Do Credit Checks Negatively Affect Your Credit Score? Even if you have no credit history?
Maintaining good credit history can be very hard on some consumers. Each account, payment, and inquiry is reported to credit agencies and determine if lenders will extend credit. Lenders want to know that consumers will pay back their debts in the event that lenders extend credit to them. Lenders must conduct credit checks to decide if they will lend money to consumers. Do credit checks affect credit scores in a negative manner for those with no credit history?
Do Credit Checks Affect Credit Scores?
Yes, credit checks can negatively affect credit scores for those without established credit. There are two kinds of credit checks that lenders can conduct: soft inquiries and hard inquiries.
Soft Credit Inquiries – These are the inquiries that do not affect the credit history of someone with no credit history. Consumers sometime order their own credit report so that they can see the information on their credit report. This inquiry does not show up on their credit report so it does not affect them in a negative manner. In addition, businesses pull consumers’ credit so that they can offer them preapprovals for credit cards. This information does not appear on the credit reports so it also does not negatively affect credit scores.
Consumers usually have no knowledge that their credit is pulled by lenders. The lenders conduct inquiries to verify the identity of the person that they plan to offer credit, and they conduct inquiries to verify that the consumer is up to their lending standards. Consumers should not worry about soft inquires because they affect their credit score in no way.
Hard Credit Inquiries – Consumers must be concerned with these inquiries. Hard inquiries show up on credit reports and they can remain there for up to 2 years. Hard inquiries can pull down a credit score by 5 points in 6 months for each hard pull of credit. For someone who does not have any established credit, it can negatively affect their credit score. If they are not approved for credit, lenders will be able to look at their credit and the next lender may decide not to extend credit based on this information.
Hard inquiries are conducted when consumers want to get mortgages, auto loans, and credit cards. Lenders take an in depth look at each person’s credit to decide if they are worthy of extending credit. Allowing too many lenders to pull credit can lead to a very low credit score that can cause problems in the future. Consumers should remember that inquiries could remain on their credit report for 2 years when they are running around in a frenzy to receive credit. Only allow lenders to pull credit when receiving credit is the only option to purchase something.
New borrowers must be very careful when they apply for credit. Each time they provide their personal information to lenders, they have an inquiry that remains on their credit report for up to 2 years. Consumers must make responsible decisions with their credit when they do not have credit history.