Why Does Checking Your Credit Score Lower Your Credit Score?

The world of credit scores can often seem confusing, filled with myths and half-truths. One of the most persistent misconceptions is that simply checking your credit score will automatically lower it. While it's true that *some* credit checks can impact your score, the reality is far more nuanced. This article aims to demystify the process, explaining the different types of credit inquiries, how they affect your credit score, and how to keep your credit health in top shape.

Understanding Credit Inquiries: Hard vs. Soft

The key to understanding why checking your credit score *might* affect it lies in the distinction between two types of credit inquiries: hard inquiries and soft inquiries.

What are Hard Inquiries?

A hard inquiry (also sometimes called a "hard pull") occurs when a lender or financial institution checks your credit report to make a lending decision. This typically happens when you apply for a new loan, credit card, mortgage, or other form of credit. Hard inquiries signal to lenders that you are actively seeking credit, which can, in some cases, be perceived as a slight increase in risk.

Here are some common examples of when a hard inquiry might be triggered:

• Applying for a new credit card
• Applying for a mortgage
• Applying for an auto loan
• Applying for a personal loan
• Applying for a student loan

What are Soft Inquiries?

A soft inquiry (also called a "soft pull") occurs when you check your own credit report or when a company checks your credit for promotional purposes or background checks. Soft inquiries are not associated with a specific credit application and are therefore not considered by lenders as an indication that you're seeking credit. Crucially, soft inquiries do not affect your credit score.

Examples of situations that trigger a soft inquiry include:

• Checking your own credit score (through services like Credit Karma, Credit Sesame, or directly from the credit bureaus).
• Pre-approved credit card offers.
• Background checks for employment purposes.
• Insurance companies checking your credit score.
• Credit card companies periodically reviewing your account.

The Impact of Hard Inquiries on Your Credit Score

The impact of a hard inquiry on your credit score is generally minimal and temporary. Here's what you need to know:

• Small Impact: A single hard inquiry typically only lowers your credit score by a few points, usually less than five.
• Short-Lived Effect: The impact of a hard inquiry diminishes over time. Most hard inquiries stop affecting your credit score after about a year and fall off your credit report entirely after two years.
• Bundling Inquiries: Credit scoring models recognize that consumers often shop around for the best rates on loans. Therefore, multiple hard inquiries for the same type of loan (e.g., a mortgage or auto loan) within a short period (usually 14-45 days, depending on the scoring model) are often treated as a single inquiry. This allows you to compare offers without significantly damaging your score.

Factors Influencing the Impact of Hard Inquiries

While the impact of a hard inquiry is generally small, several factors can influence its effect on your credit score:

• Your overall credit history: If you have a thin credit file (limited credit history) or a poor credit history (late payments, defaults, etc.), a hard inquiry may have a slightly larger impact.
• The frequency of hard inquiries: Numerous hard inquiries in a short period can be a red flag to lenders, suggesting that you may be overextending yourself financially.
• The type of credit you're applying for: Some types of credit, like credit cards, may be perceived as riskier than others, like mortgages.

Busting the Myth: Checking Your Own Credit Score Doesn't Hurt You

The most important takeaway is that checking your own credit score will NOT lower your credit score. This is because checking your own credit generates a soft inquiry, which, as we've established, doesn't affect your credit rating.

It's crucial to monitor your credit report regularly to:

• Detect errors: Identify and correct any inaccuracies that could be negatively impacting your score.
• Monitor for fraud: Catch any unauthorized activity that could indicate identity theft.
• Track your progress: See how your credit habits are affecting your score and make adjustments as needed.

You are entitled to a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once per year through AnnualCreditReport.com. This is the official website authorized by the federal government. Take advantage of this opportunity to stay informed about your credit health.

Strategies for Minimizing the Impact of Hard Inquiries

While hard inquiries have a relatively small impact, there are steps you can take to minimize their effect on your credit score:

• Shop around strategically: When applying for loans, limit your applications to a concentrated period (e.g., within 14-45 days) to take advantage of the "bundling" effect mentioned earlier.
• Avoid unnecessary credit applications: Only apply for credit when you truly need it. Don't apply for multiple credit cards just to get signup bonuses.
• Maintain a healthy credit profile: A strong credit history with on-time payments and low credit utilization will make you a more attractive borrower and reduce the relative impact of any hard inquiries.
• Space out credit applications: If you need to apply for multiple types of credit (e.g., a credit card and a mortgage), try to space them out by several months to avoid a cluster of hard inquiries.

The Importance of Overall Credit Health

Ultimately, your credit score is determined by a variety of factors, and hard inquiries are just one small piece of the puzzle. Focusing on the bigger picture and maintaining a healthy credit profile is far more important than obsessing over the potential impact of a few hard inquiries.

Here are the key factors that influence your credit score:

1. Payment History (35%): Making on-time payments is the single most important factor.
2. Amounts Owed (30%): Keeping your credit utilization ratio (the amount of credit you're using compared to your total available credit) low is crucial. Aim for below 30%.
3. Length of Credit History (15%): A longer credit history generally results in a higher credit score.
4. Credit Mix (10%): Having a mix of different types of credit (e.g., credit cards, installment loans) can be beneficial.
5. New Credit (10%): This includes hard inquiries.

Choosing a Credit Score Monitoring Service

Several reputable services allow you to monitor your credit score for free or for a small fee. When choosing a service, consider the following:

• Frequency of updates: How often is your credit score updated?
• Credit bureau coverage: Does the service provide scores from all three major credit bureaus?
• Additional features: Does the service offer credit monitoring, identity theft protection, or other valuable features?
• Cost: Is the service free, or does it require a subscription?

Some popular options include:

• Credit Karma: Offers free credit scores and reports from TransUnion and Equifax.
• Credit Sesame: Offers free credit scores and reports from TransUnion.
• Experian: Offers free access to your Experian credit report and score.
• Equifax: Offers free access to your Equifax credit report and score.
• TransUnion: Offers free access to your TransUnion credit report and score through various partners.