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Does checking your credit score lower it? – Councilor Forbes

By on July 14, 2021 0

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Monitoring your credit is one of the most important financial habits you can adopt. It allows you to correct errors, respond to fraudulent activity, and gain insight into the impact of your behaviors on your credit health.

You may have heard that checking your credit score will lower it, but it’s a myth. Let’s see where this myth comes from and when a credit check can hurt your score.

The difference between your credit score and your credit report

There are three credit bureaus that produce credit reports: Equifax, Experian, and TransUnion. When you open a credit card or loan, the lender will report the activity to at least one credit bureau, who will then add it to your credit report. Your credit reports show both current and past credit accounts, as well as legal judgments such as liens and bankruptcies.

A credit score is a three-digit number that ranges from 300 to 850. The score is determined by an algorithm that takes into account everything on your credit report. The higher the score, the more responsible you are as a borrower.

There are two main companies that produce credit scores: FICO and VantageScore. FICO is responsible for 90% of all credit scores used by lenders, but VantageScore is more common with free credit rating websites. Both companies use similar scoring models to determine your scores, so there should only be a slight difference between a FICO score and a VantageScore.

There are dozens of credit score iterations out there, and which one is used depends on the type of lender reviewing it. For example, the credit score that a car lender sees may be slightly different than that of a mortgage lender.

How often can I check my credit score?

You can check your credit score as often as you like. If you create an account with a free site, you will receive regular score updates via email, sometimes as often as weekly.

A rule of thumb is to check your credit score at least once every few months, especially if you are building your credit. A recent Consumer Reports study found that 34% of users had an error on their credit report. If you can spot a credit error early on, you may be able to avoid problems like denial of a loan or apartment lease.

When does a credit check hurt your score?

When you check your own credit score, it has no impact as it only counts as indirect demand. But when a lender or a credit card company pulls your credit score, that’s another story.

There are two ways a business can extract your credit information: an indirect investigation and a rigid investigation. An indirect request is most often used when a lender wants to pre-approve you for a loan or credit card and has no visible impact on your score. Employer credit checks also show up as inquiries.

Serious investigation occurs when you directly apply for a loan or credit card and will impact your credit score. Homeowner credit checks are also often viewed as difficult investigations. A serious investigation will officially stay on your credit report for two years, but will only affect your score for one year, usually between one and five points.

Why is it important to check your credit score

Viewing your credit score can alert you to potential issues, such as a fraudulent account opened in your name or an invoice you forgot and was retrieved.

If you check your score regularly, you can deal with these issues as they arise. If you don’t check your credit score before you apply for a mortgage or other large loan, you risk discovering a huge mistake that will take weeks to correct.

How to check your credit score

There are a number of credit scoring sites that you can use to check your credit score for free. You usually need to create an account to receive a credit score and be notified of any new account or change in credit rating.

Many banks and credit card providers offer free credit scoring services, including these eight providers:

Is It Worth Paying For A Credit Score?

Sites like MyFICO provide access to your FICO credit score when you sign up for a monthly membership. Monthly fees range from $ 19.95 to $ 39.95 per month. Unlike free credit scoring sites that only display one score, you’ll see FICO scores used by auto lenders, mortgage lenders, and other lenders who use industry-specific scoring models.

Accessing these ratings is usually not worth the monthly fee, as there is usually little difference between credit scores. Don’t sign up for a paid service if you’re worried about your credit score. Instead, use a free monitoring tool, reduce your credit card usage, and pay all your bills on time. These strategies will help you improve your score and benefit from lower interest rates.

Increase your FICO® score instantly with Experian Boost

Experian can help you increase your FICO® score based on paying bills like your phone, utilities, and popular streaming services. Results may vary. See the site for more details.