June 19, 2012
There are two different types of checks that can be performed on your credit score, soft and hard. One can hurt your score, the other doesn’t.
Soft Credit Inquiry
Soft inquiries are performed by people or companies to just take a peek into your credit when they don’t intend to make a lending decision. When you rent a car, get a new job, sign up for cable or internet service, rent an apartment, or open a savings or checking account you may have your credit checked. These kinds of checks have no ill effects on your credit score.
Similarly, the free annual check you can perform on your own credit score will not harm your score. You may not even know when your credit is being checked. Companies that offer you credit cards by mail, for example, may have checked your credit to see if you qualify.
Hard Credit Inquiry
Hard inquiries, or pulls, do affect your score. These are conducted when a person or organization wants to assess your credit worthiness and decide if they will lend you money. When you apply for a mortgage, credit card, or business/student/personal/auto loan your credit will always be checked in this manner. Be careful, though, as companies may also perform a hard inquiry when you are renting a car, applying for an apartment, cell phone plan, or cable/internet plan, opening a checking account, or requesting a credit limit increase. It’s important to know if it will be a hard pull because it will lower your credit score by around 5 points for about 6 months. It may not seem like a lot, but too many of those in a short period of time can make a significant difference. Hard inquiries also remain on your credit record for 2 years.
Checking your credit score annually is a good way to guard against identity theft and give you a better idea if you’re in a good place credit-wise or if it’s something you need to work on. By limiting the number of hard pulls on your credit each year and managing your credit responsibly, you’ll see a steady increase in your credit score, which will only help you along the way as you plan to make large purchases and want to be granted credit to help pay for them.
For more information about hard and soft credit inquiries and to learn how to check your credit score, give us a call.