Why Does Checking Your Credit Score Lower It
In terms of personal finance, your credit score is among a few factors that matter. It can affect your credit card application, loan application, or even apartment rental application. You might have heard, though, a strange rumor: checking your credit score might lower it. Is this accurate or only a financial myth? We will explore in this post the realm of credit scores and why occasionally examining them may have a detrimental effect.
The Basics of Credit Scores
You must understand the fundamentals if you want to know why looking at your credit score could lower it. Your credit score reflects your creditworthiness numerically. Usually running from 300 to 850, higher scores indicate a stronger credit profile. Lenders evaluate your risk of loan acceptance using this score.
Why Does Checking Your Credit Score Lower It?
The counterintuitive idea is that only looking at your credit score results from the difference between "soft" and "hard" queries. Your request for a copy of your credit report or score counts as a soft inquiry. These questions have no bearing on your credit score. On the other hand, a hard inquiry resulting from a lender or creditor checking your credit as part of a loan application or credit card approval process could drop your score.
The Impact of Hard Inquiries
Because they show that you're actively looking for fresh credit, hard inquiries can damage your credit score. This could be because you want to incur further debt, therefore raising your borrowing risk. But it's important to keep in mind that a single thorough search usually has little effect and will only momentarily lower your score.
Managing Your Credit Score
Having addressed why reviewing your credit score can damage it, let's now go over some tips for prudent credit management:
Regular Monitoring
Even with little score swings, you should always be checking your credit. It keeps you updated on your financial situation, helping you find mistakes and discover fraudulent activities.
Limiting Hard Inquiries
Apply for new credit strategically to help to reduce the impact of hard inquiries. Steer clear of opening several accounts quickly since this will indicate financial difficulty to possible lenders.
Paying Bills on Time
Your payment history is among the most important things influencing your credit score. On time, consistent payment of bills can benefit you and help to keep your credit score good.
Reducing Credit Card Balances
Relative to your credit limit, high credit card balances can lower your score. To keep good credit, try to keep your credit utilization ratio under thirty percent.
FAQs
Q: Does checking my credit score frequently harm it?
A: No, checking your credit score is considered a soft inquiry and doesn't affect your credit negatively.
Q: How often should I check my credit score?
A: It's a good practice to check your credit score at least once a year, or more frequently if you're actively managing your finances or planning a major financial move.
Q: Can I dispute errors on my credit report?
A: Yes, you can dispute inaccuracies on your credit report. It's essential to do so promptly to ensure your credit information remains accurate.
Q: Will closing a credit card account improve my credit score?
A: Closing a credit card account can impact your credit score, especially if it's one of your oldest accounts. It may be better to keep the account open but unused.
Q: How long do hard inquiries affect my credit score?
A: Hard inquiries typically remain on your credit report for two years, but their impact on your score diminishes over time.
Q: Is there a way to check my credit score for free?
A: Yes, you're entitled to a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) once a year. Many online services also offer free credit score monitoring.
Conclusion
In essence, even though reviewing your credit score can have a brief effect, it's a required step toward controlling your financial situation. Maintaining a decent credit score over time will depend on your knowledge of the differences between soft and hard inquiries and your credit practices. Check your credit score often and, when needed, act to raise it without fearing consequences. It determines your financial future.
Open improved financial prospects! Dial (888) 804-0104 to begin your road toward a better credit score.
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