Woman checking her credit score on a smartphone
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When Does Checking Your Credit Score Lower It? Understanding the Dip

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Jul. 30 2021, Published 2:16 p.m. ET

We’ve all heard how important it is to regularly check your credit scores. After all, since credit bureaus like Equifax have experienced security breaches in recent years, you should keep a close eye on your credit score.

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You might have heard that checking your credit score can lower it. This is both true and untrue since it depends on who's checking. If you're checking your own credit score to catch potential errors and get them repaired, this type of credit check won’t harm your score at all. It’s when you apply for a loan like a personal loan or credit card that your credit might drop temporarily.

Types of credit inquiries

When it comes to your credit score, there are two main types of credit inquiries—a hard inquiry and a soft inquiry. Soft credit inquiries or credit checks are less impactful and are usually meant to help you monitor your own credit or to provide insight to a potential lender. Hard credit inquiries are what's done when you officially apply for a loan like a mortgage.

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Soft credit checks are fine and don’t lower your credit score. Usually, a pre-qualification process with a lender is only a soft inquiry. The same goes for your annual credit checks. You can look at your credit scores as often as you like with no negative impact, but at a minimum of once a year is recommended.

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Due to the added hardships amid the COVID-19 pandemic, anyone can get free credit reports weekly through April 2022.

Ways to minimize the impact of credit checks

While soft inquiries are inconsequential to your credit score and actually help you stay secure, sometimes you can’t avoid having hard credit inquiries performed. When you need to open up a new credit card or you want to apply for an auto loan or mortgage, a hard inquiry is inevitable.

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These hard inquiries can lower your credit score, but it’s usually a temporary drop. Your score should return to its prior level within a few months if you continue using your lines of credit responsibly.

You want to avoid applying for a lot of new loans or credit accounts within a short period of time. Too many hard inquiries cause lenders to view you as a higher risk.

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credit cards lower credit score
Source: Pixabay

Remember that your credit score doesn’t update automatically when you apply for a new loan. This can be frustrating if you’re working to raise your credit score. If you are patient and continue paying your bills on time and reducing your total debts, you will see your credit scores increase eventually.

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Another strategy for keeping your credit safe is to try a credit freeze. If you don't anticipate needing any new lines of credit or loans in the near future, you can freeze your credit at all three credit bureaus for free. This protects you by restricting access and prohibiting any new accounts from being opened in your name.

If you do a credit freeze, be sure to freeze your credit at all three bureaus—Experian, TransUnion, and Equifax. You can lift the freeze at any point when you need to apply for a new loan.

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