One topic that is often discussed in regards to credit is whether or not checking your credit can actually damage your score. While there is some truth to this idea, it is not as drastic as many people mistakenly believe. Whether or not any damage is done depends on the type of inquiry that you make into your credit report.
Types of Inquiry
To determine what type of credit checking can hurt your score, you need to understand the different types of inquiries that are available. Both hard and soft inquiries could be run on your credit report. A hard inquiry occurs when you try to obtain new credit in some form. For example, when you apply for a loan at a bank, this would be a hard inquiry. When you or someone else simply checks your credit score, this is called a soft inquiry.
Credit Impact
When it comes to hurting your credit, only one type of inquiry can do any damage. When you or someone else performs a soft inquiry on your credit history, this does not do any damage to your score. When you or someone else performs a hard inquiry into your credit history, this can lower your score. This is because it looks like you are always trying to get credit and it can appear that you do not know how to handle money.
Exceptions
Even though a hard inquiry can lower your credit score, every single hard inquiry does not have the same effect. Fair Isaacs Corporation is the company that comes up with the formula for calculating a credit score. It makes allowances for people who shop around for the best rate when trying to get a loan. This means that all hard inquiries that take place within a 45-day period only count as a single inquiry.
Visibility
Soft inquiries are not visible to every party that looks at your credit report. Soft inquiries only show up on your credit report when you get a copy of it. When your creditors get a copy of your credit report to make a lending decision, they cannot see how many times a soft inquiry has occurred. This prevents them from knowing how often you check your credit.
Considerations
With the knowledge of how hard inquiries can impact your credit score, it is generally advisable to only use them when necessary. If you decide to perform hard inquiries into your credit, it would be in your best interest to do so within a very short period of time. This way, it does not look like you are always trying to obtain credit and your credit score will remain high.
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