Does a credit check affect your credit score?

Understanding how credit checks impact your score helps you make smarter borrowing decisions.

Key takeaways

• The only type of credit check that affects your score is a hard check, which can lower your score. Soft checks have no impact
• Multiple hard inquiries within a short timeframe signal financial risk to lenders and can significantly reduce your credit score
• Hard credit checks remain visible on your report for five years, but their impact on your score typically diminishes over time
• Spacing out credit applications and checking your score regularly helps maintain better credit health
• Free tools like ClearScore let you monitor your credit without affecting your score

The type of credit check determines whether your credit score is affected. Hard credit checks, which occur when you apply for new credit, like loans or [credit cards]9https://www.clearscore.com/au/credit-cards), can temporarily lower your score by a few points. However, soft credit checks, such as checking your own score or seeing which offers you’re eligible for, do not impact your credit score at all. Understanding this difference helps you manage your credit health more effectively.

Disclaimer: This information is general in nature and does not take into account your personal objectives, financial situation, or needs

Credit checks are a normal part of Australia's lending system, but not all checks are created equal. When you understand how they work, you can make better decisions about when and how often to apply for credit.

What is a credit check?

A credit check happens when someone requests to view your credit report and score. This could be you checking your own score, a lender reviewing your application, or even an employer conducting background checks. The key difference lies in who's doing the checking and why.

Lenders use credit checks to assess whether you're likely to repay borrowed money on time. They look at your payment history, current debts, and how often you've applied for credit recently. In Australia, lenders must obtain your permission before conducting a credit check under the Privacy Act 1988 (Cth).

Soft credit checks vs hard credit checks

The impact on your credit score depends entirely on whether it's a soft or hard credit check.

Soft credit checks don't affect your credit score and include:

• Checking your own credit score and report
• Pre-qualification inquiries
• Background checks by employers
• Existing lenders reviewing your account

Hard credit checks can lower your credit score and occur when:

• You apply for a credit card
• You apply for a personal loan or car loan
• You apply for a mortgage
• You apply for a phone contract

Research shows that hard checks from new credit applications can temporarily lower your credit score, especially when multiple occur within a short period.

Why lenders perform credit checks

Lenders want to understand your creditworthiness before approving applications. They're looking for patterns that suggest you'll repay money reliably, such as consistent payment history and manageable debt levels.

Your credit report tells the story of how you've managed money in the past, helping lenders predict future behaviour. A single hard inquiry shows normal credit-seeking behaviour, but multiple recent inquiries might suggest financial stress.

When you apply for new credit, the resulting hard inquiry becomes part of your credit history and can affect your score calculation.

Points deducted per hard inquiry

Most hard credit checks cause a small, temporary drop in your credit score. The exact impact varies based on your overall credit profile and the scoring model used.

People with stronger credit scores typically experience less impact from individual inquiries, while those with lower scores may see more significant effects.

Multiple hard inquiries and cumulative effects

Several hard inquiries within a short timeframe can compound the negative impact on your credit score. This happens because multiple applications suggest you might be experiencing financial difficulty or taking on too much debt at once.

The cumulative effect isn't always linear. Three hard inquiries might impact your score more than three times what one inquiry would cause.

Understanding the timeline for credit inquiries helps you plan your credit applications strategically.

Duration of hard inquiries on your credit file

Hard inquiries remain visible on your credit report for five years, but their impact on your credit score typically diminishes over time, with the effect often becoming less significant within the first several months.

Duration of soft inquiries on your credit file

Soft credit checks may appear on your credit report for you to see, but lenders can’t see them and they never affect your credit score. Whether a credit enquiry affects your credit score depends on the type of inquiry.

• Hard inquiries: Visible on report for 5 years, affects score typically for 12 months
• Soft inquiries: May be visible on the report, but never affect your credit score

Soft credit checks give you valuable information without any negative consequences for your credit score.

When soft checks are performed

Common scenarios for soft credit checks include:

• Checking your own credit score through free services
• Pre-qualification offers from lenders
• Account reviews by current lenders
• Employment background checks
• Insurance quote comparisons

These activities help you stay informed about your credit status without penalty.

Why soft checks don't affect your score

Soft inquiries don't affect credit scores because they're not associated with seeking new credit. Credit scoring models recognise that checking your own credit or receiving pre-qualified offers shouldn't be penalised. This system encourages responsible credit monitoring, which benefits both consumers and the broader financial system.

Several variables influence how much a hard credit check might affect your score.

Number of applications in a short timeframe

Applying for multiple forms of credit within weeks or months signals higher risk to lenders. The impact becomes more severe as the number of recent inquiries increases.

Your current credit score level

People with excellent credit scores have more cushion to absorb the impact of hard inquiries. Those with lower scores may see more significant effects from the same number of inquiries.

Type of credit being applied for

Different types of credit applications may have varying impacts. However, research indicates that some credit checks from Buy Now Pay Later providers may appear on credit reports but do not currently affect all credit scoring models.

Other credit report information

Your overall credit profile influences how much weight credit inquiries carry in your score calculation. Strong payment history and low debt levels can help minimise the impact of recent inquiries.

Smart planning can help you protect your credit score while still accessing the credit you need.

Space out your credit applications

Avoid applying for multiple forms of credit within short periods. Ideally, space applications several months apart to allow your score to recover between inquiries.

Check your credit report before applying

Review your credit report using free services to understand your current position. This helps you address any issues before lenders see them and gives you realistic expectations about approval chances.

Understand your credit score range

In Australia, credit scores typically range from 0 to 1,000 or 0 to 1,200, depending on the credit reporting agency. Understanding where you stand helps you apply for appropriate products.

Consolidate your shopping around

When comparing rates for the same type of credit (like home loans), try to complete all applications within a short window. Some scoring models treat multiple inquiries for the same product type as a single inquiry when they occur close together.

Several misconceptions exist about how credit checks affect credit scores.

Myth: Checking your own credit score lowers it

This is false. Checking your own credit score is a soft inquiry that never affects your credit score. Regular monitoring actually helps you maintain better credit health.

Myth: One hard inquiry permanently damages your score

Hard inquiries have temporary effects. Studies indicate that impacts typically diminish over time, and most scores recover within months if you maintain good credit habits.

Myth: All credit checks are treated equally

Different types of inquiries have vastly different consequences. Understanding the distinction between hard and soft checks helps you make informed decisions about credit monitoring and applications.

Understanding credit checks empowers you to make better financial decisions. Hard inquiries from credit applications can temporarily lower your score, while soft inquiries never affect it. Spacing out applications and regularly monitoring your credit can help maintain good credit health.

Remember that checking your own credit score is always safe and beneficial. Free tools like ClearScore make it easy to track your credit health without affecting your score.

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Frequently asked questions

How much does a single hard credit check lower my credit score? A single hard credit check typically causes a small, temporary drop in your credit score. People with excellent credit often see minimal impact, while those with lower scores may experience more significant effects.

How long do hard credit inquiries affect my credit score? Hard inquiries remain visible on your credit report for five years, but their impact on your credit score typically diminishes significantly over time, with most scoring models focusing on recent inquiry activity.

Can I check my credit score without it affecting my credit rating? Yes, checking your own credit score is always a soft inquiry that never affects your credit rating. You can check your score as often as you like without any negative consequences.

What's the difference between a credit check and a credit inquiry? These terms are often used interchangeably, but both refer to when someone accesses your credit report. The key distinction is whether it's a hard inquiry (from a credit application) or a soft inquiry (for monitoring purposes).

Does ClearScore perform a hard or soft credit check? ClearScore uses soft credit checks to show you your credit score and report, which means checking your score through ClearScore never affects your credit rating. You can monitor your credit as frequently as you want without any negative impact.

Will ClearScore help improve my credit score? ClearScore provides free access to your credit score and personalised recommendations that may help you understand factors affecting your credit health. However, improving your credit score depends on your individual financial behaviours and circumstances.

This article provides general information only and does not constitute financial advice. Individual circumstances vary, and you may wish to seek independent professional advice before making financial decisions. Information is accurate at the time of writing and may change