What Is A Hard Inquiry
A hard inquiry is when a lender checks your credit report and has your permission to check it.
This is part of the application for a credit card, car loan, student loan or mortgage. These are the kinds of inquiries that consumers fret over, since they stay on your credit report for two years for all the world of lenders and creditors to see.
If your soon-to-be landlord checks your credit as part of the application process for renting an apartment, thats a hard inquiry, too.
Basically, any time you tell someone its OK to check your credit report, FICO counts it as a hard inquiry.
Your Length Of Credit History Might Be Hurt
In addition to your payment history and credit utilization, credit scores also pay attention to your length of credit history. This category is worth 15% of your FICO Score;and, alongside your types of credit accounts, 21% of your VantageScore credit score.
When a scoring model evaluates your length of credit history, it may consider factors such as:
- How long the accounts on your credit report have been open
- The average age of accounts on your credit report
- Ages of the oldest and newest accounts on your credit report
In all of these cases, older accounts might give you an edge in the credit score department.
Your length of credit history isnt as important as other credit score factors, but it does have some influence. When you open a new credit card, the average age of accounts on your credit reports may decline. Your score might go down a bit as a result.
Average age of accounts is a factor in credit scores that can only be improved with time.
It Adds Hard Inquiries To Your Credit File
Lenders will inquire about your credit to determine what risk you pose as a borrower. There are two types of inquiries into your credit files, and each affects your credit differently.
Soft inquiries don’t have an impact on your credit score. Examples of soft inquiries include when you check your credit and when you are prequalified for special offers from credit issuers.
Hard inquiries are different. Lenders perform hard inquiries when they are considering whether or not to lend you money, and this can negatively affect your credit score in the short term. Applying for a new credit card will result in a hard inquiry in your credit file, which could lower your score by a few points. While a hard inquiry will remain on your report for two years, it will only affect your credit score for a few months.
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Will Checking Your Credit Hurt Credit Scores
Reading time: 2 minutes
Checking your credit reports or credit scores will not impact credit scores
Regularly checking your credit reports and credit scores is a good way to ensure information is accurate
Hard inquiries in response to a credit application do impact credit scores
Many people are afraid to request a copy of their credit reports or check their credit scores out of concern it may negatively impact their credit scores.
Good news: Credit scores aren’t impacted by checking your own credit reports or credit scores. In fact, regularly checking your credit reports and credit scores is an important way to ensure your personal and account information is correct, and may help detect signs of potential identity theft.
Impact of soft and hard inquiries on credit scores
When you request a copy of your credit report or check credit scores, thats known as a soft inquiry. Other types of soft inquiries result from companies that send you promotional credit card offers and existing lending account reviews by companies with whom you have an account. Soft inquiries do not affect credit scores and are not visible to potential lenders that may review your credit reports. They are visible to you and will stay on your credit reports for 12 to 24 months, depending on the type.
The other type of inquiry is a hard inquiry. Those occur after you have applied for a loan or a credit card and the potential lender reviews your credit history.
Getting your credit reports
Does Applying For A Credit Card Hurt My Credit Score
First, lets set the scene. Change is well underway to Australias credit reporting system, with our data showing the vast majority of home loans and credit card accounts now having account payment information shared as part of the new Comprehensive Credit Reporting regime. So whether or not you pay your loans and credit cards on time every month may now show on your .
Check your credit score for free
All the data on your credit report is then used to calculate your , which is essentially a snapshot of the information in the report, summarised as one number.
It can be important to be aware of the changes to credit report data in Australia, as they could affect your credit health and, as a result, any future credit or loan applications you make.
To help you better understand credit scores and the types of behaviour that can affect your score, here are some answers to a few common questions.
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Simply Applying For Credit Can Impact Your Credit Score
First, even though you need to activate the card in order to make purchases with it, whether or not you activate a credit card does not have an effect on your credit score. By going through the process of applying for a new credit card and opening the new account, you have already been approved for a certain credit limit, even if you never activate the card.
The key action that affects your credit score is applying for that card in the first place. During the process of applying for a new credit card account, your credit history has already been pulled and checked by the credit card issuer, and that hard inquiry may have an effect on your credit score.
Applying For A Credit Card With A Mortgage In Your Future
Timing is important when youre gearing up to apply for a mortgage in the future.
You typically won’t want to apply for a new credit card or any other financing at certain points during the mortgage approval process.
For example, you may want to avoid applying for new credit:
- In the months immediately preceding a mortgage application.
- Between your initial loan approval and your loan closing.
However, if youre working to improve your credit score for a mortgage application that wont take place for a while, a new credit card might be beneficial.
When you open a credit card, maintain a good payment history on the account, and keep your low, the account may help to improve your credit rating. A well-managed credit card could potentially put you in a better position when you later apply for a home loan.
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Length Of Credit History
A longer active credit history is usually better for your credit. In general, lenders like to see that you have a track record of managing credit effectively over time.
But when you close a credit card, that card stops aging and cant grow. That will cut into your active credit history for at least as long as it takes to get another account growing.
And if the card youre thinking of opening was also your first credit card, we strongly recommend keeping it open even if you rarely use it. As your oldest line of credit, it will have the biggest impact on the length of your credit history.
How Often Does My Credit Score Change
Changes to your credit score depend entirely on how often your credit report is updated. There is sometimes a lag between when you perform an action, such as making a repayment on a loan, and when your lender reports it to the credit reporting body they subscribe to. Its only when the credit reporting body has the updated information that your credit score may change.
Information thats added or removed can affect your credit score.
And newer information tends to have more of an impact than much older information. In general, your credit score probably wont change all that much over time if your use of credit doesnt change. But its important to note that each time your score is calculated, its taking into consideration the information that is on your credit report at that time. So as the information on your credit report changes, your credit score can also change.
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Use Credit Monitoring To Track Your Progress
are an easy way to see how your credit score changes over time. These services, many of which are free, monitor for changes in your credit report, such as a paid-off account or a new account that youve opened. They typically also give you access to at least one of your credit scores from Equifax, Experian, or TransUnion, which are updated monthly.
Many of the best credit monitoring services can also help you prevent identity theft and fraud. For example, if you get an alert that a new credit card account that you dont remember opening has been reported to your credit file, you can contact the credit card company to report suspected fraud.
Strategies That Will Get You A Better Credit Score
Your is one of the most important measures of your financial health. It tells lenders at a glance how responsibly you use credit. The better your score, the easier you will find it to be approved for new loans or lines of credit. A higher credit score can also open the door to the lowest available interest rates when you borrow. If you’d like to improve your credit score, there are a number of simple things you can do. It takes a bit of effort and, of course, some time. Heres a step-by-step guide to achieving a better credit score.
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Most Credit Card Offers Require Very Good Credit
Lets be clear about that. A lot of people who apply for credit cards are denied. And if you get denied too many times in a year, that can actually hurt your credit further.
Even with good credit, there are other reasons you;might still be declined; like too much overall debt;or even just one recent late payment.
To help you avoid that, lets look at what cards you can get with various credit scores. You can also browse the credit card section of this website. Each card features;a minimum required credit quality;category.
A Real Life Credit Score Example
I have over 25 credit cards, so lets take a look at my actual credit score and details. On a scale of 300 to 850, my credit score is 839 and 837 with Transunion and Equifax, respectively. Thats a pretty close to perfect credit score.
Then theres a more detailed description of what comprises my score:
As you can see here, on the high impact areas I do very well I have very low credit utilization , I make 100% of my payments on-time, and I have zero derogatory marks. Those are the most important things on your credit report, and my credit utilization wouldnt so low if I didnt have so many cards.
Furthermore, my average age of accounts is even quite good thanks to the cards Ive had open long term, which always help keep that number up.
To be clear, my situation isnt an isolated incident. I get emails all the time from people who have scores in the low 700s and are confused, because they point out that they have one credit card and use it responsibly.
Theyre worried their score will go down if they apply for more cards, but in almost all cases their scores go up in the long run when they get more cards and use them responsibly.
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Have A Low Credit Score Compare Credit Cards For Bad Credit
If you have no credit or bad credit and cant meet the minimum credit score for credit card approval of typical cards, you still have options. There are things you can do to help build up your credit rating and some forms of credit that youll still be eligible for in the meantime.
Will My Credit Score Affect My Ability To Rent
When a landlord runs a credit check on a potential renter, they likely won’t zero in on the person’s credit score. In fact, a landlord might not care at all about the credit score. Instead, the landlord might concentrate more on the potential renter’s overall credit history, particularly their record of on-time payments.
A landlord is trying to assess the likelihood that you’ll pay your rent on time every month, and reviewing your track record of managing your debts can help them with that. A credit history free of negative marks could tip the landlord’s decision to approve you, while lackluster credit may cause the landlord to ask for other assurancessuch as a higher security deposit.
The commonly used FICO® Score ranks payment history as the most important factor in calculating your score, assigning it a weight of 35%. The other factors are how much debt you carry , the length of your credit history , new credit and the types of credit accounts in your credit report .
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How New Accounts Affect Your Score
All other things being equal, an older credit card account is better for your credit score than a newer one. There are two key reasons for that:
About 15% of your FICO credit score is determined by the length of your credit history and the age of your accounts. The older the account, the longer the history, the higher the average age of your open accounts, and the better for your scores.
A new account that results from a new credit application will usually trigger a “hard” credit check, which can lower your score by several points in the short term.
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How Long Does The Point Drop Last
A point drop from a new credit card application usually has the largest impact for the first two months. But it could take up to six months before your score returns to normal or begins to improve.
Getting approved for a new credit also alters your credit profile in:
- Payment History
- Length of Credit History
- New Credit
Adding a new credit card or personal loan to your credit history can cause your to drop a few points the first couple months, but adding a new credit card can actually improve your credit score in the long term.
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Does A Credit Card Upgrade Hurt My Credit Score
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With so many credit cards on the market today, there’s a good chance you’ve seen an offer to upgrade your current card to a premium version. Or maybe you’ve thought about downgrading your card to one with no annual fee.
But one question that gives many cardholders pause: will a credit card upgrade hurt my credit score?
If the switch means a brand new account, will they lose the positive credit history they’ve built up on the card the years of on-time payments while suffering the credit-score hit that can accompany a new account?
The good news is that upgrading, downgrading or changing your credit card shouldn’t have a lasting effect on your credit score. If there’s a new account, it will essentially inherit the history of the old one. In some cases, there won’t even be a new account. The bad news: During the transition, your score could dip temporarily.
Can My Credit Score Affect Renting
Your credit score may not prevent you from renting a place to live, but landlords may consider it when deciding whether to approve your rental application. State and federal housing laws regulate what criteria landlords can use to reject a potential renter’s application. Still, credit can factor into a landlord’s decision, as well as an applicant’s refusal to undergo a credit check.
About 36% of the country’s 122.8 million households were renters in 2019, the most recent year for which the U.S. Census Bureau has reliable estimates, according to the Pew Research Center. If you’re among those numbers, it’s important you understand how your credit can affect your renting prospects.
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