Examples Of Hard Inquiries
Hard inquiries may cause a drop in your credit score. They dont stick around too long, but you should remain cognizant of how many hard inquiries are being initiated on your behalf. The following are some examples of hard inquiries.
- Once you fill out and submit an application for a new credit card, youre giving that creditor permission to do a deep dive on your financial history.
- You respond to a preapproved credit card offer in the mail. The offer is likely from a creditor with which you already have a history. Since they can pull a soft inquiry on your credit, they can use that information to determine whether you qualify for their offer. Once you send in the application, they pull an up-to-date version of your credit score to confirm your .
- You request a credit line increase. In this instance, the credit card provider will pull a new credit report to decide whether or not to grant you that increase.
Why Your Free Credit Scores From Equifax And Transunion May Be Different
You may think that your VantageScore 3.0 credit scores from Equifax and TransUnion should be the same, but thats not always the case.
Remember, VantageScore 3.0 is ultimately just a scoring model. The three-digit number it produces depends largely on the information that lenders report to each credit bureau.
When credit scores that use the same model differ between credit reporting bureaus, its typically because they dont have the same information. Here are a few of the reasons you might see different credit scores.
- Your scores are from different dates. Different bureaus receive information from lenders at different times. If new information is accounted for in one credit score and not the other, the scores may differ.
- Your scores are calculated using different credit reports. Its up to lenders to decide which credit bureaus they report your information two. Some report to all three major credit bureaus, while others report to only one or two. If your Equifax credit report has information that your TransUnion report doesnt , your scores may differ.
- Your credit reports contain incorrect information. Its possible that one or several of your credit reports contain errors. Thats why we recommend regularly checking your credit reports for errors that may affect your scores anddisputing those errors, if need be.
The Difference Between Your Credit Score And Credit Report
There are three credit bureaus that produce : Equifax, Experian and TransUnion. When you open a credit card or loan, the lender will report activity to at least one credit bureau, which will then add it to your credit report. Your credit reports show both current and past credit accounts, as well as legal judgments like liens and bankruptcies.
A credit score is a three-digit number that ranges from 300 to 850. The score is determined by an algorithm that takes all the items on your credit report into account. The higher the score, the more responsible you appear as a borrower.
There are two main companies that produce credit scores: FICO and VantageScore. FICO is responsible for 90% of all credit scores used by lenders, but VantageScore is more common with free credit scoring websites. Both companies use similar scoring models to determine your scores, so there should only be a slight discrepancy between a FICO score and a VantageScore.
There are dozens of credit score iterations, and which one is used depends on the type of lender looking at it. For example, the credit score an auto lender sees may be slightly different than the one a mortgage lender sees.
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Take Stock And Keep A Check On Spending
Having a budget and sticking to it is sensible under any circumstances, but it becomes a necessity during a recession period. Since your income can become uncertain, its important to take stock of the resources you have available to you.
For an individual, this would mean adjudging how much you have put away in your emergency fund, and which assets can be optimized or used as income sources. For business owners, this would mean taking stock of the cash reserves as well as inventory and personnel, which will help the business weather the volatile market scenario.
Cutting back on discretionary spending and shelving bigger plans like buying property or expanding a business is also necessary to keep personal or business finances stable during a recession. It is also important to manage your finances in a way that allows you to keep servicing your existing debt, failing which, your creditworthiness can suffer.
What Do Lenders See On Your Credit Report
What you see on your credit reports may be slightly different from the things lenders who are reviewing your credit might see. But generally, if a lender is reviewing your credit, they might see your:
- Personal information, such as your name, current address and previous addresses.
- Credit and loan accounts, including information about your payment history.
- Employment history.
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What Do Credit Scores Mean
Because there are so many credit scoring models in existence, you likely have multiple scores. If you pull your score from one site or product, it will likely be slightly different from one you find through another product.
So don’t get hung up on one particular score or even the exact number. Instead, pay attention to what range you fall in. Most websites and card issuers will offer some context behind the score in addition to the number.
That information will typically include where you stand and whether your score is poor, fair, good, very good or exceptional. You will also likely find information about why your score is what it is. Your score range can help you understand how lenders view your creditworthiness and what types of credit products you’re likely to be approved for.
Why Is Checking Credit Score Important
In short, it is no secret that your credit score is directly linked to your insurance premium rates and approval of auto loans. Therefore it is important to keep a tab on your credit score. It must be a routine to check your credit scores regularly.
Also, it doesnt hurt to keep a regular track of your credit score. In other words, it only helps you to maintain financial discipline. This is because a credit score gives an idea about the following.
Lets you identify your financial position
Keeping a tab on the credit score either alerts you to improve your score or helps you analyze your financial habits. Following the right financial practices is a prerequisite for a stable credit score.
Helps you build a strong credit history
Though it cant be compared to the age-old adage of making hay while the sun shines, periodical checking of your credit score will aid you in building a strong credit history, picking the shortcomings at every step. In addition, having a good credit score will help you get a similar credit-based insurance score which directly impacts your insurance premiums.
Be aware of the changes in your score.
If you are in the habit of checking your credit score regularly, then it becomes easier for you to understand where you have gone wrong then. This will allow you to take urgent action to recover the lost score points.
You become eligible for better offers.
Detect inaccurate information
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The Difference Between Hard And Soft Inquiries
Since checking your own credit score is a soft inquiry that doesnt ding your rating, its important to know what constitutes a hard inquiry and how a hard inquiry affects your score. Hard inquiries, which are also commonly referred to as hard pulls, occur when a financial institution pulls your entire to determine whether youre a good candidate as a borrower. This kind of action can result in a small reduction in your credit score that affects your rating for a few months, though the existence of a hard pull will hang around for approximately two years.
Can Checking Your Credit Score Hurt It
There are two answers:
- Personally looking up your current rating wont cause damage. Personal credit score checks are considered a soft inquiry, which is only used for informational purposes. Whether the credit score check is done by you or a potential lender, your credit score will be safe as long as the inquiry has nothing to do with a new or existing credit application.
- Your score being checked as part of a credit application has the potential to shave off a few pointsmost likely less than fiveaccording to FICO.
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Help When You Need It
Our dedicated team of Credit and Fraud Resolution Agents give you personalized support.
If you think you have an issue with fraud or identity theft, rest assured that weâre here to help with toll-free support available 7 days a week. A Fraud Resolution Agent is assigned to work with you closely every step of the way until your issue is resolved.
Become An Authorized User
If you have relatives or friends with good credit histories, you can piggyback on their records by having them add you as an authorized user to their account. While you wont be legally responsible for paying back any charges on the account, the credit history of the card will show on your report. This could instantly boost your score by a significant amount. Of course, youll have to find someone willing to add you to their account, as they would be legally responsible for any charges you may add. Youll also suffer the consequences of their bad habits if they suddenly stop paying their cards or run up significant debt. But if you have a good relationship with someone who you trust and you are willing to be responsible with their account, this could be a quick way to pump up your score.
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How Do I Run A Credit Check Without Hurting My Credit
Some places may charge you to check or monitor your credit. But you donât have to pay to use . You can use it to access your TransUnion credit report and weekly VantageScore 3.0 credit score for free anytimeâwithout negatively impacting your score.
You can even see the potential impacts of financial decisions on your credit score before you make them, with the CreditWise Simulator.
Why You Should Check Your Credit Score
Lenders use your credit score to decide whether to loan you money. The higher your score, the better your chances of getting a loan, and the lower the interest rate on that loan is likely to be.
However, some financial gurus claim that credit scores dont really matter unless you plan to borrow money. For instance, Dave Ramsey says your credit score is really an I love debt score. If you pay for everything with cash, he argues, theres no need to worry about your credit rating.
This is a misconception. These days, its not just lenders who want to know your credit score. Plenty of individuals and companies, from insurers to potential employers, pull your credit to get an idea of how trustworthy you are.
This means that if your credit is poor, you may not just have a hard time getting a car loan you may also pay more to insure the car once youve bought it. You may also be turned down for an apartment rental or even a job. So even if you have no plans to borrow money any time soon, its useful to know your score and, if its low, take steps to bump it up.
Checking your credit regularly can also help you catch mistakes that may be damaging your score. In a 2021 study by Consumer Reports, more than one in three respondents found errors in their credit reports including errors big enough to affect their credit scores.
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How To Check Credit Score
The easiest method for checking your credit score is requesting one from Equifax. When you apply for your credit report, well need some of your details. These details can include your drivers licence, passport, and Medicare cards. Well require you to complete a 100-point identity check . After all the required documents have been sent and accepted, well process your report and send it to you. After receiving your report, you can read through it and check that everything is accurate according to your records. The report will detail your credit dealings and give you a score from 0 to 1,200. The higher the number on your report, the better your credit rating. You can request your credit score online every three months or within 90 days of having a loan application denied.
How Do I Check My Credit Score
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How To Interpret Your Credit Score
Checking your credit score is easy, but merely knowing the number isnt enough. To get the most out of your scoreand improve itits necessary to interpret your score and your credit report as a whole. This involves understanding the five credit score ranges and what each means to lenders. FICO scores fall into the following ranges:
Poor . A score between 300 and 579 is well below the national average FICO Score of 711. Because of this, lenders consider borrowers with a poor credit score to be risky and are less willing to extend credit to them. That said, some lenders offer bad credit personal loans tailored specifically to low-credit borrowers.
Fair . Still below the national average, fair credit scores between 580 and 669 typically qualify borrowers for loans. However, these loans or lines of credit are more likely to come with high interest rates, lower limits and shorter terms. Borrowers with fair credit may access better terms by choosing a secured loan that poses less risk to the lender.
Good . If your score is close to or above the national average, lenders consider it to be in the good range. This means youre less of a lending risk and more likely to qualify for favorable terms.
Very Good . An above-average credit score indicates to lenders that a borrower is reliable and more likely to make on-time payments. For this reason, borrowers with a very good credit score typically have access to more competitive credit cards and better loan terms.
How Your Credit Score Is Calculated
Your FICO score is calculated based upon the following 5 main elements in your credit report:
- payment history
- amount of debt and credit utilization
- length of credit history
Other scores take into consideration different elements.
If youre trying to build credit, its important to understand how these factors work together. One of the most influential of these categories for your FICO score is the payment history. Having late payments, liens, charge-offs, and bankruptcies on your credit report can drastically harm your FICO score. Another influential category is the amount of debt you have and your credit utilization rate. If you already carry a lot of debt in the form of a mortgage, car loan, student loans, and/or maxed-out credit cards, then potential lenders may be concerned that youre carrying more debt than you can handle.
The length of your credit history moderately influences your FICO score. This shows potential lenders how you handle credit over time. The type of credit and new credit inquires play a smaller role in calculating your FICO score. If youre applying for a mortgage or preparing to finance a car, you might consider not applying for other types of credit.
1 Kritt, Erica, Buying a home? The first step is to check your credit, Consumer Financial Protection Bureau, January 9, 2017.
FICO is a registered trademark of Fair Isaac Corporation.
VantageScore is a registered trademark of VantageScore Solutions, LLC.
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Does Checking Your Credit Score Hurt Your Credit
Its a common myth that checking your credit score hurts your credit, but this is not true. Its likely that this idea grew out of the fact that when your credit is checked by banks or utility companies when youre opening an account, it shows up on your credit report and can result in a 10-20 point ding on your score. When this happens, its known as a hard inquiry or hard pull. The number of these types of inquires youve had in the recent past is also a small part of your credit score.
But when you take a look at your own credit score its what is know as a soft pull or soft inquiry and wont have a negative impact on your credit score.