We are all aware that organizations like to check our credit score before we get into any financial commitment. What some might not realize is these checks could have a negative impact on your credit score. There are many different types of credit checks with different levels of severity
Transunion, Experian, and Equifax are the 3 big credit bureaus and they allow organizations (financial institutions mostly) to check your credit. Some examples of when you’re checked are when you
- get the keys to a new apartment or a sweet ride
- put an insurance policy in your name
- go into business with an organization
- apply for a mortgage
- apply for a bank loan or line or credit
- apply for a new credit card.
- Employ you
And I’m sure you can think of others.
Three Types of Hits
The following three types of hits are drastically different and can affect your finical life as such. Take a quick read to make sure you understand how to block unwanted hits.
1.Marketing Inquiries
What They Are
“Promotion Reviews”, Qualification Checks” or Marketing inquiries are usually used to sell or qualify you for financial products. You will most likely receive an offer for a loan or other financial service after this type of inquiry.
How They Affect You
Unless you request it yourself, these hits will not show up on your full report. Anyone doing hard or soft inquiries will never see these and they will not affect your score.
Who They’re Usually For
Marketing companies, banks, credit card companies, and others.
2.Soft Inquiries
What They Are
“Account Reviews” or soft inquiries are for a quick financial situation overview. These are more often used to monitor an individual’s score without negatively impacting it. Soft checks can show a company the history of hard and soft checks without showing who made them.
How They Affect You
Soft inquiries aren’t typically used to calculate your credit score but they do show up on your full report so depending on what company made the inquiry they may indicate (indirectly) that something isn’t quite right.
Who They’re Usually For
Landlords, employers, insurance companies, and marketing companies.
3.Hard Inquiries
What They Are
Also known as “full report checks” or “regular checks”, hard inquiries are usually from financial institutions only and are used for major financial moves like taking out a mortgage or student loan.
How They Affect You
Hard inquiries are the most harmful. When these are done points are taken off your score. How many depends on the circumstances. They can reflect bad as they look like you are in need of financial resources even though people use these resources as a source of leverage and could mean you are in a great spot finically and ready to take the next big step in your life. These checks will bring up and calculate your total credit score.
Who They’re Usually For
Hard credit checks are most often conducted by banks and other large financial institutions.
Extra Tips
- Credit checks, whether hard, soft, or market can only account for 10% of your total score at most. Your score should suffer too hard from credit checks.
- If you know or think someone is going to run a credit check on you ask and be aware what type of check it is. If you can get a copy or at least take a look at your report to make sure there are no errors. Once a year, from each major bureau you can check your credit at annualcreditreport.com.
- You can always call companies to correct blatant mistakes that you find. You’ll probably have to be tenacious, but it’s worth it.
- If you make multiple checks while shopping rates, if these checks are all made within a 45 day period they will only count as one “hit”.
- Your credit score is valuable! A lot of people will want to see it to make finical decisions about you. It’s important to make sure your credit information is true and accurate. Keep these tips in mind when making financial steps in life and keep on track for a healthy financial future.
Knowledge is power! And in this case, MONEY!
Brendan