You finally did it. You saved up enough money to purchase a new home. There’s just one thing to do before you apply for a loan: check your credit score. But wait, you think. Won’t checking my credit lower it? Actually, no. Regularly checking your credit is an excellent habit, especially if you’re considering buying a house or a new car. Here’s everything you need to know about your credit score.

How Is My Credit Score Calculated?

Your credit score ranges from 300 to 850, with higher numbers indicating stronger creditworthiness. The most commonly used scoring system is known as the FICO score.

As strange as it sounds, the exact formula for determining your credit is a well-kept secret. Still, your credit score is a mix of five specific factors:

  • Payment History: 35%
  • Amounts You Owe: 30%
  • Length of Credit History: 15%
  • New Credit: 10%
  • Credit Mix: 10%

This means that the biggest influence on your credit is your payment history. Missing payments (or paying late) can majorly impact your credit. 

Will Checking My Credit Score Lower My Credit?

Checking your credit score will not lower it. This is known as a “soft” credit inquiry since you’re looking solely for information and not seeking to add new credit. Checking your credit history is a good financial habit. You can immediately address errors on your credit report, leading to stronger credit. The three major consumer credit bureaus (Equifax, TransUnion, and Experian) allow you to request one free credit report each year.

Hard vs. Soft Credit Inquiries

Again, your score will not be affected if you request your credit report. But what if someone else pulls your credit report, like when you apply for a loan or a credit card?

These are known as “hard” credit inquiries since the lender is reviewing your credit history in detail to determine your eligibility for a loan. The bad news is that a hard credit inquiry will lower your credit score. The good news is that a hard credit inquiry will only reduce your credit score by a small amount. And if you’re making a large purchase (such as a car or house), most credit bureaus treat multiple hard inquiries as one inquiry, provided they occur within the same 15 to 45-day window. So if you apply for pre-approval from various lenders, complete your applications within the same time window. That way, you’ll minimize these applications’ impact on your credit report.

How to Improve Your Credit Score

What qualifies as a “good” score? A typical breakdown is as follows:

  • 740 to 850: Excellent
  • 700 to 739: Good
  • 630 to 699: Fair
  • 629 and Below: Poor

The better your credit, the better your chances of securing a loan with favorable rates and terms. But what if your credit score needs improvement? There’s no easy fix, but the following habits can help you build and maintain strong credit:

  • Automate your finances to pay your bills on time
  • Check your credit report for errors
  • Avoid applying for new credit cards or loans
  • Keep your credit utilization ratio under 33%

Many consumers are unfamiliar with the credit utilization ratio. This is the percentage of your credit limit you’re currently using. So if your credit limit is $1,000, you want to maintain a balance no higher than $333. Using more of your credit limit could negatively impact your credit score.

Discover Your Options

Cleveland State Bank is committed to boosting financial literacy. We also offer mortgage products, loans, and other financial products. Learn more about our mortgage rates and terms, or contact us today to discover your options.


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