Why Does Checking Your Credit Score Lower It?
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If you’re like most people, you probably check your credit score on a regular basis. And if you’re like most people, you probably think that checking your credit score will lower it. But why does checking your credit score lower it?
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The Basics of Credit Scores
Credit scores are important when it comes to getting approved for loans, credit cards, and other financial products. A good credit score can save you money in the form of lower interest rates. A bad credit score can cost you money in the form of higher interest rates and may even prevent you from getting approved for financial products. So, it’s important to understand how credit scores work and how you can improve your credit score.
What is a credit score?
Your credit score is a numerical representation of your creditworthiness, and it’s one of the main factors that lenders look at when considering you for a loan. A high credit score indicates to lenders that you’re a low-risk borrower, which means you’re more likely to repay your debts on time. A low credit score, on the other hand, could lead to higher interest rates and could make it more difficult for you to qualify for a loan.
How is a credit score calculated?
Credit scores are calculated using a number of different factors, including:
-Payment history: This is the biggest factor in credit scores, accounting for 35% of the total. Payment history includes things like whether you make your payments on time and how often you pay late.
-Amounts owed: This is the second biggest factor, accounting for 30% of the total. Amounts owed includes how much debt you have and what your credit utilization is.
-Length of credit history: This makes up 15% of your score. A longer credit history usually means a better score, because it shows that you’re a responsible borrower.
-Credit mix: This is 10% of your score. A mix of different types of loans (e.g., auto loan, mortgage, credit card) shows that you can handle different types of debt.
-New credit: This is the final 10% of your score. Applying for new credit can lower your score, because it shows that you’re more likely to need debt in the future.
The Impact of Checking Your Credit Score
When you check your credit score, the credit bureau will note the inquiry on your credit report. This is a “soft inquiry” and does not impact your credit score. However, if you apply for credit, the credit bureau will do a “hard inquiry” on your credit report, which can temporarily lower your credit score.
How often can you check your credit score?
You can check your credit score as often as you like. There is no limit to how many times you can check your credit score. However, each time you check your credit score, it will lower your score by a few points.
What happens when you check your credit score?
When you check your credit score, the agency will give you a “credit inquiry” dinging your score. Each credit bureau has a different impact:
-Equifax will lower your score by 0.5-5 points
– Experian will lower your score by 0.1-8 points
– TransUnion will lower your score by 2-5 points
Inquiries remain on your report for two years, but only the inquiries in the last year count against your score.
How can checking your credit score lower it?
Most people know that their credit score is important. A good credit score can help you get approved for loans, credit cards, and other financial products with low interest rates. A bad credit score can do the opposite.
But did you know that checking your own credit score can actually lower it?
It’s true! Every time you check your credit score, it goes down a little bit. That’s because each time you check your credit score, it counts as a “hard inquiry” on your report.
Hard inquiries are when lenders check your credit report when you apply for a loan or other type of credit. They generally have a small, negative impact on your score—usually around five points—because they show that you’re looking for new sources of debt. (Inquiries from employers or landlords don’t affect your score.)
Checking your own credit score is considered a soft inquiry, however, because you’re not trying to get new debt. Soft inquiries don’t have any effect on your score.
How to Avoid Lowering Your Credit Score
Use a credit monitoring service
There are a number of things you can do to avoid lowering your credit score, but one of the best things you can do is to sign up for a credit monitoring service. Credit monitoring services will keep track of your credit report and alert you if there are any changes. This way, you can take action right away if there is any activity that could lower your score.
Check your credit report, not your credit score
Checking your credit score will not lower your credit score. However, there are a few things that could happen that could indirectly lead to a lower credit score.
First, if you check your own credit score, it will not lower your credit score. However, if you check your credit report and see something that is incorrect, you may be tempted to file a dispute with the credit bureau to have it fixed. If you do this too often, the credit bureau may flag you as someone who is constantly disputing items on their report, which could lead to a lower credit score.
Second, if you check your credit score and then apply for new credit, this could lead to a hard inquiry on your report. Too many hard inquiries can lead to a lower credit score.
Third, if you check your credit score and then decide to close some of your old accounts, this could also lead to a lower credit score. This is because closing accounts can shorten your average account history, which is one of the factors that goes into determining your credit score.
For these reasons, it’s generally best to check your credit report instead of your credit score. This way, you can catch any errors or outdated information on your report before it leads to a lowercredit score.
Keep tabs on your credit utilization ratio
Your credit utilization ratio is the percentage of your credit limit that you use, and it’s an important factor in your credit score. You can lower your credit utilization ratio by paying off debt or by asking for a higher credit limit.
If you have $10,000 in credit card debt and a $50,000 credit limit, your credit utilization ratio is 20%. But if you pay off $5,000 of that debt, your credit utilization ratio drops to 10%.
A lower credit utilization ratio is better for your score, so it’s worth it to make a plan to pay down debt. You can also ask your card issuer for a higher credit limit. If they agree to increase your limit to $75,000, then your new credit utilization ratio would be 13.3%.
Paying off debt and reducing your credit utilization ratio are two simple ways to avoid lowering your score.
