What Happens When Your Credit Score is Pulled?

What Happens When Your Credit Score is Pulled?

When you go to a lender to find financing for a purchase or simply apply for a credit card, your credit score will definitely be checked. Knowing how your credit score is affected when it’s pulled can only improve management of your credit-building progress.

There are two types of credit checks that are done, a hard inquiry and a soft inquiry. Firstly, a hard inquiry is a credit check done to decide whether or not to give you credit. Examples of hard inquiry include:

• Mortgage application
• Car loan application
• Credit card application
• Applying for business/personal loan

A hard check is more harmful than a soft check as a hard inquiry can drop your FICO^® score by 5 points or more every time it’s checked. A soft inquiry, on the other hand, is a check by you or by lenders looking to preapprove you. A soft inquiry doesn’t damage your credit score at all. Unlike hard inquiries, soft inquiries can happen without your permission as this is how you receive credit card promotions and preapprovals for loans in the mail. Examples of a soft inquiry include:

• Auto insurance quote
•  Preapproval for a home loan
• Credit card bonus preapproval
• Self Check
• Employer background check

Duration of Damage from a Hard Pull

Most hard pulls will lower your credit score for one year or less. Your credit report, however, will show the hard pull for up to two years. Your credit report is your history dealing with credit checks. 

How to Properly Manage Hard Inquiries

While hard pulls do affect your credit score, it wouldn’t be wise to avoid applying for anything in the fear that your credit score may drop. Instead, learn to properly manage hard checks so that you don’t end up with a really low score. 

While it may seem obvious, only apply for credit when you really need it. Credit checks that lower your score should be taken seriously and only considered when you see it as the best option. Furthermore, make sure to check your credit score routinely to ensure that no fraud has happened. Checking your credit score yourself is a soft inquiry and so it wouldn’t hurt your credit score. Also, make sure to scout the best terms and rates before you start applying as multiple hard pulls in a short period of time can deteriorate your score. Check your credit score before applying to anywhere that’s going to result in a hard inquiry since if you don’t meet the required credit score you’ll be rejected and your credit rating will drop for no reason. Lastly, always ask if the application is going to result in a hard or soft inquiry as being proactive can help you assess whether or not you should apply.