Does checking credit lower score? This is a common question that often confuses individuals when they are applying for loans or credit cards. The answer to this question is not straightforward and depends on several factors. In this article, we will explore the relationship between checking credit and its impact on your credit score, helping you understand how to manage your credit wisely.
Checking credit, also known as a hard inquiry, occurs when a lender or financial institution checks your credit report to assess your creditworthiness. This process can temporarily lower your credit score, but the extent of the impact varies depending on the credit scoring model used.
Understanding the credit scoring models
Credit scoring models, such as FICO and VantageScore, use various factors to calculate your credit score. One of these factors is the number of hard inquiries on your credit report. However, it’s important to note that not all inquiries have the same impact on your score.
Hard inquiries vs. soft inquiries
There are two types of inquiries: hard inquiries and soft inquiries. Hard inquiries occur when you apply for credit, such as a loan or credit card. Soft inquiries, on the other hand, happen when you check your own credit or when a lender checks your credit for promotional purposes, like pre-approving you for a credit card offer.
The impact of hard inquiries on your credit score
While hard inquiries can lower your credit score, the impact is usually minimal. According to FICO, a single hard inquiry can cause your score to drop by up to 5 points. However, this decrease is often temporary, and your score can recover within a few months, especially if you have a strong credit history.
How to minimize the impact of hard inquiries
To minimize the impact of hard inquiries on your credit score, consider the following tips:
1. Limit the number of hard inquiries: Avoid applying for multiple loans or credit cards within a short period of time, as this can raise red flags to lenders and negatively impact your score.
2. Space out your applications: If you need to apply for multiple loans or credit cards, try to space them out by a few weeks or months to give your score time to recover.
3. Monitor your credit: Regularly checking your credit report can help you identify any errors or discrepancies that could be affecting your score.
Conclusion
In conclusion, does checking credit lower score? The answer is yes, but the impact is usually minimal and temporary. By understanding the relationship between hard inquiries and your credit score, you can manage your credit wisely and maintain a healthy credit profile. Remember to apply for credit responsibly and avoid excessive hard inquiries to protect your credit score.
