Can Credit Checks Affect Your Credit Score?

Credit checks are inquires into a credit report by either an individual, business or employer. Individuals seeking to improve their scores will check their reports often to ensure that correct information is being recorded. Many individuals sometimes wonder if all of this checking will affect the score. This depends on who is performing the inquiry.

Types of Inquiries

Inquiries come in two forms, soft and hard. Soft inquiries do not involve requests for credit. When you check your credit report, it is a soft inquiry. Hard inquiries are done when someone is applying for a new line of credit. If you apply for a car loan, the lender performs a hard inquiry. A hard inquiry can be done only with your permission.

Who is Checking My Report?

Car dealers, banks and insurance companies do hard inquiries when you sign a credit application giving them permission to do so. Soft inquires, on the other hand, are sometimes performed by credit card companies or other potential creditors for pre-approval offers. Landlords and employers may perform soft inquiries on your credit report to determine your financial acumen. Only businesses or individuals with a specific business reason can pull a copy of your credit report. If you want to limit the number of pre-approval inquiries made to your credit report, contact the credit reporting agencies to request removal from marketing distributions.

Credit Inquiry Effect on FICO Score

The good news is that you can make as many soft inquiries as you would like without affecting your score. This means that those who are monitoring their scores on a regular basis do not have to worry. Hard inquiries are another matter. They lower the score slightly, although not by much. Inquiries only count for about 10 percent of the overall score, so an inquiry or two over the course of a year will not hurt it. If you are house hunting or car shopping, be aware that credit agencies count multiple inquiries occurring in a 14-day span as one inquiry. Though hard credit checks have a lowering effect on the score, individuals rarely are turned down for credit due to multiple inquiries on their credit report.

Your Credit Report

If you are asking yourself why hard credit checks are viewed negatively, it is because potential creditors want to make sure you are able to repay your debts. Too many credit applications in a short period of time could signal the start of some financial problems. Inquiries appear on the bottom of your credit report as a record entry. Inquiries only appear on the credit agency report that is pulled. For example, inquiries to Experian will not appear on a TransUnion credit report. Inquiries will remain on your credit report for up to two years from the time they were pulled. Soft inquiries may fall off after one year. Many creditors disregard inquiries more than six months old.