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What Everyone Should Know About Their Credit Score

Given that it follows you wherever you go, your credit score is a lot like your shadow. And unless you live totally off the grid, you are likely to run into that credit score at every turn.

Upcoming reading the following, please note that Seacoast Bank does not provide credit advice and these are only generic recommendations.

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Landlords, mortgage companies, banks, and employers are all interested in learning more about you through your credit score. In fact, the person you are dating may be curious about your score simply to get a better sense of who you are.

Here’s how it works. There are three main credit bureaus – Equifax, Experian, and TransUnion. Each of these bureaus gather information about your credit and come up with a score that reflects how well you manage it. The scores typically range from a low of 300 to a high of 850. Each bureau takes into consideration these six factors:

  • How long you have had credit. Generally, bureaus feel most comfortable with someone who has enough of a credit history to paint a fair picture.
  • Your payment history. Bureaus want to know how many times you have paid your obligations as promised and how many times you’ve missed a payment.
  • The types of credit you carry. Bureaus prefer you to have a mix of debts. For example, if your mix includes student loans, a mortgage, a car note, and credit cards it looks better than simply having a pile of credit cards.
  • Your credit limits and how much of those limits you’re using. As counterintuitive as it may seem, bureaus want to know that you have credit available to you that you’re not taking advantage of. It looks better to them if you’re using $1,000 of a $10,000 credit limit rather than the entire $10,000.
  • How much debt you have. Bureaus check your debt against your income in order to determine whether the debt-to-income ratio is at an appropriate level.
  • Hard inquiries on your credit report. Credit bureaus get antsy when it appears that you’re attempting to take on too much new debt.

This last factor – hard inquires – brings us to the question, “What happens to my credit score when someone checks my credit?” The answer depends upon whether the inquiry is “soft” or “hard.”

Soft Inquiry

A soft inquiry occurs when a person or company checks your credit as part of a background check. For example, a credit card company may want to see if you qualify for a credit card offer, an employer may need to know if he can trust you with money, or a utility provider wants assurance that you’ll pay your bill. It is clear to the credit bureaus that none of these inquiries are a result of you trying to take out a line of credit, so they do not impact your credit score in any way.  

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Hard Inquiry

Hard inquiries are recorded when a prospective lender checks your report in order to determine whether to extend credit. Any time you apply for an auto loan, mortgage, student loan, credit card, or any other type of loan that you are expected to repay, it is considered a hard inquiry. Hard inquiries lower your credit score slightly, a fact that only matters when you’re on the edge of two different credit classifications. Generally, credit classifications are broken down like this:

  • Excellent Credit: 750 +
  • Good Credit: 700-749
  • Fair Credit: 650-699
  • Poor Credit: 600-649
  • ­­Bad Credit: below 600

Say your credit score hovers around 700. That means that you are classified as having “good” credit. If several hard inquiries lowers your score by five points, that puts you into “fair” territory, a fact that could make a difference in regard to the interest rate you would receive on a new loan. Hard inquiries typically remain on your credit report for two years.

It’s All About Strategy

One thing to keep in mind is that the stronger your credit history, the less the dings matter. Credit bureaus factor in how well you have paid your debts in the past and how much credit you carry as they determine the degree to which a hard credit check lowers your score. If you have a long, positive credit history you probably won’t even notice that your score has changed. If you have a short credit history and have tons of new inquiries, the impact on your score is likely to be greater.

It’s all about balance and coming up with a smart plan before applying for credit. For example, if you’re shopping for a mortgage and want to check a number of lenders, each of those potential lenders are going to check your credit score before offering you a specific rate. Credit bureaus understand this and give you a certain amount of time to comparison shop (typically between 14-45 days). They can tell that you’re comparison shopping because of the type of loans you’re looking into and the amount of money you’re asking to borrow. Some credit bureau models consider such loan shopping one hard inquiry, meaning it only impacts your overall credit score like one inquiry would. Normally, comparison shopping only applies to mortgage and auto loans.

The Bottom Line

Credit inquiries produce small dings to your report that vary by bureau, but that does not mean you should be nervous about applying for a loan. Simply do your rate shopping in a compressed period of time, apply for loans you are most likely to qualify for, and go in knowing what’s on your credit report.

According to the Federal Trade Commission, you are entitled to one free copy of your credit report every 12 months from all three credit reporting companies. You can order your report online at, or call 1-877-322-8228. You will need to provide them with your name, address, date of birth, and social security number.

Make it a point to check all three credit reports to ensure there are no mistakes, including hard inquiries you did not approve of. You can get rid of any errors you find by disputing them with the credit bureaus.

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