When you are in the market for a new car, a new home, or even a new credit card, you may be tempted to do a hard search for your credit score. A hard search is one that is done when you are requesting your actual credit score from one of the three major credit bureaus. Many people believe that doing a hard search will damage their credit score, but this isn’t always the case. In this blog post, we will discuss why doing a hard search can sometimes affect your credit score and how to protect yourself from any potential damage.
What is a hard search and how does it affect your credit score?
A hard search (also known as a hard credit check) occurs when an individual or company checks your credit score to determine whether you are eligible for a loan, credit card, mortgage, insurance policy, etc. This type of inquiry is recorded in your credit report and can have an adverse effect on your overall credit score.
When it comes to why a hard search affects your credit score, the answer lies in how lenders view potential borrowers. Lenders use data from your credit report to assess risk; the more inquiries that appear on your file, the higher the perceived risk becomes–particularly if these searches occur within a short time frame. This could potentially lead lenders to believe that you are desperate for financing and therefore less likely to be a responsible borrower.
Why do lenders run a hard search before approving you for a loan?
When applying for a loan or any type of credit, lenders want to make sure that you are able to pay back the money they lend to you. To do this, they will conduct a hard search on your credit report. A hard search is when a lender requests information from your credit file and adds it to their own records in order to assess whether or not you’re eligible for the loan.
The fact that a lender has conducted a hard search can indicate that you may have taken out other loans in the past few months which could point towards financial difficulty. This can cause them to doubt your ability to reliably repay their loan as quickly as possible and therefore negatively affect your chances of being approved for the loan or credit product that you applied for.
In addition, hard searches can leave a mark on your credit report which could impact your credit score – meaning that other lenders may see this mark and may be less likely to approve you for a loan or credit product in the future.
How can you tell if you’ve been hit with a hard search?
When a lender or other financial institution carries out a hard search, it leaves a footprint on your credit report. This footprint is measurable and can be seen by potential lenders when they assess you for future loans or credit products.
A good way to check if you have been hit with a hard search is to look at your credit score. A significant decrease in your credit score could indicate that the lender has conducted a hard search of your information. The lower the score, the more likely this type of search has happened.