How much does credit score decrease when it is checked?
Credit scores are a crucial factor in determining an individual’s financial health and eligibility for loans, mortgages, and credit cards. However, one common question that often arises among consumers is how much their credit score decreases when it is checked. Understanding this aspect is essential for maintaining a healthy credit profile and avoiding unnecessary drops in creditworthiness.
The Impact of Credit Inquiries on Credit Scores
When a lender checks your credit score, it is referred to as a “hard inquiry.” Hard inquiries can temporarily lower your credit score by a few points. The extent of the decrease depends on various factors, including the number of inquiries and the time frame in which they occur.
Number of Inquiries
The more hard inquiries you have, the greater the potential impact on your credit score. Multiple inquiries within a short period can raise red flags to lenders, making them perceive you as a higher credit risk. According to FICO, each hard inquiry can lower your credit score by up to 5 points. However, if you have a strong credit history, the impact may be minimal.
Time Frame of Inquiries
The time frame in which inquiries occur also plays a role in the credit score decrease. For example, if you have a few inquiries within a 30-day window, they may be grouped together and considered as a single inquiry. This can minimize the impact on your credit score. However, if the inquiries are spread out over several months, each inquiry can contribute to a more significant decrease.
Soft Inquiries and Their Impact
It’s important to note that soft inquiries, which are not visible to lenders and do not affect your credit score, can occur when you check your own credit or when companies perform a pre-qualification check for offers. These inquiries have no impact on your credit score and should not be a cause for concern.
Strategies to Minimize Credit Score Decrease
To minimize the impact of credit inquiries on your credit score, consider the following strategies:
1. Limit the number of hard inquiries: Avoid applying for multiple credit accounts within a short period.
2. Space out inquiries: If you need to apply for multiple credit accounts, try to space them out over a few weeks or months.
3. Monitor your credit regularly: By keeping an eye on your credit report, you can identify unauthorized inquiries or errors that may be affecting your score.
In conclusion, while hard inquiries can cause a temporary decrease in your credit score, the impact is generally minimal if managed wisely. By being proactive and strategic with your credit applications, you can maintain a healthy credit profile and avoid unnecessary drops in your creditworthiness.
