Credit score: How often should you check it, and what impact does it have? | Mint

Checking credit score on a regular basis is an important step towards optimising it. It is recommended to check the credit score at least once in a year. Not only does it help you stay abreast of the changes in your score (if any), but it also helps you spot the errors that need to be rectified.

When you check your credit score on a regular basis, you can meet the following goals:

A. Bills reflected: First of all, you can find out if the latest payments made as part of your credit card bills are reflected in the statement.

B. Rectifying mistakes: If there are any mistakes in your credit report, you can reach out to the credit rating agency to rectify the same.

C. Planning finances: When you check your credit score on a regular basis, you can plan your finances well as this makes you aware of your ability to raise a loan at an appropriate rate of interest.

However, there is a wrong perception that checking the credit score often can impact your score negatively. This is vital to mention here that there are two kinds of credit inquiries: soft and hard. When a credit score is checked only for information purposes, it is known as soft inquiry.

On the other hand, when a lender checks the credit score of an applicant in order to check the feasibility for a loan, it leads to a hard inquiry. A soft inquiry typically does not lead to any impact on credit score whereas too many hard inquiries can negatively impact the credit score.

Let us understand in detail

Soft inquiry: It is an inquiry carried out to check the creditworthiness of a borrower purely for information purposes. This does not lead to any major impact on a person’s credit score.

Hard inquiry: It is an inquiry which is aimed to check the credit score of a person before deciding whether the loan should be approved or not.

Apart from annual checks, one should check his credit score at least on two following occasions:

Before applications: One should check the credit score before applying for a loan or credit card application to check your ability to raise funds.

After changes: Another occasion when one should check his score is after you clear off large debts, resolve errors, or experience a major event such as a job loss.