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Checking your credit score is the first step toward understanding the core of your financial health. However, according to the credit bureau Equifax, data obtained in 2015 showed that only 14% of Canadians checked their credit score once a year and 56% had never checked it at all.

One explanation for the low percentage of regular personal credit checks could be that people think checking their credit will have a negative effect on their overall credit score. This is where it’s important to understand that there are actually two types of credit score checks: “hard” and “soft.”

Essentially, a hard credit check is the kind that can lower your credit score, but a soft credit check won’t affect it. It’s pretty much as simple as that! Every time that your credit report is checked, a report of the check is logged. However, not everyone who may be reviewing your credit can actually see all the different kinds of checks.

Soft Credit Score Checks

Soft credit checks are so called because the only people who can see that they were made are you and the person who made the original request for the inquiry. They’re generally made for non-lending related reasons, like when an employer may check your credit as part of a job application, or when you check your score for your own information. Lenders, or other entities looking to determine whether or not you may be eligible for credit, cannot see these checks.

Hard Credit Score Checks

Hard checks, on the other hand, are associated with someone looking for credit. It’s visible to anyone who checks your file in the future, and it doesn’t look good for your creditworthiness. Each time you apply for a new credit card, for example, the card issuer does a hard check on your credit report. Each one of these checks results in a small dip in your credit score, and added up they can have a meaningfully negative influence on your overall score.

So how can you avoid excess, unwanted damage to your credit score if you’re looking for financial services or loans?

For one, only apply for what you know you need. Once you’ve determined the most important applications to make, try to get them all sorted out together: they may show up on your report as one set of applications rather than a string of unconnected ones. And lastly, call the service provider or lender you’re applying with to get more information about whether or not they will have to do a hard check to provide you with a quote or qualifying rate offer.

Now that you know the differences between these types of credit score checks, you can keep yourself informed about the health of your credit without worrying about taking points off your score for no reason at all!

Tags : Credit Checkcredit scoreHard Credit Checkpersonal financeSoft Credit Check