Does Checking Your Credit Score & Report Hurt Your Finances?
Keeping on top of your finances is essential in order to move forward into the future with healthy habits. We understand that our finances aren’t the easiest of topics. With all of the different incomings and outgoings, essential bills and disposable income we might have, it can soon become overly confusing and irritating to manage. Studies suggest that 39% of adults do not feel confident managing their money. When learning about your finances in order to gain more confidence, you need to start from the beginning. One place to seek answers includes your credit score and report. Many people are actually afraid to go near their credit scores, just in case, they happen to accidentally cause a decrease. But, does this really happen?
Is Your Credit Report and What Does It Show?
Everybody should be keeping an eye on their financial data every so often, but getting your timing right is important. Your credit report is almost like your financial CV. It’s made up of all of the relevant information when completing financial activities. For example, applying for credit or dealing with a landlord to ensure guaranteed payments.
The report includes your inquiries and your personal details like your name, age, address, workplace etc. Along with your credit accounts, your payment history, cards, bills, loans, previous mortgages, and even bankruptcy.
What Is A Credit Score?
Your credit score is basically your credit report but in numerical form. The data is taken and made into a number. This number is then categorised into different levels of good and bad credit. It shows how well you have previously managed your finances. For example, the lower the score, the worse your credit score is. The most commonly used credit reporting agency in the UK is Experian. Their scores range from 0 to 999.
Where Can You Find Your Credit Report?
Checking up on your credit report is essential to ensure there are no anomalies holding you back from any financial support. Under new regulations, you no longer have to pay any kind of fee to access your records. According to each of the main reporting agencies, you’re entitled to a free copy of your report once a year. These include Experian, Equifax, and TransUnion. However, if you feel as though something isn’t right and you need to check it more often, signing up for certain financial well-being websites like ClearScore allows you to gain access multiple times.
Does Checking Your Credit Actually Hurt Your Scores?
If you are checking your own credit score, this is a soft inquiry, therefore, it will not decrease. This means you are able to view your data whenever you like to keep everything in check. However, at the other end of the scale are hard inquiries. These can actually lower your credit score by as much as 10 points. Therefore, minimising the number of hard inquiries processed is essential.
Where Do Hard Inquiries Come From?
A hard inquiry occurs when a direct lender or other company completes a search on your credit score in order to see whether or not you will be categorised as a risk to them. In the case of a loan, when applying for payday loans or short term loans, hard credit checks are used to see if a lender is able to lend to you or not.
Despite sometimes being the only option, negative impacts can stay on your credit report for numerous years, potentially holding you back financially. So, when considering something which may include a hard credit check, unless it’s unavoidable, we advise you to try and some sort of an alternative.