Does checking your credit score hurt your credit?

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You want to know what your credit score is before applying for a loan. But does checking your own credit hurt your FICO credit score?

1. Credit bureaus classify inquiries into “hard” and “soft” varieties
2. “Hard” inquiries can lower your score by a few points
3. “Soft” inquiries do not reduce your FICO score

If done correctly, checking your own credit will not harm your score.

When checking your score hurts your credit

We would all like to pay less for mortgage financing, the biggest debt most of us will ever have. We all know that higher credit scores equal lower mortgage rates but does checking your credit score hurt your credit?

The answer is sometimes yes.

We each have to check credit scores with some frequency. In the past, this was terribly difficult to do because the rules for credit reports and credit scores differ.

Go to AnnualCreditReport.com, a site authorized under federal law. You can get one free credit report every 12 months from each of the three major credit reporting agencies. That’s a total of three credit reports every 12 months. What you can’t get for free at this site is your credit score.

Related: Error or fraud (How do I remove derogatory items from my credit report?)

Why the difference between the availability of credit reports and credit scores? Long ago, it was extremely difficult to get copies of credit reports, and then the government changed the rules. The theory was that consumers should be able to see their own credit reports because it contains their information.

If that information is wrong, then an individual’s credit standing can be hurt and the costs to borrow might rise significantly.

Today, there are a number of sites which offer free credit scores and do not require you to sign up for other services or provide a credit card number. How can these sites give away free credit score information? The answer is that such sites provide credit card offers and other financial services for consumers to consider.

As they say in digital marketing, “When the ‘product’ is free, you are the product.” In effect, providing free credit scores is a lure used by such sites to draw visitors to their platforms and acquire visitors’ information.

“Hard inquiries” and “soft inquiries.”

With a hard inquiry, when you apply for credit, a lender pulls your report to see if you qualify for a mortgage, credit card, auto loan, or other financial product. A soft credit inquiry occurs when you check your own credit, and when you are not seeking additional credit.

Related: Don't fear multiple credit checks when shopping for  mortgage

Soft inquiries also include companies purchasing lists of consumers with scores in a certain range or having other characteristics. They don’t actually view your credit.

Hard inquiries can lower your score

When you apply for credit a lender will check your credit standing. This is a hard credit inquiry and can reduce your credit score by as much as five points.

Is it a big deal to lose five points on your credit score? In some cases, the answer is yes.

Go back to the general rule. Lower credit scores equal higher rates. A lender might require 700 for a 4.5 percent interest rate. At 695, you might wind up with a higher rate, perhaps 4.625 percent.

Related: Applying for new credit while your mortgage is in process is a HUGE mistake

For a $200,000 mortgage, the monthly cost for principal and interest will increase from $1,013.37 to $1,028.28 for a lower score. That’s a difference of $14.91 per month or $178.92 a year.

Since there can be a penalty with hard credit inquiries why not deal with just deal with one lender? The system is set up to encourage mortgage shopping so you can get the best deal. As credit score pioneer Fair Isaac explains, rate shopping is “a smart thing to do, and your FICO score considers all inquiries within a 45-day period for a mortgage, an auto loan or a student loan as a single credit inquiry.”

Soft inquiries do not reduce your FICO score

The credit system encourages soft credit inquires where you are not seeking a new or additional extension of credit. Sites that offer truly free credit scores can have great value. Check your scores regularly to spot any sudden swings that might suggest credit report errors or identity theft.

Related: 6 mistakes to avoid when you refinance

In addition to inquiries you make, other forms of soft inquiries include checks by creditors where you already have an account and businesses who buy credit data in an effort to help identify potential customers.

Online credit scores may differ from the scores used by creditors. Mortgage lenders, for example, will pull scores from the three major credit reporting agencies. They will then use the middle score. In effect, online scores can provide a useful measure of your credit standing – but maybe not an exact measure.