This is how your credit inquiry affects your credit score
Ever been told that applying for your credit report will hurt your credit score? Yeah, this is not exactly true.
Your credit score is a unique credit rating system that shows lenders how risky it is to lend to you. While reviewing your loan application, lenders check your credit score and use it to determine your repayment ability. Learn how your credit score is calculated and how you can increase it here.
When you apply for your credit report or to check your credit score, you are making a credit inquiry. Credit inquiries come in two varieties: Soft and Hard, but not all credit inquiries affect your credit score.
The Soft Inquiry
A Soft inquiry is when you apply for your credit report or check your credit scores from a credit bureau. Account reviews by current lenders and companies with promotional credit offers are also soft inquiries. Soft inquiries do not affect your credit score and will not be visible to potential lenders that may review your credit report. They are only visible to you. You are entitled to one free credit report every year, and you can apply for the report here. After the first report, you have to pay for any additional credit report applied for. In Nigeria, additional Credit Score applications cost N400, while the Credit Report costs N2500.
Take note, when checking your credit report, it is important to confirm the correctness of your personal information and payment history. Is all the information stated accurate? Is there additional information that does not apply to you? If you see any information that is wrong or incomplete, you should contact the lender immediately. You could also file a dispute with the credit bureau that provided the credit report.
The Hard Inquiry
The other kind of credit inquiry is the Hard inquiry. A Hard inquiry is made by potential lenders when you apply for a loan or credit card. Hard inquiries actually affect your credit score, causing it to destabilize slightly. The hard inquiry is done by pulling your details from the accredited bureau in your region of operation.
So, while applying for your credit report does not affect your score, applying for a loan DOES hurt your credit score because it causes the potential lender to make a hard inquiry. However, there is an exception to this rule. Multiple hard inquiries for one single large purchase (such as buying a house or securing a mortgage) are usually treated as one hard inquiry for a given period of time, typically 14 to 45 days. This gives you enough time to check different financiers and get the best rates for your purchase. Note however that this exception does not apply when shopping for credit cards.
Knowledge of your credit history and credit score allows you to take control of your financial information. Next time you want to apply for your credit report, don’t hesitate to reach out to your credit bureau of choice and get the information you need to make the right decisions for your finances.
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