Does Checking Your Credit Score Lower It?
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Knowing your credit score is important to understand your financial standing, especially if you are applying for a loan or trying to reach a rental agreement. Your credit score is a measure that lenders, landlords, and even some employers use to evaluate your financial reliability.
According to Equifax, the average credit score in the US is 705, though this number varies by state.
So, now you must be wondering, “Where do you stand?” and “Does checking your credit score lower it?” Well, considering how little inquiries impact the credit report, this question is worth exploring. In this article, we are going to discuss whether credit score checks lower it and why it’s important to keep an eye on it. Let’s start!
Does Checking Your Credit Score Lower It?
The answer to “Does checking your credit score lower it?” is a No. Checking your credit score doesn’t hurt it, as it’s considered a soft inquiry. In fact, keeping tabs on credit scores is important for making smart and informed financial decisions. Some other examples of soft inquiries include:
- Employer or landlord running a credit check with your permission.
- Lenders do a credit score check before pre-approving or pre-qualifying a loan.
What Lowers Your Credit Score?
Now that you know “Does checking your credit score lower it,” let’s discuss the most critical factors that actually contribute to lowering your credit score:
Late Payments
Do you know payment history makes up around 35% of your credit score? So whenever you make a late payment, including delayed energy bills or telecommunication charges, it hits your credit score.
To help you understand this better, suppose you have a $100 internet bill you must pay by 3rd Feb. However, you missed the deadline and submitted the bill payment late, not even by one or two days but by 30 days.
The result? This late payment information stays on your credit report for up to 7 years and lowers your credit score, putting a question mark on your credibility.
Hard Inquiries
Does checking your credit score lower it? Well, hard inquiries can slightly reduce your score and make you fall in the fair or bad category in both FICO and VantageScore.
Typically, a hard inquiry refers to a record on your report that occurs when a lender checks your credit history. It’s common in loans, credit cards, and other lines of the credit application process.
The presence of a hard inquiry on the credit report indicates to other lenders and financial institutions that you are currently not stable and actively seeking new credit. This significantly enhances the risk of debt accumulation, and you may appear to be a risk to potential lenders and landlords.
High Credit Utilization Ratio
Another factor that lowers your credit score is the card utilization ratio. It’s a measure of how much credit you currently use on your credit cards compared to your total limit.
Credit reporting agencies and bureaus pay special attention to your credit utilization ratio, which contributes 20% to 30% to your credit score. If you have a high credit utilization ratio, your credit score will improve immediately.
Nonetheless, unlike other factors that stay on your credit report for years, the credit utilization ratio is updated regularly and improves as soon as you pay off your balances.
For instance, if your credit limit is $10,000 and you have already used $5,000, your credit utilization ratio is around 50%, which is too high. To prevent falling victim to thoughts like “Does checking your credit score lower it?” you should keep the ratio below 30%.
Credit Mix
While the impact of credit mix on your score isn’t as much as other factors, it can still do the damage. Credit mix refers to your different types of credit accounts, such as credit cards, mortgages, and auto loans. It accounts for about 10% of your FICO score.
Lenders prefer to see a huge credit mix portfolio to judge your ability to juggle different loans and whether you can handle credit obligations responsibly.
Let’s say you have very limited credit mix options, like only one credit card; this may not properly show your ability to manage different types of credit, resulting in a low credit score.
Short Credit History Length
Unfortunately, if your credit history is short, it will negatively impact your credit score. By credit history, we mean the amount of time your credit accounts have been open or how long you have been managing different credits or debt.
It takes up 15% to 20% of your credit score, and in case you have a short credit history, you will see a low credit score. But what makes credit history length such an important factor? Lenders and landlords rely on this to see your recent activity and how you’ve been repaying old credit.
If your credit history length is short or bad, you will have a poor credit score, which positions you as a high-risk borrower. It also restricts you from scoring the right financing, and you may have to pay high interest rates.
How to Check Credit Score Without Lowering It?
The mere thought of “Does checking your credit score lower it?” can be daunting. However, if you don’t want to compromise your outstanding credit score due to unnecessary inquiries, here’s how you should check it:
Check Your Financial Statement
Many financial institutions often add customers’ credit scores to their monthly or annual statements.
So, one way to access your score without the fear of “Does checking your credit score lower it?” is to request a financial statement from your concerned bank or institution.
You can then see your credit score and some other information, including your balance at the start and end of the month and the amount of money withdrawn over time.
Purchase Your Score
You may also purchase your credit score from credit reporting agencies like Experian, Equifax, and TransUnion for a nominal fee. Other than that, platforms like PFScores are also ideal for accessing your credit score.
PFScores considers your savings discipline along with credit and risk management to generate a personalized financial health score. There’s a free trial that you can avail to view your credit score without even having to pay a single penny.
Opt for a Credit Monitoring App or Services
Checking your credit score through credit monitoring services like Capital One CreditWise is also a good idea, as it doesn’t lower your score. These solutions provide you with a credit score as well as keep an eye on any suspicious activities in your accounts.
If fraud is detected, you are notified and can take quick action to protect your hard-earned money. This is quite important as statistics show that Identity fraud incidents hit the banking sector the most, and 94% of banking organizations were affected, with average losses of over $310,000.
Why Check Credit Score?
After knowing the answer to “Does checking your credit score lower it?” you must be wondering why you should keep an eye on your credit score in the first place, right? Here are some compelling reasons:
Help Identify Theft and Fraud
With the popularity of digitalization, there’s an increased risk of fraud in the finance industry. Unfortunately, in 2023 alone, the Federal Trade Commission (FTC) reported $10.0 billion in losses due to fraudulent activity.
To stay assured that you don’t fall victim to any such fraud and identity theft, it’s important to check your credit score. By doing so, you can pinpoint unfamiliar addresses or unauthorized credit in a timely manner before the situation escalates.
Spot and Dispute Errors
Credit score reporting isn’t as easy as it seems and involves many factors. Due to this complexity, sometimes the lender or credit reporting agencies may make mistakes in your credit report that can lower your score.
However, when you regularly check your credit score, you can easily find inaccurate information on your report and file a dispute. For instance, if a payment was reported late by the lender, you can file a complaint with the credit reporting agency backed up with all the necessary evidence.
They will verify your case and if the lender is at fault, the penalty is removed from your report, restoring your credit score to a good position. Other than this, you may also notice some typographical errors like a wrong SSN or a misspelt name that you can rectify timely.
Ensure Payments are Timely Reported
Sometimes, you make the payment on time, but it’s reported late to the credit reporting agency. This late payment becomes visible on your credit report and stays there for around 7 years, indicating to lenders that you are a high-risk borrower.
Nonetheless, when you check your credit score regularly, you can easily spot and dispute such issues. This ensures that the hard work you are doing by paying all bills on time is also reflected on your profile.
Tips to Improve Your Poor or Bad Credit Score
Most people in the US have a credit score in the good category, which makes it difficult for those with low scores to acquire loans and negotiate flexible terms. However, by following the given tips, you can improve your credit score so your application stands out:
Make Timely Payments: Firstly, you should make all payments on time, as the payment history comprises the biggest portion of your credit score. Even if you are unable to pay within the due date, make sure to pay all debts and bills at least 30 days before to avoid ending up with a low credit score.
Maintain Low Credit Card Utilization Ratio: Another thing you should do is keep your credit utilization ratio below 30%. If you fear that you may use more than this, you should try opening new lines of credit to enhance your credit limit and eliminate the fear of penalties.
Limit Hard Inquiries: We understand that sometimes you may have to apply for frequent loans to finance different things, including your home or vehicle. However, this is not a good practice and results in hard inquiries that lower your credit score. That’s why don’t apply for too many new accounts or loans unless you have exhausted all your options and maintain a good credit score.
Check Credit Only When Necessary: Although checking your own credit score, aka soft inquiry, doesn’t really harm your credit report, it’s still advisable to check the score only when necessary. Here are some instances where you should look at your credit score:
Planning to apply for a loan to make a big purchase, such as buying a home or a new vehicle.
Have noticed a data breach that has compromised your personal information
Have achieved a much-awaited milestone, such as paying off debts or student loans
FAQs
No, checking your FICO score yourself doesn’t lower it, as it’s considered a soft inquiry. However, if a lender is trying to assess your financial standing and check your FICO score, it’s termed as a hard inquiry and lowers your credit score.
No, checking your credit score through Credit Karma doesn’t lower it. This is primarily because Credit Karma requests your credit score as a soft inquiry which doesn’t impact the overall score and does not even show in the credit report.
No, checking your credit on Experian does not lower it. Similar to other platforms, checking your credit score on Experian is a soft inquiry that doesn’t affect your credit score.
Conclusion
The answer to “Does checking your credit score lower it?” is no. When you check your credit score yourself, it appears as a soft inquiry that doesn’t harm your financial standing. So, do you want to look at your credit score but don’t know which platform to trust? PFScores is the ideal one-stop solution! Just enter your information, and this platform will create a tailored credit report for you that covers everything from your spending to credit and risk management.