When it comes to our financial health, understanding credit is crucial. A person’s credit score can significantly impact their ability to secure loans, their interest rates, and even their ability to rent an apartment or obtain specific jobs. So how does this number come about?

First, we must understand the role of credit bureaus. These organizations collect and maintain information on individuals’ credit histories, including payment history, debt, and inquiries made into their credit. This information is then used to calculate your credit score, typically ranging from 300-850.

Within this process, there are two types of inquiries that can be made: hard inquiries and soft inquiries. A hard inquiry occurs when an individual or organization, such as a lender, requests access to your credit report to make a decision about extending you credit. These can hurt your score and are usually only made when applying for loans or credit cards.

On the other hand, soft inquiries occur when individuals or organizations request access to your credit report for non-lending purposes, such as pre-approval offers or background checks. These do not affect your credit score, and you may not even be aware that they occurred.

It’s essential to monitor and understand these inquiries and all aspects of your credit report to maintain a strong credit score and overall financial health. By staying on top of your credit, you can ensure that you can make the most of economic opportunities in the future.