How To Check Your Credit Score Without Hurting It
Credit scores have always been shrouded in mystery. It does not come as a surprise that consumers have outstanding misconceptions when it comes to what hurts and helps their scores. Unknown to many is that there are credit inquiries that hurt scores while others don’t. Errors on credit report also affect credit scores, significantly affecting one’s creditworthiness in the eyes of credit lenders. There are two types of credit inquiries when it comes to credit scores; hard inquiry and Soft inquiries.
What is a hard inquiry?
A hard inquiry occurs when a prospective lender makes an inquiry to a credit bureau as part of a decision making process. Hard inquiries come into being when one is making, mortgage loan, auto loan student loan and personal loan applications. These inquiries are normally tied to an actual credit application and can influence credit scores. Too many hard inquiries over a short period may add up to numerous new accounts. The opening of new accounts may be indicative of one having trouble when it comes to paying bills or is at risk of overspending. A lot of hard inquiries in a credit report may spook potential lenders in that they show one is desperate for credit and may have been turned down by other lenders. Hard inquiries at times make one appear as a high-risk borrower. Hard Inquiries are one of the factors that are used to calculate credit scores in addition to payment history, credit utilization ratio as well as a mix of types of credit. However hard inquiries rarely form the basis of one being denied credit. Hard inquiries remain in credit scores report for a maximum of two years. However, their impact on credit scores lessens with time. Accurate hard inquiry cannot be removed from a credit report. However, if a lender or company pulled your credit report without permission, a credit bureau can remove them upon a claim being lodged.
A soft inquiry occurs when a person checks his/her report or gives someone permission to review a credit report, directly from the reporting bureau. Because they are not linked to a specific application for new credit, they don’t in any way affect credit scores. Soft inquiries in a credit report are usually not visible to potential lenders and are never considered as a factor of credit scoring models. Soft inquiries come into being when one is checking credit scores, checking for pre-qualified credit card offers, checking for pre-qualified insurance quotes and during employment verification.
Managing Credit Inquiries
The fact that hard inquiries affect credit scores calls for better management, on when they should be carried and by who. To manage the impact of hard inquiries, only apply for credit when you need it. It is also important to check credit report from time to time to ensure that only authorized inquiries appear on the report. It is important to know which type of inquiries could affect credit scores as well as doing all it takes to avoid excessive inquiries in order to maintain a positive credit report with high scores.