Credit Score Myths: Does Checking It Hurt Your Score?
Hard inquiries stay on your report for up to two years. However, credit score models usually factor in your credit report from the last 12 months when computing your score
When it comes to credit health, several myths continue to do the rounds. One of the most common, and misleading, belief is that checking your credit score will lower it. This couldn’t be further from the truth. In fact, this myth discourages many people from reviewing their score regularly, which is one of the simplest and most effective habits for maintaining strong credit health. Let’s bust this misconception and understand how credit score checks work.
Why Does Your Credit Score Matter?
Your credit score is a three-digit number that reflects your creditworthiness, helping lenders assess how trustworthy you are with credit. This score is calculated based on your credit consumption behaviour, including your repayment history, existing debts, length of your credit history, and other factors. A good score, of 750 and above, can help with loan or credit card approvals and also fetch you better terms on credit, such as lower interest rates.
Credit score checks done by you or a lender affect your score differently. That is the basis of the distinction of a hard and soft enquiry. Let’s understand what they are and why they are important.
Soft Inquiry vs Hard Inquiry: What’s the Difference?
When you check your credit score, it’s known as a soft inquiry and has no impact on your credit score. Checking your score is an effective way to monitor your credit health and should be done regularly. As per RBI guidelines, you can check your score for free once a year with each of the four credit bureaus in India—CIBIL, Equifax, Experian, and CRIF High Mark.
On the other hand, a hard inquiry happens when a lender checks your credit report to gauge your creditworthiness when you apply for a loan or credit card. Such inquiries can lower your score, even if the application is rejected.
When Do Hard Inquiries Show Up?
All hard inquiries are recorded on your credit report and are visible to future lenders. These occur when you apply for any kind of loan (home, auto, personal), request a balance transfer, or seek a higher credit limit on your existing card.
Hard inquiries stay on your report for up to two years. However, credit score models usually factor in your credit report from the last 12 months when computing your score. If your credit history is healthy and long, a single hard inquiry won’t have much of an impact on your score. But if your credit history is short or your score is already low, such an inquiry can be slightly greater.
Can Multiple Hard Inquiries Hurt Your Score?
If you apply for multiple loans or credit cards within a short duration, it may signal to lenders that you’re financially distressed. This can increase their hesitance to approve your request, or offer you credit at a higher interest rate to offset the risk. In some cases, repeated inquiries can even result in outright rejection. This is why it’s important to space out your credit applications by at least a few months and apply only when you really need.
Regularly checking your credit score is a smart habit that doesn’t hurt, but helps you stay on top of your financial health. What truly impacts your score is how often you apply for credit and how well you manage it.
(The author is the Senior Manager-Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
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