Credit scores are one of the critical elements American lenders use to determine your eligibility for anything, from getting a new credit card to the interest rate you’ll pay on your mortgage. Your credit score has many factors that affect whether it goes up or down, and you’ve probably heard that checking your credit report too many times can make your score go down. But is that true, and if it’s true, how can you stay on top of your credit if you can’t check it? So let’s discuss how your credit score works and ways you can stay on top of your progress without making your score go down.
An Overview of Your Credit Score and the Things That Affect It
Depending on the scoring system used, your credit score is the total sum of five or six factors. FICO© scores have five elements, while Vantage Score© uses six. Your score shows potential lenders your ability to manage debt responsibly and affects the interest rate you’ll receive when you’re approved to borrow money.
Credit scores are scored in a range of 300 – 850, with 850 being the highest score possible. Anything under 580 is considered “poor” and can affect your ability to get unsecured credit or loans. But even having a score slightly above 580 doesn’t guarantee you’ll likely be approved. To secure new credit, aim for a score of at least 670.
If you’re not there yet, then it’s time to take steps to improve your score. Consider trying this payoff calculator to create a strategy for reducing your debt and improving your score. Otherwise, you may be out of luck when you need money the most to pay for things like medical bills, education, or a new home.
Can I Check My Credit Report Without Lowering My Score?
Yes and no. As a consumer, you have the right to receive your credit report for free once a year from each of the three credit reporting bureaus: Equifax, TransUnion, and Experian. Even if you decide to pull your report multiple times a year, the only negative is that you’ll be charged for the report; there will be no hit to your credit score.
Using credit monitoring apps and budgeting software also does not hurt your credit score. These services use what’s known as a “soft pull” and can check your credit report daily without any consequences to your report or score.
The only time checking your credit affects your score is through what’s known as “hard pulls.” A hard pull is done whenever you apply for credit or a loan, though some jobs that deal with high-level security clearances or are in the financial industry will also do a hard pull on your credit report.
How a Hard Pull Can Affect Your Credit Score
A hard pull is no different than a soft pull in terms of what information they receive. The reason it affects your score negatively, though, is because you’re (or your potential lender) is pulling it to determine your eligibility for the credit card or loan you’re applying for. Having too many hard pulls done around the same time makes it look like you’re desperate to borrow money, even if that’s not the case. But lenders won’t see it that way and can decide that you’re too risky to loan money to and will reject you outright.
The best credit scores have no more than two to three hard pulls on their history. Don’t worry if you’ve had a pull on your credit report in the past and want to apply for a new credit card; these pulls typically fall off within five to seven years.
Lastly, hard pulls only account for 10% of your credit score, so while they will result in a drop in your score, the dip won’t be more than a point or two.
The Bottom Line
Your credit score is a critical piece of your financial history, so you must keep an eye on it as much as possible. Staying on top of your finances is a good strategy, and the idea that seeing your credit score regularly can make your score drop is a myth. However, some situations can decrease your score due to hard pulls, so only use those sparingly.
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