Does a Background Check Affect Your Credit Score?

Many people wonder if various background checks, often a part of significant life events, might negatively impact their credit score. This article clarifies the relationship between different types of background checks and your credit score.

Types of Credit Inquiries

Credit checks involve different types of inquiries, each with a distinct impact on your financial standing. There are primarily two categories: soft inquiries and hard inquiries.

A soft inquiry, sometimes called a soft pull or soft credit check, occurs when someone reviews your credit report without you formally applying for new credit. These types of inquiries typically happen when you check your own credit score, or when a potential lender pre-screens you for a pre-approved offer. Soft inquiries do not affect your credit score and are often not visible to other lenders.

A hard inquiry, also known as a hard pull or hard credit check, takes place when a lender or creditor checks your credit report as part of a formal application for new credit. Examples include applying for a mortgage, an auto loan, a personal loan, or a new credit card. Hard inquiries require your explicit consent and have the potential to temporarily lower your credit score by a few points. While they can remain on your credit report for up to two years, their impact on your credit score typically diminishes after 12 months.

Background Checks and Your Credit Score

Many common background checks, such as those conducted for employment or rental applications, typically involve a soft inquiry into your credit history. Employers and landlords generally use these soft inquiries to assess your financial responsibility and reliability.

For employment background checks, employers are primarily looking for information related to financial responsibility, such as bankruptcies, significant debts, or a history of financial mismanagement. They do not see your actual credit score; instead, they view a modified, limited version of your credit report. This process helps them gauge your ability to handle money skillfully and provides insight into your overall reliability, especially for positions involving financial oversight.

Similarly, when applying for a rental property, landlords commonly perform a soft credit check. While some landlords might opt for a hard inquiry, which requires your consent, the prevailing practice for tenant screening utilizes the credit-score neutral soft inquiry. The information they access helps them determine your ability to consistently meet rent obligations.

When Credit Checks Impact Your Score

Credit checks can impact your score when they are part of a formal application for financial products. Applications for new credit, such as a mortgage or credit card, trigger a hard inquiry on your credit report. These inquiries signal to lenders that you are actively seeking new credit, and each can cause a slight, temporary dip in your credit score. The impact is usually minor, often fewer than five points for a single inquiry, and is short-lived.

Credit scoring models, like FICO and VantageScore, recognize that consumers often shop around for the best rates on certain types of loans. To accommodate this, multiple hard inquiries for the same type of loan, such as a mortgage, auto loan, or student loan, within a specific timeframe are typically treated as a single inquiry. This “rate shopping” window can range from 14 to 45 days, depending on the scoring model used. This grouping helps to mitigate the negative impact on your score, allowing you to compare offers without undue penalty.