Does a Credit Report Lower My Credit Score?

In the world of consumer lending, lenders rely on credit reports and credit scores to determine if a borrower is worthy of a loan. Your credit report forms the basis of your credit history and tells lenders what you've done in the past with respect to using consumer credit. Companies that create credit scores use the information in your report to calculate your individual score, but a credit report itself is not a credit score.

Credit Reports

Every time you apply for a loan, pay credit card bill or do anything in which a lender extends you credit, this information gets reported on your credit report. The companies that create credit reports sell this information to creditors because creditors want to know whether they can trust a borrower to repay a potential loan. To help lenders do this, companies also develop credit scores, numbers that represent how safe or risky a potential borrower is.

Borrower Activity

What raises or lowers your credit score is the information contained on your credit report. If, for example, you have several loans and have never made a late payment or defaulted on the loan, you will generally have a very high credit score. On the other hand, if your credit report contains a litany of negative behavior, such as making numerous late payments and filing bankruptcy, your credit score will be low.

Credit Inquiries

When you apply for a loan, your creditor will look at your credit report as part of the loan application process. Creditors typically do this in one of two ways, with a "soft" or "hard" pull. A soft pull is one in which the creditor merely looks at the information. A hard pull is one where the creditor not only looks at the information but also tells the credit reporting agency that it has looked as part of the loan application process. A hard pull itself can lower your credit score, but typically not for very long and not by very much.

Other Considerations

Just as your behavior as a creditor changes over time, so does your credit score. If you've had a bad credit history in the past, that doesn't mean your report will be bad for the rest of your life. As long as you can prove to lenders that you have become a responsible borrower, that information gets reported on your credit report, and it will have an effect on your credit score. The higher your credit score is, the more likely it is you will be approved for a loan.