What to do before a credit check
Whenever you apply for credit, the lender will check your credit history to help it determine whether to approve your application. The better your credit history, the more likely it is that the lender will approve your application. And if you are approved, your credit history will impact things like the interest rate and credit limit you’re offered.
So before applying for credit, there are a few things you should consider. Read on to learn more about credit checks and what you should do before applying for credit.
- Lenders will check your credit history whenever you apply for credit.
- Checking your own credit reports and scores can help you see where you stand.
- Pre-approval or pre-qualification can give you a better idea of whether you might be approved for credit before you even apply.
- Using your existing credit responsibly can help you maintain good credit or build your credit—and that can help your chances of approval if you apply for new credit.
Understanding hard credit inquiries vs. soft credit inquiries
When considering what to do before applying for credit, it’s important to understand how credit checks—also known as credit inquiries—work.
There are two different types of credit inquiries: soft inquiries and hard inquiries. A soft inquiry is a review of your credit file and existing accounts. A soft inquiry doesn’t impact your credit scores. Hard inquiries, on the other hand, do impact your credit scores and happen when a lender checks your credit reports after you apply for credit.
What to do before applying for credit
Remember: The better your credit history, the more likely it is that your credit application will be approved. And if you’re approved, a better credit history could mean better terms—like a lower interest rate or a higher credit limit, for example.
These tips can help you see where you stand and put your best foot forward when applying for credit.
Check your credit reports and credit scores
Taking a look at your own credit reports and credit scores could help you figure out whether you’re likely to qualify for the credit you’re applying for. Checking them can also help you stay on top of factors that could affect your credit—like your payment history, debt, credit age, credit mix and new credit applications. It can even help you spot any errors that may need to be fixed.
And since checking your own credit is an example of a soft inquiry, it doesn’t affect your credit scores.
One way to monitor your credit is with CreditWise from Capital One. With CreditWise, you can stay on top of your VantageScore® 3.0 credit score and TransUnion® credit report for free—even if you’re not a Capital One cardholder.
You can also get free copies of your credit reports from each of the three major credit bureaus—Equifax®, Experian® and TransUnion—by visiting AnnualCreditReport.com.
Check if you're pre-approved
Want a better idea of whether you might be approved before you even apply for credit and trigger a hard inquiry? Pre-approval or pre-qualification can help you find out whether you might be eligible for a credit card or loan before you even submit an application.
Capital One’s pre-approval tool, for example, can help you find out whether you’re pre-approved for some of Capital One’s credit cards before you apply. It’s quick and only requires some basic information. And checking to see whether you’re pre-approved only requires a soft inquiry, so it won’t impact your credit scores.
Compare your options
Whether you’re considering revolving credit—like a credit card—or installment credit—like a personal loan—it’s important to compare your options. No matter what type of credit you’re considering, comparing things like the fees, interest rates and rewards you may earn can help you find the best fit for you.
Capital One, for example, has a credit card comparison tool that helps you search by credit requirements, rewards type and other factors.
Use your exisiting credit responsibility
It’s always important to use your credit responsibly—and that’s true when you’re applying for a new credit product too.
Whether you’re trying to maintain good credit scores or improve your credit scores before you apply, consider a few tips from the Consumer Financial Protection Bureau:
- Always pay your bills on time.
- Stay well below your credit limits. Experts recommend keeping your credit utilization ratio—a measure of how much of your credit you’re using—below 30%.
- Apply only for credit you need. Lenders may think your financial situation has changed for the worse if you apply for multiple credit cards or loans over a short period of time.
Credit checks in a nutshell
Lenders will check your credit history whenever you apply for credit—it helps them decide whether to approve your application. And the better your credit history, the more likely it is that your application will be approved—and the better the terms might be.
So before you apply for credit, take a look at your own credit reports and scores, consider pre-approval or pre-qualification, compare your options, and be sure to use your existing credit responsibly. Doing so will help you put your best foot forward when you apply.
We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.
Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.
Your CreditWise score is calculated using the TransUnion® VantageScore® 3.0 model, which is one of many credit scoring models. It may not be the same model your lender uses, but it can be one accurate measure of your credit health. The availability of the CreditWise tool depends on our ability to obtain your credit history from TransUnion. Some monitoring and alerts may not be available to you if the information you enter at enrollment does not match the information in your credit file at (or you do not have a file at) one or more consumer reporting agencies.