Does Your Credit Go Down Every Time You Check It?

Many wonder if checking their credit history negatively impacts their financial standing. The answer depends on the specific method used to access credit information. Understanding different credit inquiry types clarifies why some checks do not affect your score, while others might.

Types of Credit Inquiries

Credit inquiries fall into two main types: soft inquiries and hard inquiries. These distinctions determine how your credit score might be affected. The inquiry’s nature, including who initiates it and its purpose, dictates its classification.

Soft inquiries, also called soft pulls or soft credit checks, occur when someone reviews your credit report or score for informational purposes without applying for new credit. You often initiate these checks, such as when you check your own credit score through a personal finance app or directly from a credit bureau. Other scenarios include pre-approved credit card offers you receive in the mail or background checks by potential employers.

Hard inquiries happen when a lender or creditor formally checks your credit report for a new credit application. This occurs when applying for a new credit card, mortgage, auto loan, or personal loan. Each hard inquiry indicates you are seeking additional credit, which can be viewed as a potential increase in your debt burden.

Impact on Your Credit Score

The type of credit inquiry directly influences whether your credit score changes. Soft inquiries have no negative effect on your credit score. They are not considered in score calculations, nor are they visible to other lenders.

Hard inquiries can cause a slight, temporary decrease in your credit score. This dip occurs because applying for new credit suggests increased risk to lenders, especially with multiple applications in a short period. A single hard inquiry typically results in only a few points’ deduction, and its impact usually subsides within a few months, though it can remain on your credit report for up to two years.

Rate shopping helps mitigate the impact of multiple hard inquiries for the same loan type. For mortgages, auto loans, or student loans, multiple inquiries within a concentrated timeframe are often treated as a single inquiry by credit scoring models. This window typically ranges from 14 to 45 days, depending on the scoring model. For example, applying for several auto loans within a two-week period will likely group these inquiries as one, minimizing score impact.

Checking Your Credit Report and Score

Regularly checking your credit report and score is a recommended financial practice that does not negatively affect your credit. Consumers are entitled to a free copy of their credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—once every 12 months. This is mandated by federal law under the Fair Credit Reporting Act. You can access these reports through AnnualCreditReport.com.

Reviewing your credit report through AnnualCreditReport.com is a soft inquiry and will not lower your credit score. Many credit card companies and banks offer free access to your credit score, such as a FICO Score or VantageScore. Checking your score through these services also constitutes a soft inquiry with no detrimental effect on your credit score.

Monitoring your credit report and score regularly allows you to identify potential errors or fraudulent activity, like identity theft, promptly. Correcting inaccuracies on your report can prevent future financial difficulties and help maintain a healthy credit profile. Checking your own credit, whether your report or score, is a safe and beneficial practice that does not result in a lower credit score.