How To Minimize The Damage Of Hard Credit Checks
At this point, youre probably wondering how you can ever safely get a credit card without damaging your score. Youll also probably need a mortgage at some point, which requires hard credit inquiries, as well. But this is nothing to panic over.
The main thing to remember is not to have too many hard credit checks on file at once. If youre in the market for a credit card, new car financing, or a mortgage, its best to make all of the applications within a couple of weeks, so that they all show up as one set of applications rather than many hard credit hits.
You can minimize the risk of credit card rejection by only applying for credit cards that you actually need and are likely to be approved for. Check your credit score before you apply for a credit card, so that you can be sure that your credit rating falls within the credit card companys requirements. Certain credit cards also allow you to check the interest rate you could qualify for before you apply for the card. This service is categorized as a soft credit check, so it wont harm your credit score for the future.
Student Loans Don’t Affect My Credit Score
False. Your credit score isn’t just impacted by your credit card bills. You need to pay all your bills on time, which includes your utilities, student loans, mortgage and any medical bills you might have.
“Default on a few student loans, and you’ll see just how much student loans affect your scores,” Ulzheimer says.
If you struggle to remember to pay your bills each month, there’s an easy fix: autopay. In the case of student loan companies, some give you a discount on your interest rate if you set up autopay.
How To Minimize The Number Of Hard Inquiries You Have
Hard inquiries aren’t bad to have even if they may cause a slight temporary dip in your credit scores but it can be good practice to know how to minimize the number of inquiries on your credit report.
Below, CNBC Select rounded up some general guidelines to keep track of your hard inquiries:
- Don’t apply for several credit cards within a short timeframe. Experts generally recommend only applying for a credit card every six months.
- Only apply for credit cards you would actually benefit from using.
- Make sure you check your credit score beforehand . You can do so for free with most card issuers, using apps such as Discover’s Credit Scorecard and Chase’s Credit Journey .
- Before applying for a credit card, shop around with prequalification tools, which allow you to check your likelihood of qualifying for a card without damaging your credit.
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How To Check Your Credit Score Without Lowering It
Weve already seen that soft inquiries wont lower your credit score, but in case you still have some doubts about how to check your credit score safely, its time to put your mind at rest.
There are plenty of places you can get a free credit score without facing a hard pull. One great way is to go directly to a bank or credit card issuer. Many of them provide soft inquiries and scores for free. For example, Discover, which uses FICO scores, gives anyone a free credit scorecard you dont even need to be a customer to use the service.
Another popular website is annualcreditreport.com, which gives users a free credit report from each credit bureau every year. Although it wont give you the score itself, a credit report provides crucial information about the factors that contribute to your score and can therefore give you insight into how to improve your score. This can be a good one to check out once youve found out your score.
Generally, you dont need to pay to see your credit score, though some companies do charge. These companies may give you a more precise score, but the free options will suffice in most cases.
As for the hard pulls, unfortunately its inevitable that your credit score will decrease slightly. However, its not the end of the world.
Do Credit Inquiries Affect My Fico Score
FICOs 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.
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The Difference Between Your Credit Score And Credit Report
There are three credit bureaus that produce : Equifax, Experian and TransUnion. When you open a credit card or loan, the lender will report activity to at least one credit bureau, which will then add it to your credit report. Your credit reports show both current and past credit accounts, as well as legal judgments like liens and bankruptcies.
A credit score is a three-digit number that ranges from 300 to 850. The score is determined by an algorithm that takes all the items on your credit report into account. The higher the score, the more responsible you appear as a borrower.
There are two main companies that produce credit scores: FICO and VantageScore. FICO is responsible for 90% of all credit scores used by lenders, but VantageScore is more common with free credit scoring websites. Both companies use similar scoring models to determine your scores, so there should only be a slight discrepancy between a FICO score and a VantageScore.
There are dozens of credit score iterations, and which one is used depends on the type of lender looking at it. For example, the credit score an auto lender sees may be slightly different than the one a mortgage lender sees.
Does Checking Your Credit Score Lower It In Canada
When you apply for a mortgage, a new credit card, or even home rental, lenders and creditors will want to check your credit report. Some credit checks will impact your credit score while some will not. Learn what credit checks can hurt your credit rating and why you should keep tabs on your own credit score regularly…
How To Get Your Credit Report
You can check your credit score for free using the Chase Credit Journey, and if you want to do a deeper dive into your credit history, you can review your credit report using this feature as well.
You can get a free copy of your credit report once a year from each of the three major credit bureaus at annualcreditreport.com
You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law.
How To Dispute A Credit Score
There are times when you may want to dispute a credit score. That may be because there is incorrect information in your credit report. You can dispute a credit score by fielding a dispute and requesting to remove false information. If the dispute works and removes the negative marks on your credit report, your credit score may improve.
Note there are two types of disputes: indirect and direct. Lets dive into the differences below.
An indirect dispute reports false information to a credit agency. If youre ready to file an indirect dispute, you can contact each credit agency Equifax®, Experian® and TransUnion® online through their websites. Each has its own dispute center, and youll need to individually submit a dispute with each one:
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Tips For Improving Your Credit
Checking your credit score regularly is essential if you’re working on building or rebuilding your credit history. As you look for opportunities to improve your credit, here are some tips to help you get started:
- Get caught up on overdue payments, if applicable, and pay all of your debts on time every month going forward.
- Keep your credit card balances lowremember, the key is to keep your utilization rate below 30%, but the lower, the better. If you have high balances, focus on paying them down as quickly as possible.
- Consider asking a family member to add you as an authorized user on their credit card account. Before they submit the request, however, make sure the account has a positive history that can help improve your credit score.
- Avoid applying for new credit unless you need it.
- Get credit for paying your utility and phone billsthese payments typically don’t get reported to the credit bureaus, but with Experian Boost®ø, you can allow Experian to connect your bank accounts and use the data to identify utility and phone payments. Once you verify the accounts, they can be added to your Experian credit file and may help boost your credit score.
As you use these tips and other good credit practices, you’ll be well on your way to a better credit score.
Plan Before Shopping For A Loan
Before shopping for a loan, it’s always smart to proactively plan your finances.
First, learn whether the type of credit you’re applying for can have its hard inquiries treated as a single inquiry. If so, determine the applicable timeframe. Then you can plan your shopping period accordingly.
Second, you may also want to check your credit reports before getting quotes to understand what information is reported. Find out how to request a free credit report from Equifax.
If you’re worried about the effect that multiple hard inquiries may have on your credit reports, it may be tempting to accept an offer early rather than allow multiple hard inquiries on your credit. However, consider your individual situation carefully before cutting your shopping period short. In many cases, the impact hard inquiries have on your credit scores from shopping around will likely be minimal compared to the long-term benefits of finding a loan with a lower interest rate. The more informed you are about what happens when you apply for a loan, the better you can prepare for the process before you start shopping.
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How Often Can You Check Your Credit Score
You can check your credit score as often as you want without hurting your credit, and it’s a good idea to do so regularly. At the very minimum, it’s a good idea to check before applying for credit, whether it’s a home loan, auto loan, credit card or something else.
When you do this, you can help make sure there aren’t any problems that could make it difficult to get approved for a new loan or credit account. By checking at least a few months in advance, it can also give you time to address anything that could be hurting your credit score.
It’s also a good idea to check your credit report at least once a year. While your credit score is a numerical snapshot of your overall credit health, your credit report provides the actual information used to calculate your score.
As you check your credit report, look out for anything you don’t recognize. If you find something odd, contact the lender to make sure it’s legitimate. Sometimes, a lender may operate under a different name and report a name you’re not familiar with to the credit bureaus if you’re applying for a car loan, the dealership may submit a credit application to multiple lenders.
If you find information you believe is inaccurate or even fraudulent, report it to the credit bureaus.
You can get a free credit report from each of the three credit bureaus every 12 months through AnnualCreditReport.com. You can also get a free copy of your Experian credit report online every 30 days.
How Inquiries Affect Your Score: Vantagescore Vs Fico
Although both soft and hard inquiries show up on your credit reports, only hard inquiries have an impact on your credit scores. Although VantageScore and FICO both ding your credit scores for hard inquiries, other factors, like payment history, are more influential when it comes to credit score calculation.
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Strategically Shop For New Credit
You can use the credit-scoring rate shopping windows to apply for student loans, auto loans or mortgages with multiple lenders without increasing the impact of the hard inquiries. This is often a good idea, as you can compare rates and terms, and determine which lender will give you the best offer.
Newer FICO scores will count multiple hard inquiries for these types of loans that occur within a 45-day window as one inquiry. Older FICO models, which are still used in the mortgage industry, dedupe inquiries that occurred within a 14-day window. VantageScore also uses a 14-day dedupe, which it applies to all inquiries.
One way to limit the number of hard inquiries in your credit reports is to only apply for new credit accounts or credit line increases when you really need them. You may also want to spread out applications, particularly credit card applications that may not be subject to the dedupe rules.
Whats 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 dont 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, lets look at the main reasons why such inquiries take place:
- Loan application
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How To Check Your Credit Score And Does Checking Lower It
It looks at everything from your address and whether you make payments on time, to how many loans youve had, to if there have been any county court judgements against you.
The score is often used by lenders, such as banks, to determine how much you can borrow and be trusted to pay back.
If you havent the foggiest what your credit score is, dont panic. Its really easy to check.
How Hard Inquiries Affect Your Credit Score
Unlike a soft inquiry, a hard inquiry may lower your credit score by zero to five points, depending on your credit history. Additionally, a hard inquiry stays on your credit report for two years, although your credit score should bounce back from this inquiry after about one year.
With this in mind, its smart to be conservative when it comes to filling out applications that require hard credit checks, as a few points here and there will start to add up if your score takes multiple hits in a short period of time. This may impact your ability to get a loan, rental, or new line of credit.
Additionally, If a potential lender reviews your credit report, and sees that you have recently tried to open a line of credit, it could signal financial instability or distress. This could serve as a red flag to lenders when they consider whether or not youre a risk for them financially, and could result in them declining your request. When searching for new lines of credit, its best to be cognizant of your credit report activity and separate credit checks/pulls on your report over time, to eliminate any confusion about whether or not you are financially secure or able to pay the lender back.
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Soft Inquiries Only Appear On Credit Reports That You Request
If you request a copy of one of your credit reports, you may see that the hard and soft inquiries are located in different sections of the report. The names of the sections can vary depending on the credit bureau and the service you use to check your credit.
For instance, the hard inquiries might be labeled hard inquiries, or they could be called credit inquiries, requests for your credit or regular inquiries. The soft inquiries might be under a section called soft inquiries, requests viewed only by you, promotional inquiries or a similar name.
Soft inquiries only show up on copies of your credit reports that you request. If someone else checks your credit with either a hard or soft pull, the credit bureau will send them a credit report that only lists hard inquiries from the last two years.