Credit Checks: What They Are and How They Affect Your Credit Score

Hey Wicked Club fam!

How are ya? Hope y’all had a great week. This week's been a blast for me - I’m in my content creator era 💅 Building Wicked Pay in public with you all is gonna be so much fun, and I can't wait to grow our awesome community even bigger and stronger.

Excited to share my first video ever! Check it out here. Don't forget to follow along on my journey at @poojabuilds for all the behind-the-scenes action!

🗒️ This week’s rundown:

• Topic of the week: Credit Checks: What They Are and How They Affect Your Credit Score

• Love and Money: Can You Handle Debt Together?

• Quarterly Reward Activation Reminder

🧐 Credit Checks: What They Are and How They Affect Your Credit Score

The topic of Credit checks might sound a bit boring and even unimportant, but they’re actually pretty important in the world of personal finance. Whether you’re dreaming of that new credit card, eyeing a shiny car, or even landing your dream job, credit checks are part of the deal. Let’s break down what they are and how they can give your credit score a little boost or a tiny bruise.

🤨 What’s a Credit Check?

Think of a credit check like a report card for adults. It’s when a lender, landlord, or even a potential employer takes a peek at your financial history to see how reliable you are with money. Your credit report is like your financial biography, and it’s kept up to date by credit bureaus like Equifax, Experian, and TransUnion. It includes details like your credit accounts, payment history, current debt, and any major financial mishaps (hello, bankruptcy).

✌️ Two Types of Credit Checks

Credit checks come in two types: hard inquiries and soft inquiries. Both are important, but they play different roles in your financial life.

1. Hard Inquiries: These happen when you apply for something big like a mortgage, car loan, or a new credit card. Lenders do a deep dive into your credit report to decide if you’re a good risk. Hard inquiries can nudge your credit score down a few points, and they stick around on your report for about two years. But don’t worry, they’re not a huge deal unless you rack up a bunch of them in a short time.

2. Soft Inquiries: These are the friendly, no-pressure checks. They occur when you peek at your own credit report, when a lender pre-approves you for a loan, or when a company checks your credit as part of a job application process. Soft inquiries don’t affect your credit score at all, so feel free to check your credit as often as you like!

🔍 How Credit Checks Impact Your Score

The effect of a credit check on your score depends on which type it is:

• Hard Inquiries: One or two hard inquiries might cause a tiny dip in your score. Multiple hard inquiries in a short time can have a bigger impact because lenders might think you’re desperate for credit or taking on too much debt. But here’s the good news: if you’re shopping around for the best rate on a mortgage or auto loan, credit scoring models like FICO count multiple inquiries for the same type of loan within a short period (usually 14-45 days) as just one inquiry. So, you can compare rates without freaking out about your score.

• Soft Inquiries: These are the chill checks that don’t touch your credit score. Whether you’re checking your own credit or getting a pre-approved loan offer, soft inquiries are harmless.

📝 Tips for Managing Credit Checks

Here’s how to handle credit checks like a pro:

1. Limit Hard Inquiries: Avoid applying for multiple credit accounts in a short period. Only apply for credit when you really need it, and do some research to make sure you’re likely to get approved, so you don’t waste those hard inquiries.

2. Monitor Your Credit: Check your credit report regularly to stay on top of things and catch any errors or signs of identity theft. You can get free annual credit reports from the three major credit bureaus or use credit monitoring services.

3. Plan Rate Shopping: If you’re looking for a mortgage or car loan, do your shopping within a short time frame. This way, multiple inquiries get lumped together as one, keeping your score intact.

Credit checks might seem like a minor detail, but they can make a big difference in your financial life. By managing your credit inquiries smartly, you can keep your credit score healthy and open the door to better loan terms, lower interest rates, and more financial opportunities.

💔 Love and Money: Can You Handle Debt Together?

Love is grand, but finances can be a major source of stress in relationships. I recently came across a Reddit thread where a man discovered his wife had secretly accumulated about $16k in credit card debt over a year. He now feels betrayed and is questioning his choice in marrying her. Turns out, this situation isn’t as rare as I’d hoped with tons of other similar threads on Reddit and people asking for help on how to move forward with their partners. These Reddit threads really highlights the importance of financial transparency in a relationship.

💚 Why Discuss Finances Early On?

Many couples shy away from discussing money, especially before marriage. However, finances are a fundamental part of a future together. It's like merging your lives – financially included. Before taking a big leap, consider these points:

• Financial Responsibility Matters: While love is important, financial compatibility is key. Knowing your partner is responsible with money fosters trust and security.

• Open Communication is Key: Finances shouldn't be taboo. Talking openly about financial goals, spending habits, and even potential debt builds a strong foundation.

😣 Hidden Debt: A Communication Breakdown

Hidden debt often stems from shame or fear of judgment. This lack of communication creates tension and erodes trust. Remember, healthy relationships require honesty – especially regarding finances.

🤝 Tackle Debt Together:

Discovering hidden debt can be a shock, but it doesn't have to be the end. Here's how to navigate this challenge:

• Talk it Out: Open and honest communication is essential. Voice your feelings and understand the root cause of the debt.

• Create a Debt-Busting Plan: Together, devise a strategy to tackle the debt. This might involve budgeting, increasing income, or prioritizing repayment approaches.

• Seek Guidance: Consider working with a financial advisor or couples therapist. A financial advisor can craft a realistic plan, while a therapist can help mend emotional wounds and improve communication.

• Set Shared Goals: Building trust involves achieving small financial goals together. Work towards paying off debt or saving for an emergency fund to rebuild trust and strengthen your bond.

• Financial Transparency Moving Forward: Commit to financial openness. Regularly discuss finances, establish joint goals, and involve both partners in financial decisions.

🫰 It's About More Than Money:

Hidden debt can test a relationship, but open communication, a solid plan, and a commitment to teamwork can strengthen your bond. Remember, it's about trust, communication, and working as a team to overcome challenges. By approaching finances with honesty and transparency, you can build a secure and happy future together.

And please, can we normalize asking for credit scores on the first date? 😆

🔔 Quarterly Reward Activation Reminder

We are entering quarter 3, and the rotating categories are now changing July 1st! Remember to activate these rewards on your account to ensure you receive all the cashback!

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