Credit Score

In the world of personal finance, your credit score is one of the most crucial indicators of your financial health. It affects everything from loan approvals to interest rates. Naturally, keeping an eye on your score is important, but many people worry that checking their own score could negatively impact it. So, does checking your score actually lower it? Let’s clear up this common misconception and delve into the details.

Understand the credit score

Before we tackle the impact of checking your score, it’s helpful to understand what a score is. Ascore is a numerical representation of your creditworthiness, based on your credit history. It ranges typically from 300 to 850, with higher scores indicating better credit health. Your score is influenced by various factors including your payment history, credit utilization, length of credit history, types of credit accounts, and recent credit inquiries.

TYPES OF CREDIT INQUIRIES

To understand the impact of checking your score, it’s essential to differentiate between the two types of credit inquiries:

1. HARD INQUIRIES:

These occur when a lender or creditor checks your credit report as part of their decision-making process. For example, when you apply for a new credit card, loan, or mortgage, the lender will perform a hard inquiry. Hard inquiries can affect your score slightly and may stay on your credit report for up to two years. However, their impact typically diminishes over time.

2. SOFT INQUIRIES:

These occur when you or someone else checks your credit report for non-lending purposes. Examples include checking your own score, credit card companies performing pre-approval checks, or background checks by employers. Soft inquiries do not impact your score at all.

CHECKING YOUR OWN SCORE

When you check your own score, you’re performing a soft inquiry. Soft inquiries are only visible to you and do not affect your score. This means that regularly monitoring your own score is a safe and beneficial practice. It allows you to stay informed about your credit health, spot potential errors or fraudulent activities, and make proactive adjustments to improve your financial situation.

WHY IT’S IMPORTANT TO CHECK YOUR CREDIT SCORE

Regularly checking your score is important for several reasons:

1. ERROR DETECTION

Obtain your score from reputable sources, such as your bank, credit card Company, or authorized credit reporting agencies. Many financial institutions offer free access to your score as a part of their services.

2. FINANCIAL PLANNING

Understanding your score helps you plan for major financial decisions, such as applying for a mortgage or car loan. It also allows you to work on improving your score before making these significant applications.

3. FRAUD PREVENTION

Monitoring your score can alert you to unusual activity that may indicate identity theft or fraud. The sooner you spot suspicious activity, the faster you can take action to protect yourself.

BEST PRACTICES FOR CHECKING YOUR SCORE

Best Practices for Checking Your Credit Score

1. USE TRUSTED SOURCES

2. CHECK REGULARLY

Make a habit of checking your score periodically. This doesn’t mean you need to check it every day, but doing so every few months can help you stay on top of your financial health.

3. UNDERSTAND THE SCORE

Familiarize yourself with the factors that influence your score. This knowledge will help you make informed decisions to improve and maintain a healthy score.

CONCLUSION

The concern that checking your own score might lower it is simply a myth. As long as you’re performing a soft inquiry by checking your own score, there is no negative impact. In fact, keeping track of your score is a proactive step towards better financial management and security. By understanding and monitoring your score, you can ensure that your financial health remains in top shape.

So go ahead and check your score without worry. It’s a wise financial habit that helps you stay informed and in control of your credit health.

Does Checking Your Credit Score Lower It?