How many points does a credit check take off your credit score?

The Impact of Credit Checks on Your Credit Score

Credit checks are a routine part of loan applications, credit card approvals, and other financial transactions. While these checks are necessary to assess your creditworthiness, they can also have an impact on your credit score. However, the extent of this impact can vary depending on the type of credit check performed.

Hard Inquiries vs. Soft Inquiries

There are two main types of credit checks: hard inquiries and soft inquiries. Hard inquiries are initiated by lenders or other financial institutions when you apply for new credit. These inquiries are recorded on your credit report and can temporarily lower your score. Soft inquiries, on the other hand, are typically conducted by you or potential employers to review your credit history. Soft inquiries do not affect your credit score.

Impact of Hard Inquiries

Hard inquiries can cause a slight decrease in your credit score. The typical range is between 2 to 5 points, but the exact impact may vary depending on your overall credit history. Multiple hard inquiries within a short period of time can also have a cumulative effect, lowering your score further.

Impact of Soft Inquiries

Soft inquiries have no impact on your credit score. They are used for informational purposes only and do not involve any credit checks or reporting to credit bureaus.

Temporary Fluctuation

It’s important to note that the impact of credit checks on your score is usually temporary. Hard inquiries typically remain on your credit report for two years, but their effect on your score gradually diminishes over time. As you establish a positive payment history and maintain a good credit utilization ratio, the negative impact of previous credit checks will subside.

Conclusion

Credit checks are an essential part of the credit process, but it’s crucial to understand their potential impact on your score. By distinguishing between hard and soft inquiries, you can minimize the negative consequences and maintain a strong credit profile. If you have concerns about the impact of credit checks on your score, you can consider limiting the number of hard inquiries you initiate and monitoring your credit report regularly to track any changes.