There are many things that can affect your credit, but one thing that most people worry about are credit checks. Credit checks can affect your credit in some ways. To understand how they can impact your score it is important to understand what they are and the different types of checks.
Different Types of Credit Checks
Credit checks are when you or another party actively look to see what your credit score is. There are two main types of credit checks, called soft and hard checks. Soft checks are when you look up your credit score. You can do this through many different free sites, but the most well known site is Credit Karma. These soft checks do not affect your score at all. Therefore, if you decided to check your credit score each week by doing a soft check, there would be no negative impact on your score.
Hard credit checks are when a financial institution or lender actively checks your credit score to determine if they want to lend you money. These credit checks can negatively impact your credit score. Typically, each time there is a hard check into your credit, your score will drop about five points. This number drop can change depending on how much credit you have and how long you have had credit.
Looking For A Lender
One of the biggest things that people tend to worry about when looking for a new home is getting a good rate. The only way to find the best rate is to shop around for a good rate at different financial institutions. Each time you decide to shop around your credit score will get checked. This can negatively impact your score if you are not smart.
While it could have a long term affect on your credit, your actual FICO score does not take into consideration any checks within the last 30 days. Therefore, if you are looking to secure a mortgage or to shop around for a great rate it is very important that you do so within a small timeframe, less than 30 days. This will allow you to get the best possible rate without your score dropping before you can secure a loan.
How Long Do Credit Checks Affect Your Credit?
Another main question that people want to know is how long can a credit check negatively affect your credit. Typically, FICO credit scores only take into consideration credit checks within the past year. Credit checks for the previous two years will remain on your credit history, but only the previous year actually affect the score. So, if you are looking to buy a new car, a new home, or open a credit card, you should do these things all within a 30 day window or space them out over a year. This will help your credit score go up so that you can get the best possible rate available on all of your large purchases. Avoid applying for credit if you do not need it to avoid a decrease in your score.