Your credit score plays a big role in your financial life - it can determine whether you qualify for a loan, the interest rates you receive, and even your ability to rent an apartment.
But one common concern many people have is whether checking their credit score will lower it. The short answer? It depends on the type of inquiry being made.
Let’s break it down so you can better understand how credit inquiries affect your score and what you can do to keep your credit in good shape.
Hard Inquiries vs. Soft Inquiries: What’s the Difference?
Not all credit checks impact your score. Credit inquiries fall into two main categories: hard inquiries and soft inquiries.
Hard Inquiries (Hard Pulls)
A hard inquiry occurs when a lender or creditor checks your credit report to evaluate your risk as a borrower. These inquiries can lower your credit score by a few points and typically stay on your report for up to two years. However, their impact lessens over time.
Examples of hard inquiries:
Applying for a mortgage
Applying for an auto loan
Applying for a credit card
Requesting a personal loan
Soft Inquiries (Soft Pulls)
Soft inquiries do not affect your credit score. These happen when you check your own credit or when a company reviews your credit for non-lending purposes.
Examples of soft inquiries:
Checking your own credit score
Pre-approved credit card offers
Background checks by employers
Credit checks by insurance companies
Since soft inquiries don’t impact your score, you can check your credit as often as you’d like without worrying about hurting it. In fact, regularly monitoring your credit is a smart financial habit that can help you catch errors or signs of identity theft early.
How Much Do Hard Inquiries Impact Your Credit Score?
A single hard inquiry usually lowers your score by less than five points, according to credit scoring models like FICO. However, multiple hard inquiries within a short period - such as applying for several credit cards at once - can have a larger impact.
That said, credit bureaus understand that borrowers shop around for big purchases like homes and auto loans. If you apply for several loans of the same type within a short timeframe (usually 14-45 days, depending on the scoring model), these inquiries may be treated as a single inquiry to minimize the impact.
Why Monitoring Your Credit Score is Important
Many people avoid checking their credit score out of fear that it will lower their score, but avoiding it could actually do more harm than good. Here’s why keeping an eye on your credit score is a good idea:
Detect Errors Early: Credit reports aren’t always accurate. Mistakes happen, and catching them early can prevent unnecessary damage to your score.
Spot Fraud and Identity Theft: If someone uses your personal information to open accounts, you can take action before it worsens.
Improve Your Credit Score: Understanding where you stand allows you to make smarter financial decisions, such as paying down debt or adjusting spending habits.
Qualify for Better Loans: A strong credit score can help you secure better interest rates and loan terms.
Will Checking My Credit Score Affect My Ability to Get a Loan?
If you're just checking your own score, there’s no effect on your creditworthiness. In fact, regularly reviewing your credit score is a good financial habit. However, if you apply for multiple loans in a short period, lenders may see that as a red flag, signaling that you’re taking on too much debt.
When you apply for a loan through AMG Finance, our team can help you understand how your credit history may impact your eligibility. We work with customers of all credit backgrounds and offer financing solutions tailored to your needs.
How to Protect Your Credit While Applying for Loans
If you’re planning to apply for a loan, follow these tips to minimize the impact on your credit score:
1. Check Your Credit Score In Advance: Since soft inquiries don’t hurt your credit, monitor your score regularly to stay informed.
2. Apply For Credit Only When Necessary: Avoid submitting multiple applications for loans or credit cards unless you're actively shopping for the best rates.
3. Keep Your Credit Utilization Low: Using too much of your available credit can lower your score, making lenders less likely to approve you.
4. Make On-Time Payments: Payment history is the biggest factor in your credit score, so always pay your bills on time.
Need Financial Help? AMG Finance Has You Covered
At AMG Finance, we offer loan solutions and tax preparation services to help you stay on top of your finances. Whether you’re looking for a loan or need assistance during tax season, our team is here to guide you.
Have questions about how financing works? Contact AMG Finance today to learn more about your options.
