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What to Do Before a Credit Check | GreenDayOnline

The three credit bureaus keep records on millions of borrowers, and they often receive information from lenders about the status of your accounts. Usually, one of these upgrades is released each month. Your credit score, another important measure of your creditworthiness, is calculated using the Fair Isaac Corp. (FICO) reports and VantageScore.

When a lender, landlord, or other institution makes a credit inquiry, they will obtain a copy of your credit report from the credit bureau. They’ll examine your credit score, ability to manage additional debt, and whether you make payments on time. It will also affect how much money you can borrow and whether you are eligible for a loan.

What Is The Difference Between Checking a Credit Score and a Credit Report?

A credit report is a document that contains details about your credit history, credit utilization, and other aspects of your credit behavior and situation. The data in your credit report is used to determine your credit ratings.

Your credit score and the details on your credit report play a significant role in deciding your ability to obtain a mortgage, credit card, auto loan, or other types of credit product and the interest rate you will be charged. The data in your credit report is used to determine your credit ratings.

How to Check Your Credit Score?

AnnualCreditReport.com or toll-free 1-877-322-8228 allow you to request a free copy of your credit report from each of the three leading credit reporting agencies, Equifax®, Experian®, and TransUnion®, once a year. Additionally, if you’ve been turned down for credit, are receiving welfare, are unemployed, or your report is inaccurate, you have a right to see your credit report within 60 days.

Each of the three credit reporting agencies should provide you with a copy of your credit report, which you should carefully evaluate as each one could be inaccurate or include inconsistent data. Within 30 days of obtaining your report, seek a dispute form from the agency if you find an inaccuracy.

What Does Your Credit Score Tell Lenders About You?

A high credit score means you will likely be approved for loans and other financial transactions. To apply for a loan, you should check your credit score first. The three main factors lenders look at when determining whether to approve you for a loan are: payment history, debt to income ratio, and length of credit history.

Understanding Hard Credit Inquiries vs. Soft Credit Inquiries

Hard inquiries occur when a creditor checks your credit report for specific reasons, such as applying for a new account, checking your credit score, or verifying your identity. These inquiries may temporarily lower your credit score.

Soft inquiries occur when creditors check your credit report without any intention of extending your credit. For example, a soft inquiry may occur when a creditor requests a copy of your credit file to verify your address or phone number.

Soft inquiries don’t negatively impact your credit score because they don’t indicate that you’re trying to get credit. However, these inquiries may appear on your credit report for up to seven years. If you want to improve your credit score, avoid making unnecessary purchases, pay off debts, and keep track of all your accounts.

Do credit inquiries affect my FICO Score?

Although the harm may not always be severe, a hard credit query may drop your credit score by as much as 10 points. According to FICO, “For most people, one additional credit inquiry will reduce their FICO Scores by fewer than five points.”

According to FICO, hard credit inquiries can stay on your credit report for up to two years. Still, only credit inquiries from the previous 12 months are considered when your credit score is calculated. As a result, a credit inquiry that is more than a year old will no longer impact your FICO credit score.

What Should You Do Before Applying for Credit?

Choose the Required Credit Type

Consider what kind of credit you require after resolving difficulties with your credit score and credit record. Revolving credit and installment credit are the two main categories of credit. You usually have to pay interest on the money you borrow with both types of credit.

Examine your credit report

You should analyze the details in your credit report and review your credit score. Each of the three major credit agencies (Experian, TransUnion, and Equifax) keeps one credit report on file for every consumer. At AnnualCreditReport.com, you may obtain free credit reports from each of the three bureaus.

You can submit a dispute with the credit agency whose report the information appears if you see something unusual on your credit report, such as a late payment you think shouldn’t be there.

Verify your credit rating.

As you get ready to apply for a credit product, checking your credit score will give you a fair sense of how your credit is doing. On various websites, you can check your credit score for free. For instance, Experian offers your FICO® Score free of charge. You may access your credit score for free from many lenders and credit card providers. A nonprofit credit counseling organization also typically offers free credit score retrieval services.

Why do employers check your credit score, and what can they can see?

Employers look at your credit score for two reasons:

1) To determine whether you are financially responsible

2) To know how much money you owe.

They can also see information about your payment history, length of employment, number of jobs held, and bankruptcies.

How to Do a Soft Credit Check and See Your Credit?

The soft queries are visible on your credit reports. Every 12 months, you can order one free copy of your credit report from each of the three main credit bureaus (Experian, Equifax, and TransUnion) by visiting AnnualCreditReport.com. Additionally, Experian.com offers a free monthly credit report check.

As an inquiry is only included in the reviewed credit report, keep in mind that your three reports may each show a different number of queries. For instance, the soft inquiry won’t be recorded on your Equifax or TransUnion credit reports if you check your Experian credit report first.

How much will credit inquiries affect my score?

According to FICO’s research, creating many credit accounts quickly entails a higher credit risk. Your FICO Scores may be affected if the information on your credit report shows that you have recently applied for several new credit lines (as opposed to rate shopping for a single loan, which is treated differently, as mentioned below). Even though FICO Scores only consider queries from the previous year, they are visible for two years on your credit record.

Multiple queries will appear on your report if you quickly apply for various credit cards. Although applying for new credit can be riskier, most Credit Scores are unaffected by several requests from lenders for school, vehicle, or mortgage loans in a short period. These are often handled as a single query and won’t significantly affect your credit ratings.

Jason Rathman
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