Checking Your Own Credit Won’t Drop Your Score. Here’s What Will

If you’re thinking about buying a home, there’s a good chance you’ve put off looking at your credit.

I hear it all the time: “I don’t want to check it. I heard that lowers your score.”

It doesn’t. Looking at your own credit report or your own score has no effect on your score at all.

What does affect it are a few everyday habits most people don’t think twice about. And they matter a lot more when you’re a few months away from applying for a mortgage, because your score plays a big part in the rate you’re offered. Even a small difference in rate adds up over the life of a loan.

Here’s what I want every buyer to know before they apply, starting with the myth that keeps so many people from looking in the first place.

Why checking your own credit is safe.

When you pull your own credit report, it’s recorded as a soft inquiry. Soft inquiries also happen when a card company sends you a preapproved offer or when your bank reviews an account you already have. You may see them listed on your report, but they don’t count toward your score.

A hard inquiry is different. That happens when you apply for new credit, like a credit card, a car loan or a mortgage, and the lender pulls your credit to make a decision.

So go ahead and look. I’d actually encourage it. You can get free copies of your reports from all three credit bureaus, Equifax, Experian and TransUnion, at annualcreditreport.com. That’s the official site, and the reports are free every week.

When you have them, read through each one. Look for accounts you don’t recognize, late payments you know you made on time, balances that look wrong, or old debts that should have dropped off. The Federal Trade Commission explains that you can dispute mistakes with the credit bureau and with the company that reported the information.

A dispute can take time to resolve. That’s one more reason to check your reports months before you plan to buy, not the week you apply.

One more thing worth knowing: those free reports show your credit history, not necessarily your score. Many banks and card companies show you a free score, but it may not be the same scoring model a mortgage lender uses. That’s normal. Use it as a general guide, and I’ll pull the scores that matter when you’re ready.

Late payments do the most damage
Payment history is the biggest single factor in your credit score. FICO says it makes up about 35% of its scores.

A payment that’s 30 days or more past due can be reported to the credit bureaus, and it can stay on your report for up to seven years. The impact fades over time, but a recent late payment can hurt, especially in the months right before you apply for a mortgage.

Most late payments aren’t about money. They’re about a busy month, a card you forgot you had, or a bill that changed its due date.

Here’s what I’d do:

Turn on autopay for at least the minimum payment on every card and loan.
Set a reminder a few days before each due date.
Check the accounts you rarely use, like a store card from last year’s holiday shopping, so a small balance doesn’t slip by.
If you’ve missed a payment recently, call the lender, get current as quickly as you can, and keep every payment on time from here on out. Time and a clean record are what help most.

High card balances can lower your score, even when you pay on time
This one surprises people.

You can pay every bill on time and still see your score drop if your card balances are high compared to your credit limits. That’s called credit utilization, and FICO says amounts owed make up about 30% of its scores.

Here’s why it catches people off guard. Card companies usually report your balance to the credit bureaus around your statement date. So even if you pay the card in full every month, a big balance on the statement can still show up on your report.

A hypothetical example: you have a $5,000 limit and your statement shows a $4,500 balance. You’re using 90% of your available credit. Pay that down to $1,000 before the statement closes, and you’re at 20%.

There’s no magic number, but lower is generally better. If you’re planning to apply for a mortgage soon, I’d:

Pay down card balances before the statement date, not just by the due date.
Spread spending across cards instead of maxing out one.
Hold off on closing old cards. Closing a card lowers your total available credit, which can push your utilization up.
And with the holidays coming, this is the time of year balances creep up. If you plan to buy in the next few months, keep an eye on what ends up on the cards this season.

New credit applications, and the one exception for mortgage shoppers
Every time you apply for new credit, the lender pulls your report with a hard inquiry. One inquiry might only lower your score by a few points, but several in a short time can add up, and new accounts also lower the average age of your credit.

Hard inquiries stay on your report for two years, though FICO scores only count the ones from the last 12 months.

The timing is what I watch. In the months before and during your mortgage process, I’d avoid:

Opening a store card for a discount at the register.
Financing a car, furniture or appliances for the new place.
Co-signing a loan for someone else.
New debt can also change your debt-to-income ratio, which affects how much you qualify for. A new car payment the week before closing can cause real problems.

Now the good news. Shopping for a mortgage rate is treated differently. Credit scoring models count multiple mortgage inquiries within a short window as a single inquiry, because they know you’re comparing offers, not taking out several loans. Depending on the scoring model, that window is 14 to 45 days. So compare your mortgage options, but keep your rate shopping within about two weeks to be safe, and don’t let a fear of inquiries stop you from getting a better deal.

Working with a mortgage broker helps here too. I can compare options from multiple lenders for you, so you don’t have to apply with each one on your own.

Protect your score before you apply
Your credit score isn’t set in stone. It changes as your habits change, and a few small steps over a few months can make a real difference.

If you’re planning to buy a home in the next year, here’s where I’d start:

Pull your free reports and dispute any errors.
Set up autopay so nothing slips through.
Pay card balances down before the statement date.
Hold off on new credit until after you close.