 1900 is the least risky. E.g; If your score is 500, it is very likely that your loan application will be returned negatively. If your credit rating is in the risky range and you want to increase it, it is of great importance for you to know the factors that affect your credit rating. The factors that determine the credit rating that everyone who uses a credit card, has a loan or will apply for a loan are:
Timely payment of credit product payments, Your credit usage intensity, Your current account and debt status.
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Instantly Boost Your Score
Each company may consider different information when working out your score and use a different formula. For example, your credit report held by each of the main credit reference agencies may contain different information. Firms also differ in how many points are awarded for each piece of relevant information, depending on the formula used and any lending policies. Scores are often expressed using different ranges, meaning they wonât usually be directly comparable.
The Experian Credit Score is completely free and gives you an indication of how companies may view your credit report. Itâs represented as a number from 0-999, where 999 is the best possible score, and is based on the information in your Experian Credit Report. You can check it without paying a penny, and itâll be updated every 30 days if you log in.
How A Hard Inquiry Impacts Your Credit Score
Although hard inquiries remain on your credit report for two years, FICO only considers inquiries from the last 12 months when calculating your credit score.
For example, if you see a hard inquiry listed on your credit report but it was from over a year ago, it wouldn’t influence your credit score or deduct any points from it.
Your credit history also plays a role in how much a hard inquiry would impact your credit score.
According to FICO, one credit inquiry on most people’s credit reports will take less than five points off of their FICO score. They say “most” people because not everyone has the same credit history. If you have a healthy credit history and credit score to begin with, it’s likely that any hard inquiry on your credit report would do very little damage to your score, or even none at all.
Hard inquiries tend to have a greater impact on the credit scores of people with a short credit history or few credit accounts. This means that for those just starting to build their credit, a hard inquiry can knock off more points from your credit score than it would for someone who has a long credit history. But don’t let that prevent you from applying for credit. It’s OK to have inquiries periodically; it indicates you are trying to build credit; but you just don’t want too many hard inquiries on your credit report in a short amount of time.
How To Check Your Credit Report
Have you ever wondered how a bank or other lender decides whether to give you credit? One of the tools they use is your credit report. This tells them about your credit history and helps them assess how much of a risk lending to you will be, depending on the quality of your credit score.
Whats in this guide
Checking Your Own Credit
You can check your credit report or score as many times as youd like and your credit score wont drop a single point as long as you check it through a reputable source, like;AnnualCreditReport.com, the credit bureaus, FICO, or a legitimate third-party. However, having a lender check your credit score for you would appear as a hard inquiry, which would affect your credit score the same as an inquiry for a new application.
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What Does A Cifas Marker On My Credit Report Mean
Cifas is a national fraud prevention service. It can place Protective Registration and Victim of impersonation warnings on your credit file.
This;is a paid service for people who have recently been victims of financial fraud. It indicates to any lender that youre potentially vulnerable to fraud so that theyll make extra checks every time you apply for a financial product. While this can protect you, it can increase how long credit application approvals can take. It will stay on your credit report for two years.
Find out more, and apply, on the;Cifas website
Victim of impersonation
This;is filed by your lender for your own protection if youve been the victim of identity fraud. It will stay on your report for 13 months.
If one of these is on your credit report, it gives potential lenders a fraud warning. It tells them youve been a victim of fraud in the past, or could be particularly vulnerable to fraud in the future.
What Doesnt Affect Your Credit Score
Typically, there are lots of myths and falsehoods swirling around about what affects your credit score and what doesnât. Hereâs a list of common misconceptions â things that donât have any impact on your credit score: