The average credit score in the U.S. is 698, which is considered good on most credit-rating scales.
Your credit score matters when borrowing money or acquiring a new credit card, but getting credit often requires a credit pull. What is a credit pull, you might wonder?
A credit pull is something that lenders do when evaluating your loan application, and it can affect your credit score. There are several types of credit pulls.
If you’re curious about the different types, continue reading to learn more.
Hard Inquiries
The first type of credit pull you might experience is a hard inquiry. A hard inquiry is something that creditors perform when people apply for loans.
For example, when you apply for a new credit card or loan, the lender will ask you to agree to a credit check. Lenders perform credit checks to determine if a person is creditworthy.
If you want to apply for a loan or credit card, you should understand how this works. You can use various tools to monitor your credit score. Additionally, you can use tools like Bento to improve your budgeting.
Soft Inquiries
The other common type of credit pull is a soft inquiry. Soft inquiries don’t cause any harm to borrowers, and they’re not what lenders use when people apply for loans.
Instead, lenders perform soft inquiries when they want to send invitations to people for credit card offers or loans. A lender can learn about a person’s credit score through a soft inquiry, but it won’t affect their credit.
Hard inquiries are more consequential to your credit report than soft inquiries.
Effects of Credit Pulls on Your Score
How do credit pulls affect your score? As mentioned, soft inquiries do not affect your credit. Therefore, it doesn’t matter how many soft inquiries hit your credit report.
On the other hand, hard inquiries affect your credit report in several ways. First, a hard inquiry remains on your report for two years.
Secondly, when a lender makes a hard inquiry, it may slightly decrease your credit score.
Several factors affect your credit score, and new credit and hard inquiries affect 10% of your score. Therefore, each time you apply for a new loan or credit card, the hard inquiry the lender performs affects your credit.
As a result, you can protect your score by limiting the number of hard inquiries you experience. In addition, you must consent to a hard inquiry from a lender, which means you can control this factor.
Monitor Your Score to Improve It
Avoiding credit pulls can help you improve your score. But, you can also improve it by monitoring your score regularly and taking the correct steps.
A good credit score is essential for borrowing money or getting approved for credit cards. It’s also vital when renting an apartment. Therefore, you should look for ways to improve your score.
Did you enjoy this article? If so, feel free to look at others on our site.
No responses yet